In this guide
Key takeaway: Liquidity represents the cornerstone consideration for anyone trading prediction markets. Markets with substantial liquidity offer compressed bid-ask spreads, rapid order execution, and pricing that accurately reflects consensus. Polymarket dominates the space with over $1.5B in total traded volume; competing venues typically operate at substantially lower activity levels.
Prediction market liquidity shapes your entire trading experience — from the cost of entry to your ability to unwind exposure efficiently. However, many newcomers prioritise market selection over liquidity assessment. This article explores why liquidity fundamentally outweighs other considerations.
What is liquidity?
Within financial markets, liquidity refers to the ease with which you can transact without materially affecting the asset's price. Prediction markets exhibit three distinct liquidity dimensions:
- Depth: The aggregate quantity of shares standing at successive price tiers within the order book
- Spread: The distance separating the highest bid (willing buyer price) from the lowest ask (willing seller price)
- Volume: The quantity of shares exchanged throughout a specified timeframe
A market displaying 10,000 shares bid at 48 cents alongside 10,000 shares offered at 50 cents demonstrates strong liquidity. Conversely, 50 shares on either side with a 10-cent gap indicates poor liquidity.
Why liquidity matters for traders
Insufficient liquidity erodes returns through multiple channels:
- Expanded spreads: Transaction costs increase when entering and exiting trades
- Slippage: Substantial positions shift market prices unfavourably
- Locked-in positions: Absence of willing counterparties prevents exit prior to settlement
- Distorted pricing: Sparse markets fail to capture genuine probability assessments
How to measure prediction market liquidity
Prior to executing trades, evaluate these metrics:
- Order book depth: PolyGram's depth chart visualises concentrated buyer and seller interest
- 24h volume: Elevated trading activity correlates with improved execution likelihood
- Number of unique traders: Markets attracting 100+ distinct participants typically possess adequate liquidity for standard retail positions
- Spread percentage: Seek markets where spreads remain below 3 cents (3%) for economical execution
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 bids and asks, capturing the spread whilst furnishing depth to the broader market. Polymarket incentivises this activity through fee reductions and MATIC token distributions. PolyGram's liquidity engine replicates Polymarket's order book, guaranteeing PolyGram participants access identical depth as those trading Polymarket directly.
Tips for trading illiquid markets
- Employ limit orders exclusively — avoid market orders when book depth is sparse
- Distribute sizable orders across multiple price points
- Exercise restraint: establish your target price and await execution rather than accepting unfavourable fills
- Account for timing — thin markets frequently deepen as expiration approaches
Trade on the most liquid prediction market platform. Start trading on PolyGram →