Prediction Market Terms Explained: The Complete Glossary in Plain English

You opened a prediction market. The price says 70¢. You're not sure if that's what you pay, what the crowd thinks the odds are, or something else entirely. It doesn't feel like it matters until suddenly it does. This prediction market glossary covers 50 terms you'll encounter on platforms like Polymarket, Kalshi, Metaculus, and Manifold. Not a textbook. Not a developer reference. Organized the way you'll run into them. If you're starting from zero, read How Prediction Markets Work first.

Prediction Market Terms: Market Structure

Before you trade anything, you're looking at a structure. A market, inside an event, on a platform. Each word means something specific, and they don't all mean the same thing across platforms. For a platform-by-platform breakdown, see our Platform Comparison Guide.

1. Prediction Market

A prediction market is a market where participants trade contracts whose payoff depends on the outcome of a future event, so prices function as real-time probability estimates.

In plain English: A crowd-powered odds board where the odds move because real people are staking money on their beliefs.

Platform note: Kalshi brands these as "event contracts" to emphasize their regulated financial structure; Polymarket uses tokenized outcome positions on a blockchain.

2. Event Contract

An event contract is a standardized financial contract that settles to a fixed amount (typically $1.00) if a specified condition is met, and $0.00 if it is not.

In plain English: A $1 coupon: worth a dollar if you're right, worth nothing if you're wrong.

3. Binary Market (YES/NO Market)

A binary market is a market with exactly two mutually exclusive outcomes, YES and NO, where contracts are priced between $0.00 and $1.00.

In plain English: One question, two buttons: happening or not happening.

4. Multi-Outcome Market (Categorical Market)

A multi-outcome market is a market where multiple mutually exclusive outcomes each carry a separate price or probability, with all outcome prices approximately summing to 1.00 (100%).

In plain English: "Which of these happens?" With live odds on each option.

5. Scalar Market (Range / Numeric Market)

A scalar market is a market whose resolution is a number, a date, or a value within a defined range, rather than a binary YES/NO outcome.

In plain English: You're predicting "how much" or "when," not just "will it happen."

6. Market (Platform Object)

A market is a single tradeable proposition representing one specific outcome or question on a platform.

Platform note: On Kalshi, "market" refers to a single tradeable outcome; the grouping unit is called an "event." On Polymarket, "event" groups related markets together.

7. Event (Grouping)

An event is a collection of related markets organized under one umbrella topic or question on a platform.

In plain English: The folder. Markets are the files inside it.

8. Series (Kalshi)

A series is a collection of related events covering disjoint time periods that share a common ticker prefix. A Kalshi-specific structural concept.

In plain English: A repeating question, like "Will inflation exceed 3% this month?" run every month, stacked into one organized series.

Prediction Market Terms: Reading the Price

The number you see on a prediction market isn't exactly a price, and it isn't exactly a probability. It's both, with fees, spreads, and rounding between them. This section untangles what you're actually looking at when you see "70¢."

9. Price (Contract Price)

The contract price is the traded value of an outcome contract, expressed between $0.00 and $1.00 for binary markets, where $1.00 represents a certain YES outcome.

In plain English: What it costs to own one share of "this happens," in cents on the dollar.

10. Implied Probability

Implied probability is the market's consensus probability estimate, derived from the current contract price. For $1.00-settling binary markets, it is calculated as price × 100%, before accounting for fees and spread.

In plain English: The crowd's current best guess, expressed as a percentage.

Common confusion: A 70¢ price implies roughly 70% probability, but only roughly. The spread, fees, and whether you're looking at the bid, ask, or midpoint all affect the real number.

11. Midpoint (Mid Price)

The midpoint is the arithmetic average of the best bid and best ask prices, commonly displayed as the "probability" figure on order-book prediction markets.

Common confusion: The midpoint is not what you'll pay. When you buy, you pay the ask (higher). When you sell, you receive the bid (lower).

12. Bid

The bid is the highest price at which a buyer currently has an active order to purchase an outcome contract.

