Prediction Market Glossary

Glossary

Every term you meet on a prediction market, in two sentences each. One page, so you can search it - and link straight to a definition.

The basics

What a prediction market is and what the pieces are called.

Prediction market: A marketplace where people buy and sell shares in the outcome of a future event. The price of a share is the market's collective estimate of how likely that outcome is.See also: Share (contract), Implied probability
Share (contract): The unit that trades. A winning share pays out one dollar when the market resolves, a losing one pays nothing, and in between it trades somewhere between zero and one hundred cents.See also: Prediction market, Settlement
Binary market: A market with exactly two outcomes, YES and NO, whose prices should add up to about one hundred cents. Most single questions are binary.See also: Multi-outcome market
Multi-outcome market: A market with several competing outcomes, such as who wins a championship. If the outcomes are mutually exclusive, their probabilities should sum to about one hundred percent.See also: negRisk, Ladder market
Ladder market: A set of markets on cumulative thresholds or deadlines - above 100, above 150, above 200 - whose outcomes do not exclude each other. Their prices do not sum to one hundred percent, and treating them as a probability distribution is a mistake.See also: Multi-outcome market, Threshold market
Threshold market: A market asking whether a number ends up above or below a stated level by a date. Almost every crypto and commodity price question is one of these.See also: Touch versus terminal, Base rate
negRisk: A flag on a multi-outcome event meaning the outcomes are mutually exclusive, so exactly one of them will resolve YES. Without it, an event's prices can legitimately sum to far more than one hundred percent.See also: Multi-outcome market, Ladder market
Venue: The exchange a market lives on - Polymarket, Kalshi and others. The same question on two venues can carry different wording, different liquidity and therefore different prices.See also: Liquidity, Resolution source

Price and probability

The conversions that turn a price into a statement about the world.

Implied probability: The probability a price implies. In a prediction market the conversion is trivial: a share at 34 cents implies a 34 percent chance, because a winning share pays one dollar.See also: Share (contract), Vig (juice)
Cents to percent: The core reading skill. Read the price in cents as the probability in percent - no arithmetic required - and read the reciprocal as the payout multiple.See also: Implied probability, Payout multiple
Payout multiple: What a winning share returns relative to its cost. A 25-cent share returns four times your stake if it wins, which is exactly why the market only gives it a 25 percent chance.See also: Cents to percent, Expected value
Expected value: Probability times payout, minus cost. It is positive only when your estimated probability is higher than the price - which means the whole game is having a better estimate, not finding a big payout.See also: Edge, Payout multiple
Vig (juice): A bookmaker's margin, built into the odds so both sides of a coin flip imply more than a fifty percent chance. Prediction markets do not have it; they charge a visible fee instead.See also: Implied probability, Taker fee
Mark price: The reference price a venue displays, usually the midpoint of the best bid and ask or the last trade. On a thin market it can differ noticeably from what you would actually pay.See also: Spread, Slippage
24h change: How far the implied probability has moved in a day, quoted in percentage points rather than percent. A move from 20 to 24 is four points, not twenty percent.See also: Percentage point
Percentage point: The unit for differences between probabilities. The gap between a 40 percent price and a 47 percent estimate is seven percentage points; calling it seven percent means something different and usually wrong.See also: 24h change, Divergence

Order book and trading

How a trade actually happens, and what it costs.

