Key takeaway: For prediction market participants, liquidity stands as the paramount consideration. Abundant liquidity delivers narrow bid-ask spreads, swift order execution, and fair market pricing. Polymarket dominates with over $1.5B in total traded volume; rival platforms typically operate at substantially lower liquidity levels.
Liquidity in prediction markets shapes your entire trading experience — influencing execution costs and your capacity to unwind positions efficiently. Yet novice traders often overlook liquidity depth, instead prioritising market selection. This article clarifies why market depth outweighs nearly every other consideration.
What is liquidity?
Liquidity in financial trading refers to the ease with which you can transact an asset without materially altering its market price. Within prediction markets, three distinct dimensions define liquidity:
- Depth: The quantity of contracts available at successive price tiers within the order book
- Spread: The distance separating the highest buyer's offer from the lowest seller's asking price
- Volume: The total number of contracts traded during a specified timeframe
A market displaying 10,000 contracts bid at 48 cents alongside 10,000 offered at 50 cents demonstrates strong liquidity. Conversely, 50 contracts on either side with a 10-cent separation signals poor liquidity conditions.
Why liquidity matters for traders
Insufficient liquidity erodes profitability through multiple channels:
- Expanded spreads: Transaction costs rise when entering and closing trades
- Slippage: Substantial position sizes push prices unfavourably during execution
- Illiquid positions: Absence of willing counterparties may prevent exit prior to contract settlement
- Distorted pricing: Shallow markets generate quotes misaligned with genuine probabilities
How to measure prediction market liquidity
Prior to committing capital, evaluate these metrics:
- Order book depth: PolyGram's depth visualisation tool displays cumulative buy and sell interest
- 24h volume: Elevated trading activity indicates superior fill probability — particularly advantageous for smaller positions
- Number of unique traders: Markets attracting 100+ distinct participants typically accommodate standard retail order sizes
- Spread percentage: Seek markets where the spread remains below 3 cents (3%) to minimise transaction drag
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 bids and asks, capturing spread revenue whilst supplying counterparty access to other market participants. Polymarket compensates market makers through fee reductions and MATIC incentive programmes. PolyGram's proprietary liquidity aggregation system replicates Polymarket's order book structure, guaranteeing PolyGram clients access to equivalent depth as native Polymarket users.
Tips for trading illiquid markets
- Deploy limit orders exclusively — avoid market orders in sparse trading conditions
- Divide substantial orders across multiple price points
- Exercise patience: establish your desired price and await execution rather than accepting unfavourable fills
- Factor in timing — shallow markets frequently deepen as contract expiration approaches
Trade on the most liquid prediction market platform. Start trading on PolyGram →