In this guide
Key takeaway: Liquidity stands as the paramount consideration for anyone trading prediction markets. When liquidity runs deep, you enjoy compressed spreads, rapid order execution, and fair market pricing. Polymarket dominates the sector with $1.5B+ in total traded volume; most rival platforms lag considerably behind in terms of available depth.
Prediction market liquidity shapes your entire trading experience — influencing both the cost of entry and your ability to exit swiftly. However, newcomers often prioritise market selection over liquidity assessment. This resource clarifies why liquidity outweighs all other considerations.
What is liquidity?
Liquidity in financial markets refers to the ease with which you can transact an asset without materially affecting its price. Within prediction markets, three distinct elements comprise liquidity:
- Depth: The quantity of shares accessible at various price tiers within the order book
- Spread: The difference separating the highest bid (best purchase price) and lowest ask (best sale price)
- Volume: The total number of shares exchanged during a specific timeframe
A market displaying 10,000 shares offered at 48 cents and 10,000 requested at 50 cents exhibits strong liquidity. Conversely, a market with merely 50 shares on each side separated by a 10-cent gap demonstrates poor liquidity.
Why liquidity matters for traders
Insufficient liquidity erodes your profits through multiple channels:
- Wider spreads: You incur greater costs when opening and closing trades
- Slippage: Substantial positions cause the market to shift unfavourably
- Trapped positions: Absence of willing buyers prevents you from unwinding before the market settles
- Price inaccuracy: Sparse markets produce prices misaligned with genuine probabilities
How to measure prediction market liquidity
Prior to executing any trade, evaluate these metrics:
- Order book depth: PolyGram's depth chart allows you to assess the scale of buy and sell interest
- 24h volume: Elevated trading activity correlates with improved order fulfilment odds
- Number of unique traders: Markets attracting 100+ distinct participants typically possess sufficient liquidity for standard retail positions
- Spread percentage: Target markets where spreads remain below 3 cents (3%) to minimise transaction expenses
Which platforms have the most liquidity?
| Platform | Cumulative volume | Avg. spread |
| Polymarket | $1.5B+ | 1-3 cents |
| Kalshi | $500M+ | 2-5 cents |
| Betfair Exchange | N/A (sports-focused) | 1-2% on sports |
| Augur/Azuro | $50M+ | 5-15 cents |
How market makers create liquidity
Institutional liquidity providers simultaneously post competing buy and sell quotations, earning profits on the spread whilst supplying depth to the broader market. Polymarket compensates these providers through fee reductions and MATIC incentives. PolyGam's proprietary liquidity engine replicates Polymarket's order book structure, guaranteeing PolyGram participants access equivalent depth as those trading Polymarket directly.
Tips for trading illiquid markets
- Restrict yourself to limit orders — avoid market purchases when order books are sparse
- Distribute sizable positions across multiple price points
- Exercise patience: establish your target price and await execution rather than accepting unfavourable crossing prices
- Account for timing — sparse markets frequently attract greater participation as settlement approaches
Trade on the most liquid prediction market platform. Start trading on PolyGram →