Order book: The live list of buy and sell orders at each price. It shows not just the current price but how much size sits behind it, which is what decides whether that price survives your trade.See also: Depth, Spread
Bid and ask: The highest price anyone will pay and the lowest anyone will accept. You buy at the ask and sell at the bid, so the gap between them is a cost you pay on entry and again on exit.See also: Spread, Order book
Spread: The gap between bid and ask. On a thin market it routinely costs more than any fee - crossing a six-cent spread means losing six points of implied probability the moment you trade.See also: Bid and ask, Liquidity
Depth: How much volume sits at each price level in the order book. Deep books absorb large orders without moving the price; shallow ones do not.See also: Order book, Slippage
Liquidity: How easily a position can be opened or closed without moving the price. It is the single most underrated variable: the same probability on a liquid and an illiquid market are two different statements.See also: Volume, Spread
Volume: How much has traded, usually over the market's lifetime or the last 24 hours. High volume means more people have staked money on the current price, which makes it more informative.See also: Liquidity, Open interest
Open interest: The total value of positions currently open, as opposed to how much has changed hands. Rising open interest with a rising price means new money is arriving, not just churn.See also: Volume
Maker and taker: A maker posts an order and waits; a taker crosses the spread to trade immediately. Most venues charge the taker and may rebate the maker, which makes patience a discount.See also: Taker fee, Limit order
Taker fee: The explicit fee charged for crossing the spread. On some venues it is largest near 50 cents, where a contract carries the most uncertainty, and shrinks toward the price extremes.See also: Maker and taker, Vig (juice)
Limit order: An order to trade only at a stated price or better. It may never fill, but it puts you on the maker side and protects you from paying the spread.See also: Maker and taker, Market order
Market order: An order to trade immediately at whatever price the book offers. Fast, and on a thin book expensive: your own order can walk the price several cents against you.See also: Limit order, Slippage
Slippage: The difference between the price you expected and the price you got. It grows with order size and shrinks with depth, which is why size and liquidity have to be considered together.See also: Depth, Market order
Position sizing: Deciding how much to stake given your edge and the risk of being wrong. A correct view and a reckless size still ends badly, which is why sizing is a separate discipline from forecasting.See also: Expected value, Edge

Resolution and rules

The wording that decides who gets paid.

Resolution rules: The exact wording that decides the outcome. The headline is marketing; these rules are the contract, and reading them before trading prevents more losses than any indicator.See also: Resolution source, Settlement
Resolution source: The named authority whose publication settles the market - an agency, an exchange settlement price, an official announcement. If a market does not name one, that is the risk.See also: Resolution rules, Oracle
Settlement: The moment the market closes and winning shares pay out. Settlement can lag the real-world event by days when the deciding authority publishes on its own schedule.See also: Resolution rules, Expiry
Expiry: The deadline written into the market. Everything about a threshold question depends on it: the same price target is a different bet with three weeks left than with three months.See also: Threshold market, Touch versus terminal
Touch versus terminal: Whether a threshold resolves if the level is reached at any point, or only if it holds at the deadline. Touch markets are meaningfully more likely to resolve YES, and the wording is often the only clue which one you are trading.See also: Threshold market, Expiry
Oracle: The mechanism that reports the real-world outcome to an on-chain market, sometimes with a dispute process. It is where an ambiguous outcome becomes a contested one.See also: Resolution source, Ambiguity risk
Ambiguity risk: The risk that the event happens but the rules do not clearly say so - a partial ceasefire, a delayed certification, a revised statistic. It is a real and underpriced way to lose a correct forecast.See also: Resolution rules, Oracle
Revision: A later correction to an official statistic. Whether a market settles on the first print or the revised figure is a detail in the rules that decides who gets paid.See also: Resolution source, First print
First print: The initial published value of a data series, before revisions. Most macro markets settle on it, which means a market can pay out on a number that is later corrected.See also: Revision

Research and signals

The vocabulary of forecasting, calibration and edge.

