Guide 2 May 2026 4 min read

Prediction Market Glossary 2026: 50 Essential Terms Explained

Prediction market trading comes with its own vocabulary drawn from finance, statistics, and blockchain technology. This glossary covers the 50 most important terms every trader should understand.

Core Trading Terms

Ask (Offer): The lowest price at which a seller is willing to sell shares. You pay the ask when buying at market price.
Bid: The highest price at which a buyer is willing to purchase shares. You receive the bid when selling at market price.
Bid-Ask Spread: The difference between best ask and best bid. Tighter spreads = more liquid market = lower trading cost.
CLOB (Central Limit Order Book): The order matching system used by Polymarket and PolyGram. Matches resting buy and sell orders by price and time priority.
Conditional Token: The on-chain representation of a YES or NO share in a prediction market. Stored in smart contracts on Polygon.
Fill Price: The actual price at which your order executed. May differ from the quoted price if the market moves between order placement and execution.
FOK (Fill or Kill): An order type that must be executed immediately in full or cancelled entirely. No partial fills.
Liquidity: The ease with which you can buy or sell shares without significantly affecting the price. High-volume markets with tight spreads are most liquid.
Market Order: An order to buy or sell at the best available current price. Executes immediately but at whatever the market offers.
Limit Order: An order to buy or sell only at a specified price or better. Rests in the order book until matched or cancelled.
Open Interest: The total value of outstanding unresolved positions in a market. Higher open interest = more trading activity and liquidity.
Slippage: The difference between the expected price and execution price, caused by insufficient liquidity at the target price.

Probability & Statistics Terms

Brier Score: A measure of prediction accuracy. Lower is better. Calculated as the mean squared error between your probability and the outcome (0 or 1).
Calibration: A measure of how well your probability estimates match actual outcomes. Well-calibrated means 70% confident predictions come true 70% of the time.
Expected Value (EV): The average outcome when accounting for all possibilities weighted by probability. Positive EV = profitable long-term bet.
Kelly Criterion: A mathematical formula for optimal position sizing: f = (bp - q) / b, where b = net odds, p = probability, q = 1-p.
Superforecaster: A trader/forecaster with demonstrated above-average calibration over many predictions, as defined in Philip Tetlock's research.

Blockchain & Settlement Terms

Polygon: The Layer 2 blockchain on which Polymarket and PolyGram operate. Offers sub-cent transaction fees and ~2 second finality.
USDC (USD Coin): The stablecoin used for prediction market settlement. 1 USDC = 1 USD, issued by Circle and backed by US Treasuries.
Smart Contract: Self-executing code on the blockchain that holds prediction market funds and automatically distributes payouts when markets resolve.
Oracle: A trusted data source that reports real-world outcomes to smart contracts. Polymarket uses UMA's optimistic oracle for resolution.
Gas: The fee paid to Polygon validators for processing a transaction. Typically less than $0.01 on Polygon.

Market Types

Binary Market: A market with exactly two outcomes (YES/NO). The most common prediction market format.
Categorical Market: A market with more than two possible outcomes (e.g., "Who will win the Republican nomination 2028?").
Scalar Market: A market where the payout scales with the outcome value (e.g., "What will BTC price be on December 31?").
Conditional Market: A market that only resolves if a conditioning event occurs. Voids if the condition is not met.

FAQ

Where can I learn more prediction market terminology?: PolyGram's API documentation covers technical terms in depth. Polymarket's help center covers user-facing concepts.
What is the difference between a prediction market and a futures contract?: A futures contract has a continuous price tied to an underlying asset. A prediction market has a binary $0 or $1 payout based on event outcomes.
What does it mean when a market is "resolved YES"?: The event occurred, and YES shares pay $1 each. NO shares pay $0. Settlement is automatic via smart contract.