Guide 2 May 2026 4 min read

Prediction Market Glossary 2026: 50 Essential Terms Explained

Prediction market trading comes with its own vocabulary drawn from finance, statistics, and blockchain technology. This glossary covers 64 essential terms every prediction market trader should understand — from order types and risk management to blockchain and forecasting concepts.

Core Trading Terms

Ask (Offer): The lowest price at which a seller is willing to sell shares. You pay the ask when buying at market price.
Bid: The highest price at which a buyer is willing to purchase shares. You receive the bid when selling at market price.
Bid-Ask Spread: The difference between best ask and best bid. Tighter spreads = more liquid market = lower trading cost.
CLOB (Central Limit Order Book): The order matching system used by Polymarket and PolyGram. Matches resting buy and sell orders by price and time priority.
Conditional Token: The on-chain representation of a YES or NO share in a prediction market. Stored in smart contracts on Polygon.
Fill Price: The actual price at which your order executed. May differ from the quoted price if the market moves between order placement and execution.
FOK (Fill or Kill): An order type that must be executed immediately in full or cancelled entirely. No partial fills.
Liquidity: The ease with which you can buy or sell shares without significantly affecting the price. High-volume markets with tight spreads are most liquid.
Market Order: An order to buy or sell at the best available current price. Executes immediately but at whatever the market offers.
Limit Order: An order to buy or sell only at a specified price or better. Rests in the order book until matched or cancelled.
Open Interest: The total value of outstanding unresolved positions in a market. Higher open interest = more trading activity and liquidity.
Slippage: The difference between the expected price and execution price, caused by insufficient liquidity at the target price.

Probability & Statistics Terms

Brier Score: A measure of prediction accuracy. Lower is better. Calculated as the mean squared error between your probability and the outcome (0 or 1).
Calibration: A measure of how well your probability estimates match actual outcomes. Well-calibrated means 70% confident predictions come true 70% of the time.
Expected Value (EV): The average outcome when accounting for all possibilities weighted by probability. Positive EV = profitable long-term bet.
Kelly Criterion: A mathematical formula for optimal position sizing: f = (bp - q) / b, where b = net odds, p = probability, q = 1-p.
Superforecaster: A trader/forecaster with demonstrated above-average calibration over many predictions, as defined in Philip Tetlock's research.

Blockchain & Settlement Terms

Polygon: The Layer 2 blockchain on which Polymarket and PolyGram operate. Offers sub-cent transaction fees and ~2 second finality.
USDC (USD Coin): The stablecoin used for prediction market settlement. 1 USDC = 1 USD, issued by Circle and backed by US Treasuries.
Smart Contract: Self-executing code on the blockchain that holds prediction market funds and automatically distributes payouts when markets resolve.
Oracle: A trusted data source that reports real-world outcomes to smart contracts. Polymarket uses UMA's optimistic oracle for resolution.
Gas: The fee paid to Polygon validators for processing a transaction. Typically less than $0.01 on Polygon.

Market Types

Binary Market: A market with exactly two outcomes (YES/NO). The most common prediction market format.
Categorical Market: A market with more than two possible outcomes (e.g., "Who will win the Republican nomination 2028?").
Scalar Market: A market where the payout scales with the outcome value (e.g., "What will BTC price be on December 31?").
Conditional Market: A market that only resolves if a conditioning event occurs. Voids if the condition is not met.

FAQ

Where can I learn more prediction market terminology?: PolyGram's API documentation covers technical terms in depth. Polymarket's help center covers user-facing concepts.
What is the difference between a prediction market and a futures contract?: A futures contract has a continuous price tied to an underlying asset. A prediction market has a binary $0 or $1 payout based on event outcomes.
What does it mean when a market is "resolved YES"?: The event occurred, and YES shares pay $1 each. NO shares pay $0. Settlement is automatic via smart contract.