In this guide
Key takeaway: Within prediction markets, a share's market price functions as the probability estimate. When a YES share trades at $0.65, participants collectively assess a 65% likelihood of that outcome occurring. Grasping this relationship between price and probability forms the bedrock of successful trading strategy.
Should you transition from traditional sports betting, prediction market odds operate quite differently. You will not encounter fractional odds (5/1), American odds (+400), or decimal odds (5.0). Rather, prediction markets employ a straightforward mechanism: share prices themselves encode the underlying probability assessment.
Price = Probability
All prediction market contracts split into two outcomes: YES and NO. Prices aggregate to roughly $1.00 (minus a modest spread captured by the market maker). The interpretation follows this pattern:
- YES at $0.72 = Collective view suggests 72% probability of occurrence
- NO at $0.28 = Collective view suggests 28% probability the event fails to occur
- YES at $0.50 = Equilibrium state — market shows no lean either direction
- YES at $0.95 = Near-certain outcome — merely 5% risk of non-occurrence
Calculating Your Expected Value
Expected value (EV) reveals whether a position generates profit across repeated trades. The calculation is straightforward:
EV = (Your probability x Potential profit) - ((1 - Your probability) x Potential loss)
Illustration: Suppose "Event X" trades at $0.40 (40% implied), yet your assessment puts true odds at 55%. Purchasing YES at $0.40 yields:
- Upside if YES resolves: $1.00 - $0.40 = $0.60
- Downside if NO resolves: $0.40
- EV = (0.55 x $0.60) - (0.45 x $0.40) = $0.33 - $0.18 = +$0.15 per share
Positive EV signals a mathematically sound trade. Across many such positions, favourable EV accumulates into tangible wealth creation.
The Spread
The gap separating the highest purchase offer (bid) from the lowest sale offer (ask) constitutes the spread. On Polymarket, actively traded contracts typically feature spreads of 1-3 cents. This mirrors the "vig" in sports betting yet proves substantially tighter:
- Prediction market spread: 1-3% (analogous to vig)
- Sports betting vig: 5-15% embedded within quoted odds
- Implied overround: Prediction market YES + NO prices approximate $1.00. Sports betting implied probabilities frequently total 110-115%
Reading the Order Book
The PolyGram order book depth visualisation displays all active buy and sell orders across price tiers. This reveals:
- Liquidity: Volume available for trading without triggering substantial price shifts
- Support/resistance: Price zones where concentrated orders form "walls" that dampen movement
- Market sentiment: Whether aggregate demand exceeds supply or vice versa at prevailing rates
Converting to Traditional Odds
For those preferring established odds notation:
| Market Price | Implied Prob. | Decimal Odds | American Odds |
| $0.80 | 80% | 1.25 | -400 |
| $0.65 | 65% | 1.54 | -186 |
| $0.50 | 50% | 2.00 | +100 |
| $0.25 | 25% | 4.00 | +300 |
| $0.10 | 10% | 10.00 | +900 |
Common Mistakes
- Treating price as an indicator of trade quality: A $0.90 contract is not automatically inferior to a $0.10 contract — profitability hinges solely on whether the quoted price aligns with genuine probability
- Overlooking the spread: Thinly traded markets may feature spreads of 5-10 cents, which substantially erodes your expected advantage
- Excessive conviction: Before wagering against consensus, consider why thousands of participants hold the opposite view
Discover current odds spanning 1,500+ contracts on PolyGram. Start trading on PolyGram →