Base rate: How often something like this has happened before. Starting from the base rate and adjusting for what is specific to this case is the most reliable forecasting habit there is.See also: Calibration, Threshold market
Calibration: Whether your stated probabilities match reality over many forecasts: of everything you called 70 percent, about seventy percent should happen. It is the only honest way to grade a forecaster.See also: Brier score, Base rate
Brier score: A scoring rule for probabilistic forecasts - the squared distance between your probability and the outcome, averaged. Lower is better, and it punishes confident wrong calls hardest.See also: Calibration
Edge: The gap between the outcome and the price paid, averaged over many resolved positions. It is a far better measure of skill than win rate, because it asks whether someone was right when the price said they should not be.See also: Win rate, Smart money
Win rate: The share of positions that ended on the winning side. It is easy to inflate by buying heavy favourites, which is why it flatters wallets that take almost no risk and earn almost nothing.See also: Edge
Smart money: Wallets with a demonstrated edge over many resolved markets. Useful as a prompt to investigate, dangerous as a trade to copy, since you cannot see the rest of their book.See also: Edge, Divergence
Divergence: The gap between the market price and an independent estimate - your own, a model's, or a researched probability. A wide gap is a reason to look closer, not evidence that the market is wrong.See also: Percentage point, Edge
Realized volatility: How much a price has actually moved historically, usually annualised. It is what tells you whether the move a threshold market needs is routine or extraordinary for that asset.See also: Base rate, Threshold market
Risk-neutral probability: The probability implied by options prices, which embeds a risk premium and is therefore not a real-world forecast. A useful second opinion as long as it is labelled correctly.See also: Implied probability, Realized volatility
Herding: Traders following a narrative rather than evidence, which pushes a price past what the facts support. It is the source of most genuine mispricings and it can persist much longer than a position can.See also: Divergence, Liquidity
Hedge: A position taken to offset risk somewhere else rather than to express a view. It is the reason a large wallet on the NO side may be saying nothing at all about the outcome.See also: Smart money

Commodities and venues

Terms you meet the moment a market is about a physical thing.

Futures contract: A standardised agreement to buy or sell a fixed quantity of something at a future date. Commodity prediction markets usually settle against one, so the contract and its month are part of the question.See also: Settlement price, Contract month
Contract month: The delivery period a futures contract covers. Two contracts on the same commodity can move quite differently, especially across a harvest or a heating season.See also: Futures contract, Contango
Settlement price: The official daily closing price an exchange publishes, which is what markets and contracts reference. It is not the last trade and not the spot price.See also: Futures contract, Spot price
Spot price: The price for immediate delivery, as opposed to a futures price for later. In thinly traded commodities the spot price is often an assessment rather than a traded number.See also: Price assessment, Settlement price
Price assessment: A price published by a reporting agency based on surveyed transactions, used where no liquid exchange price exists - uranium, rare earths, lithium, LNG. A market settling on one is settling on a methodology.See also: Spot price, Resolution source
Benchmark: The reference grade or contract a whole market prices against, such as Brent for crude oil. Everything else trades at a differential to it.See also: Differential, Settlement price
Differential: The premium or discount a specific grade, origin or location carries against the benchmark. In a physical shortage the differential moves long before the benchmark does.See also: Benchmark, Basis
Basis: The gap between the futures price and the local cash price. Futures reflect the world balance; basis reflects whether there is transport and a buyer where the goods physically sit.See also: Differential, Futures contract
Contango: When later contract months trade above nearer ones, usually a sign of comfortable supply, since it pays to store. The opposite shape is backwardation.See also: Backwardation, Contract month
Backwardation: When nearer contract months trade above later ones - the market paying a premium for immediate delivery. It is one of the clearest signals that a physical market is tight.See also: Contango, Inventories
Inventories: Stocks held in exchange warehouses or national storage. Read as days of consumption cover rather than as tonnes, since the same tonnage means different things in different markets.See also: Stocks-to-use, Backwardation
Stocks-to-use: Ending inventories divided by annual consumption, the standard cushion measure in agricultural markets. Tight cover is what turns an ordinary crop problem into a price spike.See also: Inventories
Chokepoint: A strait, canal, corridor or industrial step that a large share of a commodity's trade must pass through. Chokepoints are where geopolitics enters a price chart.See also: Differential
Spare capacity: Production that could be brought online quickly, held mostly by a few oil producers. It decides how large a price move a given disruption produces.See also: Inventories, Chokepoint
By-product supply: Metal produced as a side effect of mining something else, as most silver is. Its output barely responds to its own price, so shortages take unusually long to correct.See also: Inventories

64 terms · Back to top

The basics

What a prediction market is and what the pieces are called.

