Prediction-market glossary
Plain definitions for the words used on this site and on Polymarket. Written for someone who has used a regular sportsbook before but is new to prediction markets.
The basics
- Prediction market
- A market where you trade contracts that pay $1 if a real-world event happens and $0 if it does not. The price is the market's collective probability estimate. A contract trading at $0.62 means traders think the event has a 62% chance.
- Polymarket
- The largest prediction market by volume. Runs on Polygon, settles on-chain, denominates everything in pUSD (a 1:1 USD-pegged token). Front of Goal routes orders to Polymarket and earns a builder fee on the volume we send.
- CLOB
- Central Limit Order Book. The same matching engine model used by stock exchanges: every buy and sell sits at a price level, and crossing orders match. Polymarket's CLOB is what you trade against here.
- Outcome token
- An ERC-1155 token issued by Polymarket's conditional-tokens contract. One token per possible outcome. The winning outcome's tokens redeem for $1; the losing ones for $0.
- Implied probability
- Price expressed as a percentage. A $0.41 contract has a 41% implied probability. When prices for all outcomes in a market sum above $1, the gap is the spread.
Reading prices
- Bid
- The highest price someone is currently willing to buy at. If you sell at market, this is what you get.
- Ask
- The lowest price someone is currently willing to sell at. If you buy at market, this is what you pay.
- Spread
- Ask minus bid. A two-cent spread on a $0.50 contract is wide; a half-cent spread is tight. Tight markets are cheaper to enter and exit.
- Midpoint
- The average of the bid and the ask. The site's price displays use the midpoint when it exists; otherwise the last trade.
- Depth
- How many shares sit at each price level. Deep books absorb large trades without moving the price; thin books move on every order.
- Tick size
- The minimum price increment, $0.01 on Polymarket V2. You cannot place a buy at $0.503; round to $0.50 or $0.51.
Order types
- Limit order
- Buy or sell at a specific price or better. If the market never reaches your price, the order does not fill.
- Market order
- Take whatever is on the book right now. Fills immediately, but you pay the spread and any slippage if your size exceeds top-of-book depth.
- GTC (Good Til Cancelled)
- Sits on the book until it fills or you cancel. Default for resting limit orders.
- FOK (Fill or Kill)
- Either fill the entire order at the limit price or cancel it. No partial fills.
- FAK (Fill And Kill)
- Fill what is available at the limit price, cancel the rest. Useful for taking the top of the book without leaving a resting order.
Market structure
- Binary market
- Two outcomes, Yes and No. "Will Liverpool win the Premier League?" is binary.
- Categorical market
- Three or more mutually exclusive outcomes. A 3-way moneyline (home / draw / away) is categorical.
- Negative-risk market
- A categorical market built from binary children where exactly one wins, like a tournament-winner with 32 teams. Polymarket settles these through the NegRiskAdapter, which mints and merges position tokens efficiently.
- Outright
- A market on a season or tournament outcome, not a single match. Examples: Premier League winner, World Cup top scorer, La Liga relegation.
- Open interest
- The total dollar value of contracts currently held by traders. Higher open interest means a larger pool of money committed to the market.
- Volume
- The total dollar value traded in a window, not the value held. Volume can be much larger than open interest if the market churns. The 30-day volume on every page is rolling.
How wallets work here
- Non-custodial
- Front of Goal never holds your funds or your private key. Every trade is signed by your wallet; we forward the signature to Polymarket. If we disappeared tomorrow, your money would still be on Polygon under your control.
- Magic
- An email-and-Google sign-in that creates a self-custodial wallet without a seed phrase. Convenient, fast, and the keys can be exported any time. Built on Polygon for low gas.
- Deposit wallet
- A small smart-contract wallet Polymarket deploys for each Magic user. Holds your pUSD, batches operations gaslessly through the builder relayer, and is owned by your Magic key.
- Safe
- A Gnosis Safe smart wallet, used by some imported Polymarket accounts. Multi-sig capable, more flexible, but operations cost gas unless routed through the builder relayer.
- Builder fee
- A small fee Polymarket pays third-party frontends for the volume they route. Front of Goal's fee is 0.5%, attached to every order. The user pays the same all-in price either way; the fee comes from Polymarket's existing taker spread, not on top.
Trading concepts
- Kelly criterion
- A bet-sizing formula that maximizes long-run growth. If your edge is small, Kelly says bet a small fraction; if your edge is large, bet a large fraction. The trade modal computes Kelly when you enter your own probability estimate.
- Edge
- The gap between your probability estimate and the market price. Buying a $0.40 contract on something you think is 50% gives you a 10-point edge.
- Vig
- The cumulative spread across all outcomes in a market. On a soccer 3-way moneyline, the prices of home, draw, and away might sum to $1.04 instead of $1.00. The 4 cents is the vig.
- Slippage
- The difference between the price you saw and the price you got. Caused by depth running out or the market moving between click and fill.
Want more
The Polymarket docs at docs.polymarket.com cover the contracts and APIs in full. The about page explains what we add on top.