In this guide
Key takeaway: Within prediction markets, a share's price functions as the probability itself. When a YES share trades at $0.65, the collective market assessment is that a 65% likelihood exists for the outcome to occur. Grasping this fundamental relationship between price and probability forms the cornerstone of successful trading strategy.
Those transitioning from traditional sports betting will notice that prediction market odds operate on entirely different mechanics. Fractional odds (5/1), American odds (+400), and decimal odds (5.0) do not appear here. Instead, prediction markets employ a transparent mechanism: share price directly equates to the underlying probability.
Price = Probability
All prediction market contracts split into two opposing positions: YES and NO. These prices combine to roughly $1.00 in total (accounting for a modest spread retained by the market maker). The interpretation follows this pattern:
- YES at $0.72 = The market assesses a 72% likelihood of occurrence
- NO at $0.28 = The market assesses a 28% likelihood of non-occurrence
- YES at $0.50 = Fifty-fifty proposition — neutral market positioning
- YES at $0.95 = Overwhelming consensus — merely 5% probability of the opposite outcome
Calculating Your Expected Value
Expected value (EV) establishes whether a position generates profit over repeated execution. The calculation remains straightforward:
EV = (Your probability x Potential profit) - ((1 - Your probability) x Potential loss)
Suppose a market quotes "Event X" at $0.40 (representing 40%), yet your analysis suggests the true probability stands at 55%. Should you purchase YES at $0.40:
- Profit upon YES resolution: $1.00 - $0.40 = $0.60
- Loss upon NO resolution: $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 numerous positions, positive EV compounds into tangible wealth accumulation.
The Spread
The gap separating the highest purchase offer (bid) from the lowest sale offer (ask) constitutes the spread. Polymarket's active outcome markets typically display spreads between 1-3 cents. This mechanism parallels the "vig" in sports betting yet operates at substantially reduced costs:
- Prediction market spread: 1-3% (functionally equivalent to vig)
- Sports betting vig: 5-15% embedded within the quoted odds
- Implied overround: Prediction market YES and NO prices approximate $1.00 total. Sports betting implied probabilities frequently reach 110-115%
Reading the Order Book
The PolyGram order book depth chart displays all active buy and sell orders arranged by price tier. This visualization reveals:
- Liquidity: Transaction volume available at current pricing without slippage
- Support/resistance: Price zones containing substantial order clusters, forming barriers against movement
- Market sentiment: Whether demand or supply dominates at the prevailing price level
Converting to Traditional Odds
Should you prefer conventional odds representations:
| 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 a quality indicator: A $0.90 position carries no inherent advantage or disadvantage relative to a $0.10 position — only whether pricing accurately reflects true probability matters
- Neglecting the spread: Thin markets may feature 5-10 cent spreads, substantially diminishing your statistical advantage
- Excessive conviction: Before dismissing thousands of market participants' collective view, ensure your reasoning justifies such disagreement
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