Prediction market

A marketplace where people buy and sell shares in the outcome of a future event. The price of a share is the market's collective estimate of how likely that outcome is.See also: Share (contract), Implied probability

Binary market

A market with exactly two outcomes, YES and NO, whose prices should add up to about one hundred cents. Most single questions are binary.See also: Multi-outcome market

Multi-outcome market

A market with several competing outcomes, such as who wins a championship. If the outcomes are mutually exclusive, their probabilities should sum to about one hundred percent.See also: negRisk, Ladder market

Ladder market

A set of markets on cumulative thresholds or deadlines - above 100, above 150, above 200 - whose outcomes do not exclude each other. Their prices do not sum to one hundred percent, and treating them as a probability distribution is a mistake.See also: Multi-outcome market, Threshold market

Threshold market

A market asking whether a number ends up above or below a stated level by a date. Almost every crypto and commodity price question is one of these.See also: Touch versus terminal, Base rate

negRisk

A flag on a multi-outcome event meaning the outcomes are mutually exclusive, so exactly one of them will resolve YES. Without it, an event's prices can legitimately sum to far more than one hundred percent.See also: Multi-outcome market, Ladder market

Venue

The exchange a market lives on - Polymarket, Kalshi and others. The same question on two venues can carry different wording, different liquidity and therefore different prices.See also: Liquidity, Resolution source

Price and probability

The conversions that turn a price into a statement about the world.

Implied probability

The probability a price implies. In a prediction market the conversion is trivial: a share at 34 cents implies a 34 percent chance, because a winning share pays one dollar.See also: Share (contract), Vig (juice)

Cents to percent

The core reading skill. Read the price in cents as the probability in percent - no arithmetic required - and read the reciprocal as the payout multiple.See also: Implied probability, Payout multiple

Payout multiple

What a winning share returns relative to its cost. A 25-cent share returns four times your stake if it wins, which is exactly why the market only gives it a 25 percent chance.See also: Cents to percent, Expected value

Expected value

Probability times payout, minus cost. It is positive only when your estimated probability is higher than the price - which means the whole game is having a better estimate, not finding a big payout.See also: Edge, Payout multiple

Vig (juice)

A bookmaker's margin, built into the odds so both sides of a coin flip imply more than a fifty percent chance. Prediction markets do not have it; they charge a visible fee instead.See also: Implied probability, Taker fee

Mark price

The reference price a venue displays, usually the midpoint of the best bid and ask or the last trade. On a thin market it can differ noticeably from what you would actually pay.See also: Spread, Slippage

24h change

How far the implied probability has moved in a day, quoted in percentage points rather than percent. A move from 20 to 24 is four points, not twenty percent.See also: Percentage point

Percentage point

The unit for differences between probabilities. The gap between a 40 percent price and a 47 percent estimate is seven percentage points; calling it seven percent means something different and usually wrong.See also: 24h change, Divergence

Order book and trading

How a trade actually happens, and what it costs.

Order book

The live list of buy and sell orders at each price. It shows not just the current price but how much size sits behind it, which is what decides whether that price survives your trade.See also: Depth, Spread

Bid and ask

The highest price anyone will pay and the lowest anyone will accept. You buy at the ask and sell at the bid, so the gap between them is a cost you pay on entry and again on exit.See also: Spread, Order book

Spread

The gap between bid and ask. On a thin market it routinely costs more than any fee - crossing a six-cent spread means losing six points of implied probability the moment you trade.See also: Bid and ask, Liquidity

Depth

How much volume sits at each price level in the order book. Deep books absorb large orders without moving the price; shallow ones do not.See also: Order book, Slippage