In plain English: The best "I'll pay this much" on the board right now.

13. Ask (Offer)

The ask is the lowest price at which a seller currently has an active order to sell an outcome contract.

In plain English: The best "I'll sell for this" on the board right now.

14. Bid-Ask Spread

The bid-ask spread is the difference between the best ask price and the best bid price. It represents the cost of immediately buying and then immediately selling the same contract.

In plain English: The "gap" you lose if you buy and sell right away without waiting. Wider spread = less liquid market = more expensive to trade.

15. Fair Value

Fair value is a trader's estimate of the true probability of an outcome, translated into a contract price, independently of what the current market price shows and net of fees and friction.

In plain English: Your honest answer to "what percent is it, really?" Before you look at what the market says.

16. Calibration

Calibration is a property of a forecaster's probability estimates: a forecaster is well-calibrated when events they assign a probability of p% actually occur approximately p% of the time, across many forecasts.

In plain English: If you say "70%" a lot, you should be right about 70 out of 100 times. Not 90. Not 50.

17. Overconfidence

Overconfidence is the systematic tendency to assign probabilities that are too extreme (too close to 0% or 100%) relative to actual outcome frequencies, resulting in poor calibration.

In plain English: Being too sure, too often. The most common forecasting error, even among experienced traders.

18. Base Rate / Reference Class

A base rate is the historical frequency of an event within a defined reference class — the set of similar past situations used as the starting point for a probability estimate before considering case-specific details.

In plain English: The "boring average" before you factor in anything special about this particular situation.

Example: Before analyzing a specific election, ask: how often does the incumbent party win in midterm elections? That's the base rate. Start there, then adjust.

Prediction Market Terminology: Orders and Execution

Knowing what you're buying and what the price means gets you halfway there. This section covers the prediction market terminology of execution: the mechanics of getting in, and what can go wrong between clicking "buy" and your trade filling.

19. Limit Order

A limit order is an instruction to buy or sell a contract only at a specified price or better. It will not execute at a worse price than specified.

In plain English: "I'll buy at 68¢, not 70¢." Your order waits until someone meets your price.

20. Market Order

A market order is an instruction to execute immediately at the best available price, without specifying a price limit.

In plain English: "Get me in now, at whatever the current price is." Speed over price.

Common confusion: Market orders on thin markets can fill at worse prices than expected. See: slippage.

21. Resting Order

A resting order is a limit order that has been submitted and is sitting on the order book, waiting to be matched by a counterparty at the specified price.

In plain English: An offer on the shelf, waiting for a taker. Patient traders use resting orders to avoid paying the spread.

22. Fill / Partial Fill

A fill occurs when an order (or part of an order) is executed against a matching counterparty order. A partial fill occurs when only a portion of the requested size is executed.

In plain English: Your order got matched. Partial fill: you asked for 1,000 shares, but only 200 were available at your price.

23. Slippage

Slippage is the difference between the expected execution price and the actual average price at which an order fills, typically occurring because the order consumes multiple price levels in the order book.

In plain English: You expected 70¢ but got an average of 72¢ because not enough shares were available at 70¢.

24. Position Size

Position size is the total dollar amount or number of shares committed to a single outcome in one market.

In plain English: How much you've put on one side of one question. The number that determines whether being wrong is a minor setback or a significant loss.

25. Fee / Transaction Cost

A transaction fee is the cost charged by a platform per trade, typically expressed as a percentage of the trade value or as a fixed amount per contract.

In plain English: What the platform takes each time you buy or sell. Fees reduce your effective return even when you're right.

26. Liquidity

Liquidity is a measure of how easily a contract can be bought or sold at or near the current market price, without significantly moving that price. It is determined by order book depth, spread size, and trading volume.

In plain English: How easy it is to get in or out at a fair price. Low liquidity means wide spreads, more slippage, and exits at worse prices.

Prediction Market Terms: Resolution and Settlement

This is the section most beginners skip. It's also the one that matters most when things get complicated. Markets don't just end. They resolve, through a defined process, against specific criteria. The headline rarely tells the full story.

