Prediction Market Glossary
From arbitrage to whale — the language of prediction markets explained.
A
Arbitrage
The practice of buying and selling the same asset on different markets simultaneously to profit from price differences. In prediction markets, this means buying YES on one platform and NO on another when their combined cost is less than ¢100, guaranteeing profit regardless of outcome.
Ask Price
The lowest price at which a seller is willing to sell a contract. In prediction markets, this is the cheapest price you can currently buy YES or NO shares for on the order book.
B
Bid Price
The highest price a buyer is willing to pay for a contract. The difference between the bid and ask price is the spread — tighter spreads indicate better liquidity.
Binary Market
A market with exactly two outcomes: YES or NO. Most prediction market contracts are binary — the event either happens or it doesn't. The contract pays ¢100 if the chosen outcome occurs, ¢0 if it doesn't.
C
CLOB
Central Limit Order Book — the matching engine used by Polymarket. It organizes all buy and sell orders by price, matching the highest bid with the lowest ask. CLOBs provide transparent price discovery and allow limit orders.
Conditional Token
A blockchain-based token that represents a position in a prediction market. Polymarket uses conditional tokens on the Polygon network — each YES or NO share is a token that can be traded, transferred, or held until resolution.
E
Edge
The advantage a trader has over the market price. If you believe the true probability of an event is 70% but the market prices it at 60%, your edge is 10 percentage points. Sustainable profits require a consistent edge.
Event Contract
A financial contract that pays out based on the outcome of a specified real-world event. Kalshi's regulated products are officially called "event contracts" under CFTC oversight.
Expected Value
The average outcome of a trade if repeated many times, calculated as (probability × payout) − (probability of loss × cost). Positive expected value (+EV) trades are profitable over time. Professional traders focus on expected value rather than individual outcomes.
F
Fee
The cost charged by a platform for trading. Polymarket charges zero trading fees on most markets. Kalshi charges approximately 7% of profit on winning trades with a per-contract cap. Fees directly affect arbitrage calculations.
I
Implied Probability
The probability of an outcome as expressed by the market price. A contract trading at ¢65 implies a 65% probability. Comparing implied probabilities across platforms reveals where markets disagree.
K
Kalshi
A CFTC-regulated prediction market exchange based in the US. Kalshi offers event contracts on politics, economics, weather, entertainment, and more. As a regulated exchange, it provides legal certainty for US-based traders.
L
Limit Order
An order to buy or sell a contract at a specific price or better. Unlike market orders (which fill immediately at the best available price), limit orders wait in the order book until a matching counterparty appears. Limit orders give you price control but don't guarantee execution.
Liquidity
The ease with which a contract can be bought or sold without significantly affecting its price. High-liquidity markets have tight spreads and large order books. Low-liquidity markets are harder to trade and more prone to price slippage.
M
Market Maker
A participant who provides liquidity by placing both buy and sell orders in a market. Market makers profit from the spread between their bid and ask prices. Their activity is essential for efficient price discovery but shouldn't be confused with directional trading.
Market Resolution
The process of determining the outcome of a prediction market contract. After the event occurs, the platform verifies the result and pays out winning contracts at ¢100. Resolution criteria are defined when the market is created.
N
O
Odds
The price of a prediction market contract, representing the market's estimated probability of an outcome. Displayed in cents (¢0 to ¢100). Comparing odds across platforms is central to finding value.
P
Polymarket
A prediction market platform operating on the Polygon blockchain. Polymarket uses USDC for settlement and a Central Limit Order Book (CLOB) for trading. Known for deep liquidity on political and crypto markets.
Position
Your current holdings in a prediction market contract. A "long YES" position means you hold YES shares and profit if the event occurs. A "long NO" position profits if it doesn't. Position size is how much capital you have allocated.
Prediction Market
An exchange where participants trade contracts based on the outcomes of future events. Prices reflect the collective probability estimate of all participants. Prediction markets have been shown to outperform polls and expert forecasts.
Price Gap
A difference in the price of the same event across two platforms. A price gap of 5 cents means one platform prices an event 5 percentage points differently than the other. Large gaps may indicate arbitrage opportunities or information asymmetry.
S
Signal
A data point that suggests a potential opportunity. In ProfitLabs, three signal types are tracked: arbitrage (cross-platform profit), whale activity (large trades), and price gaps (platform disagreement). Signals are research inputs, not trading recommendations.
Slippage
The difference between the expected price of a trade and the actual execution price. Slippage occurs in low-liquidity markets when your order is large enough to fill multiple levels of the order book, pushing the price against you.
V
Volume
The total amount traded in a market over a given period. High volume indicates active interest and typically means tighter spreads and better price discovery. Low-volume markets are riskier to trade.
W
Wallet
A blockchain address used to trade on Polymarket. Each wallet has a public trading history that can be analyzed. Tracking wallet activity — especially wallets with large balances or strong track records — is a key research method.
Whale
A trader who makes large bets — typically $1,000 or more on a single trade. Whale activity is tracked as a signal because large traders have economic incentives to be well-informed. Clusters of whale trades on the same side are particularly noteworthy.
Y
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