Liquidity

How easily a position can be opened or closed without moving the price. It is the single most underrated variable: the same probability on a liquid and an illiquid market are two different statements.See also: Volume, Spread

Volume

How much has traded, usually over the market's lifetime or the last 24 hours. High volume means more people have staked money on the current price, which makes it more informative.See also: Liquidity, Open interest

Open interest

The total value of positions currently open, as opposed to how much has changed hands. Rising open interest with a rising price means new money is arriving, not just churn.See also: Volume

Maker and taker

A maker posts an order and waits; a taker crosses the spread to trade immediately. Most venues charge the taker and may rebate the maker, which makes patience a discount.See also: Taker fee, Limit order

Taker fee

The explicit fee charged for crossing the spread. On some venues it is largest near 50 cents, where a contract carries the most uncertainty, and shrinks toward the price extremes.See also: Maker and taker, Vig (juice)

Limit order

An order to trade only at a stated price or better. It may never fill, but it puts you on the maker side and protects you from paying the spread.See also: Maker and taker, Market order

Market order

An order to trade immediately at whatever price the book offers. Fast, and on a thin book expensive: your own order can walk the price several cents against you.See also: Limit order, Slippage

Slippage

The difference between the price you expected and the price you got. It grows with order size and shrinks with depth, which is why size and liquidity have to be considered together.See also: Depth, Market order

Position sizing

Deciding how much to stake given your edge and the risk of being wrong. A correct view and a reckless size still ends badly, which is why sizing is a separate discipline from forecasting.See also: Expected value, Edge

Resolution and rules

The wording that decides who gets paid.

Resolution rules

The exact wording that decides the outcome. The headline is marketing; these rules are the contract, and reading them before trading prevents more losses than any indicator.See also: Resolution source, Settlement

Resolution source

The named authority whose publication settles the market - an agency, an exchange settlement price, an official announcement. If a market does not name one, that is the risk.See also: Resolution rules, Oracle

Settlement

The moment the market closes and winning shares pay out. Settlement can lag the real-world event by days when the deciding authority publishes on its own schedule.See also: Resolution rules, Expiry

Expiry

The deadline written into the market. Everything about a threshold question depends on it: the same price target is a different bet with three weeks left than with three months.See also: Threshold market, Touch versus terminal

Touch versus terminal

Whether a threshold resolves if the level is reached at any point, or only if it holds at the deadline. Touch markets are meaningfully more likely to resolve YES, and the wording is often the only clue which one you are trading.See also: Threshold market, Expiry

Oracle

The mechanism that reports the real-world outcome to an on-chain market, sometimes with a dispute process. It is where an ambiguous outcome becomes a contested one.See also: Resolution source, Ambiguity risk

Ambiguity risk

The risk that the event happens but the rules do not clearly say so - a partial ceasefire, a delayed certification, a revised statistic. It is a real and underpriced way to lose a correct forecast.See also: Resolution rules, Oracle

Revision

A later correction to an official statistic. Whether a market settles on the first print or the revised figure is a detail in the rules that decides who gets paid.See also: Resolution source, First print

First print

The initial published value of a data series, before revisions. Most macro markets settle on it, which means a market can pay out on a number that is later corrected.See also: Revision

Research and signals

The vocabulary of forecasting, calibration and edge.

Base rate

How often something like this has happened before. Starting from the base rate and adjusting for what is specific to this case is the most reliable forecasting habit there is.See also: Calibration, Threshold market

Calibration

Whether your stated probabilities match reality over many forecasts: of everything you called 70 percent, about seventy percent should happen. It is the only honest way to grade a forecaster.See also: Brier score, Base rate

Brier score

A scoring rule for probabilistic forecasts - the squared distance between your probability and the outcome, averaged. Lower is better, and it punishes confident wrong calls hardest.See also: Calibration

Edge

The gap between the outcome and the price paid, averaged over many resolved positions. It is a far better measure of skill than win rate, because it asks whether someone was right when the price said they should not be.See also: Win rate, Smart money