27. Resolution

Resolution is the process by which a prediction market's outcome is officially determined and finalized, enabling winning positions to be paid out and losing positions to expire worthless.

In plain English: The moment the market declares a winner and closes the books.

28. Settlement / Payout

Settlement is the process of distributing payouts to holders of winning positions following resolution, typically automated on regulated or blockchain-based platforms.

In plain English: When you actually receive your money after being right.

29. Oracle

An oracle is a third-party data source or mechanism that provides verified real-world information to a prediction market platform to determine how a market resolves. On Polymarket, this role is filled by the UMA Protocol. For a broader look at how prediction markets are regulated, see our Legal and Regulatory Guide.

In plain English: The trusted referee that tells the market what actually happened.

30. UMA Optimistic Oracle

The UMA Optimistic Oracle is Polymarket's resolution mechanism: a decentralized dispute system where a proposed resolution is considered final unless challenged within a defined dispute window, at which point token-holder arbitration determines the outcome.

In plain English: Someone proposes the answer, a clock starts, and if no one disputes it in time, it becomes final. If there's a dispute, UMA token holders vote.

31. Resolution Rules / Resolution Criteria

Resolution rules are the specific, written conditions that define exactly how and under what circumstances a market resolves YES, NO, or is voided. They are distinct from the market's title or description.

Critical confusion: The market title is not the resolution rules. Always read the full resolution criteria before trading. The title is shorthand. The criteria are what the market actually trades on.

32. Ambiguous Resolution

An ambiguous resolution occurs when a market's outcome cannot be clearly determined under its stated resolution criteria, typically because the event occurred in a way the criteria did not anticipate.

33. Annulled / N/A / Voided

A market is annulled, marked N/A, or voided when it is cancelled rather than resolved. This typically occurs because the underlying event did not happen, the resolution criteria cannot be applied, or the market was created in error. Positions are refunded.

In plain English: The market is cancelled. Everyone gets their money back.

Platform note: Terminology varies. Metaculus uses "Annulled"; Manifold uses "N/A"; Polymarket uses "void" or "N/A."

34. Close Date vs. Resolution Date

The close date is the date and time when trading on a market stops; the resolution date is the separate date when the outcome is officially determined and settlement occurs. These are often not the same date.

In plain English: Trading ends first. The verdict comes later. You can be right and still be waiting weeks.

Common confusion: Many beginners assume the market resolves when it closes. It doesn't. A market about an election may close on election night but not resolve until certified results are published days later.

35. Tie Handling

Tie handling refers to the rules a platform applies when a multi-contract market's outcome results in an exact statistical tie between two or more options. On PredictIt, a tie results in all tied contracts closing at $0.50.

Prediction Market Terminology: Positions and Risk

Once you've traded, you own something. Here's how to read what you own, how to think about what you're risking, and what your options are before the market resolves.

36. YES Shares / NO Shares

YES shares and NO shares are outcome-specific positions in a binary prediction market. YES shares pay $1.00 if the outcome occurs; NO shares pay $1.00 if it does not.

In plain English: The side you picked. YES shares = you believe it happens. NO shares = you believe it doesn't.

37. Long / Short

A long position profits if the probability of an outcome increases (typically holding YES shares); a short position profits if the probability decreases (typically holding NO shares or selling YES shares).

In plain English: Long = you're rooting for it to happen. Short = you're rooting against it.

38. Open Position

An open position is a prediction market trade that has been executed but not yet settled. The market has not yet resolved, and the position's value remains at risk.

In plain English: A bet you've placed that's still live. The clock is still running.

39. Unrealized P&L

Unrealized profit and loss (P&L) is the gain or loss on an open position calculated at the current market price. It is what you would receive if you sold your position right now, minus what you paid.

In plain English: What you'd make or lose if you exited today. It's "unrealized" because you haven't actually closed the trade yet.

40. Hedge

A hedge is a trade taken in the opposite direction of an existing position, or in a correlated market, to reduce total exposure and limit potential losses.

