Prediction Market Glossary: 50+ Terms Every Trader Should Know
The definitive glossary of prediction market terminology. From order books to oracles, resolution to rebates — every term you need to trade confidently.
Table of Contents
Core Prediction Market Terms
Prediction Market: A financial exchange where contracts pay out based on the outcome of real-world events. YES Share: A token that pays $1.00 if the event occurs and $0.00 if it does not. NO Share: The inverse — pays $1.00 if the event does not occur. Event Contract: The legal term for a prediction market instrument, used by the CFTC. Resolution: The process by which a market's outcome is determined and payouts are distributed.
Oracle: A system that provides real-world data to smart contracts for market resolution (e.g., UMA's optimistic oracle). CLOB: Central Limit Order Book — the matching engine that pairs buy and sell orders by price-time priority. Market Maker: A participant who provides liquidity by continuously posting buy and sell orders. Condition ID: A unique identifier for each market on Polymarket, used by the smart contracts and PredictEngine's trading engine to track positions.
Trading and Order Terms
Bid: The highest price a buyer is willing to pay for a share. Ask: The lowest price a seller is willing to accept. Spread: The difference between the best bid and best ask — your cost of immediate execution. Limit Order: An order to buy or sell at a specific price or better. Market Order: An order that executes immediately at the best available price. Slippage: The difference between the expected price and the actual fill price, caused by insufficient liquidity.
Maker: A trader who adds liquidity by placing limit orders (earns rebates on Polymarket). Taker: A trader who removes liquidity by matching existing orders (pays fees). Fill: When your order is matched and executed. Partial Fill: When only part of your order is executed due to insufficient counterparty volume. PredictEngine's trading engine handles partial fills automatically, tracking each fill as a separate sub-position for accurate P&L reporting.
Strategy and Analysis Terms
Arbitrage: Simultaneously buying and selling related contracts to profit from price discrepancies — risk-free if executed correctly. Implied Probability: The probability of an event implied by the market price (a $0.65 YES share implies 65% probability). Edge: Your informational or analytical advantage over the market consensus. Expected Value (EV): The average outcome of a trade weighted by all possible results — positive EV trades are profitable over many repetitions.
Midpoint: The average of the best bid and best ask, used as a reference price. Whale: A trader placing very large orders that can move market prices. Copy Trading: Automatically replicating the trades of another trader. Bot: An automated trading program that executes strategies without manual intervention. PredictEngine's bot engine supports single-side, arbitrage, and copy-trading strategies with configurable parameters.
Blockchain and Crypto Terms
Polygon: The Layer 2 blockchain where Polymarket settles trades — fast and cheap (sub-cent gas fees). USDC: The stablecoin used as the base currency on Polymarket, pegged 1:1 to the US dollar. ERC-1155: The token standard used for Polymarket outcome shares, allowing multiple token types in a single contract. Smart Contract: Self-executing code on a blockchain that manages collateral, tokens, and payouts without a trusted intermediary.
Gas: The fee paid to process transactions on a blockchain. Bridge: A protocol that moves assets between different blockchains (e.g., Ethereum to Polygon). Wallet: A blockchain address controlled by a private key that holds your assets. Private Key: The cryptographic secret that controls your wallet — PredictEngine encrypts these with AES-256 and never exposes them in plaintext. Understanding these terms helps you navigate the blockchain layer underneath prediction market trading.
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Frequently Asked Questions
What is the most important term to understand?
Start with YES/NO shares, resolution, and spread. These three concepts cover the basics of what you are buying, when you get paid, and what it costs to trade. Everything else builds on these fundamentals.
What is the difference between a maker and a taker?
A maker adds liquidity by placing limit orders that sit on the order book. A taker removes liquidity by matching existing orders. Polymarket charges takers a small fee and gives makers a rebate.
What does implied probability mean for trading?
If YES shares trade at $0.45, the market implies a 45% probability. If your research suggests the true probability is 60%, you have a 15-percentage-point edge — buy YES and expect to profit on average.
Do I need to understand blockchain terms to trade?
Not necessarily. PredictEngine abstracts away the blockchain layer so you can focus on trading. However, understanding terms like USDC, Polygon, and gas helps you troubleshoot deposits and withdrawals.