Win rate

The share of positions that ended on the winning side. It is easy to inflate by buying heavy favourites, which is why it flatters wallets that take almost no risk and earn almost nothing.See also: Edge

Smart money

Wallets with a demonstrated edge over many resolved markets. Useful as a prompt to investigate, dangerous as a trade to copy, since you cannot see the rest of their book.See also: Edge, Divergence

Divergence

The gap between the market price and an independent estimate - your own, a model's, or a researched probability. A wide gap is a reason to look closer, not evidence that the market is wrong.See also: Percentage point, Edge

Realized volatility

How much a price has actually moved historically, usually annualised. It is what tells you whether the move a threshold market needs is routine or extraordinary for that asset.See also: Base rate, Threshold market

Risk-neutral probability

The probability implied by options prices, which embeds a risk premium and is therefore not a real-world forecast. A useful second opinion as long as it is labelled correctly.See also: Implied probability, Realized volatility

Herding

Traders following a narrative rather than evidence, which pushes a price past what the facts support. It is the source of most genuine mispricings and it can persist much longer than a position can.See also: Divergence, Liquidity

Hedge

A position taken to offset risk somewhere else rather than to express a view. It is the reason a large wallet on the NO side may be saying nothing at all about the outcome.See also: Smart money

Commodities and venues

Terms you meet the moment a market is about a physical thing.

Futures contract

A standardised agreement to buy or sell a fixed quantity of something at a future date. Commodity prediction markets usually settle against one, so the contract and its month are part of the question.See also: Settlement price, Contract month

Contract month

The delivery period a futures contract covers. Two contracts on the same commodity can move quite differently, especially across a harvest or a heating season.See also: Futures contract, Contango

Settlement price

The official daily closing price an exchange publishes, which is what markets and contracts reference. It is not the last trade and not the spot price.See also: Futures contract, Spot price

Spot price

The price for immediate delivery, as opposed to a futures price for later. In thinly traded commodities the spot price is often an assessment rather than a traded number.See also: Price assessment, Settlement price

Price assessment

A price published by a reporting agency based on surveyed transactions, used where no liquid exchange price exists - uranium, rare earths, lithium, LNG. A market settling on one is settling on a methodology.See also: Spot price, Resolution source

Benchmark

The reference grade or contract a whole market prices against, such as Brent for crude oil. Everything else trades at a differential to it.See also: Differential, Settlement price

Differential

The premium or discount a specific grade, origin or location carries against the benchmark. In a physical shortage the differential moves long before the benchmark does.See also: Benchmark, Basis

Basis

The gap between the futures price and the local cash price. Futures reflect the world balance; basis reflects whether there is transport and a buyer where the goods physically sit.See also: Differential, Futures contract

Contango

When later contract months trade above nearer ones, usually a sign of comfortable supply, since it pays to store. The opposite shape is backwardation.See also: Backwardation, Contract month

Backwardation

When nearer contract months trade above later ones - the market paying a premium for immediate delivery. It is one of the clearest signals that a physical market is tight.See also: Contango, Inventories

Inventories

Stocks held in exchange warehouses or national storage. Read as days of consumption cover rather than as tonnes, since the same tonnage means different things in different markets.See also: Stocks-to-use, Backwardation

Stocks-to-use

Ending inventories divided by annual consumption, the standard cushion measure in agricultural markets. Tight cover is what turns an ordinary crop problem into a price spike.See also: Inventories

Chokepoint

A strait, canal, corridor or industrial step that a large share of a commodity's trade must pass through. Chokepoints are where geopolitics enters a price chart.See also: Differential

Spare capacity

Production that could be brought online quickly, held mostly by a few oil producers. It decides how large a price move a given disruption produces.See also: Inventories, Chokepoint

By-product supply

Metal produced as a side effect of mining something else, as most silver is. Its output barely responds to its own price, so shortages take unusually long to correct.See also: Inventories