In plain English: A safety net. If you're heavily long on an outcome, a hedge protects you from losing everything if you're wrong.

41. Exposure

Exposure is the total amount of capital at risk across a set of positions. It represents the maximum loss if all positions resolve against you.

In plain English: The honest number: how much could you lose if everything goes wrong?

42. Exit / Close Position

Exiting or closing a position means selling your shares before market resolution, locking in gains or cutting losses at the current market price rather than waiting for the outcome.

In plain English: Cashing out before the answer comes in. You don't have to wait for resolution to take your profit or stop a loss.

Prediction Market Terms: Platform Mechanics

You don't need to understand how a stock exchange works to buy a stock. But when prices move in ways that seem strange, or a market is hard to trade in and out of, the reason usually lives in this section.

43. Order Book / CLOB (Central Limit Order Book)

An order book is a real-time, organized list of all outstanding buy (bid) and sell (ask) orders at various price levels for a given market. A Central Limit Order Book (CLOB) is a specific exchange structure where resting orders are matched by price-time priority when a counterparty order arrives.

In plain English: The live bulletin board of who's willing to buy or sell, at what price, and for how many shares. Polymarket uses a CLOB, like a stock exchange.

44. Automated Market Maker (AMM)

An automated market maker is a mechanism that sets prices algorithmically based on a mathematical formula, allowing traders to execute against a liquidity pool rather than matching a human counterparty.

In plain English: Instead of waiting for a person to take the other side of your trade, you trade against a math formula that adjusts the price as you go.

45. Liquidity Pool

A liquidity pool is the pool of capital that an automated market maker uses to fill trades, contributed by liquidity providers and governed by the AMM's pricing formula.

In plain English: The pile of chips the market uses to let you trade even when no one is on the other side at that exact moment.

46. Market Maker / Liquidity Provider (LP)

A market maker is a participant (or mechanism) that provides liquidity by posting both buy and sell quotes in a market. A liquidity provider (LP) supplies capital or resting orders to keep a market tradeable, often in exchange for fee incentives.

In plain English: The people (or bots) making sure there's always someone to trade with. Without them, thin markets become untradeable.

47. Outcome Token

An outcome token is a blockchain-based tokenized representation of a specific position in a prediction market (for example, a YES token or NO token) that can be held, traded, or redeemed upon resolution.

Platform note: Outcome tokens are specific to Polymarket's architecture, built on the Conditional Token Framework (CTF). Other platforms use account-based position tracking.

48. Volume

Volume is the total number of contracts or shares traded in a market over a defined time period, typically expressed as daily volume.

In plain English: How active the market is. High volume = lots of people trading. Low volume = wide spreads, fewer resting orders to fill against.

49. Open Interest

Open interest is the total number of outstanding contracts or shares in a market that have been opened but not yet settled or closed. It is a measure of how much capital is committed to a market at any given time.

In plain English: How many positions are still live. High open interest signals genuine commitment to a market.

50. LMSR (Logarithmic Market Scoring Rule)

The Logarithmic Market Scoring Rule (LMSR) is a market-maker mechanism, developed by economist Robin Hanson, that determines prices through a cost function guaranteeing an always-available counterparty at every probability.

In plain English: An academic formula that lets you trade probabilities even in a thin market, because the math itself acts as the counterparty.

That 70¢ you saw at the start? It's the crowd's implied probability (approximately 70%), with some spread and fees baked in. The resolution rules are worth reading before you enter, not after. The bid-ask spread is why immediately buying and selling costs you money even if the market doesn't move.

Fifty prediction market terms is a lot to absorb at once. In practice, most trading comes down to a handful: implied probability, limit order, spread, resolution criteria, and close date vs. resolution date. Get comfortable with those five and the rest of this prediction market glossary follows naturally.

Keep going: How Prediction Markets Work explains the mechanics behind everything in this glossary, including why prices move when no news has broken.

The Platform Comparison shows you which of the four platforms fits how you actually want to trade.