Prediction Market Glossary: 40 Terms in Plain English
Every term below gets a plain-English definition in the first sentence, then one practical note about why it matters for your money. These are the 40 words a beginner actually meets on Polymarket or Kalshi, grouped by theme. New to all of it? Start with what is a prediction market?
The basics
Prediction market
A marketplace where people trade yes/no shares tied to future events, so prices become live probability estimates. Unlike a sportsbook, you trade against other people, not the house.
Event contract
The thing you actually buy: a contract paying a fixed amount (usually $1) if a defined event happens, $0 if not. "Event contract" is the regulator-approved term you'll see on Kalshi.
Yes share / No share
The two sides of every market. Exactly one of them pays $1 at the end, which is why their prices add up to about a dollar.
Price
What one share costs right now, between 1¢ and 99¢. It doubles as the market's probability estimate, which makes it the most information-dense number on the screen.
Implied probability
The price read as a percentage: 65¢ implies a 65% chance. Converting prices to probabilities in your head is the core beginner skill — drill it here.
Multi-outcome market
A market with more than two options, like "Who wins the election?" with five candidates. Each option has its own yes/no pair, and all option prices together sum near $1.
Volume
Total money traded in a market so far. High volume means many opinions are priced in and the market is harder to beat, but also cheaper to trade.
Crowd wisdom
The idea that many independent guesses average out to something accurate. It's why calibrated market prices are hard to beat, and why your edge must come from information the crowd lacks.
Prices and probability
Edge
The gap between your honest probability estimate and the market's price. No gap, no trade — this single word separates trading from gambling.
Expected value (EV)
Your average result if the same bet repeated forever: (your probability × win amount) minus (chance of losing × stake). Positive EV requires your estimate to genuinely beat the price — check any bet with the free calculator.
Calibration
How well probabilities match reality over many predictions. Research on the Iowa Electronic Markets (running since 1988) shows market prices are well-calibrated on average: 70% markets resolve Yes roughly 70% of the time.
Favorite-longshot bias
A documented pattern from horse racing to prediction markets: cheap longshots tend to be overpriced because they feel like lottery tickets. It's the classic beginner trap at 5–10¢.
Mispricing
A price that differs from the best available estimate of the true probability. Finding mispricings is the whole job; they're rarest in high-volume markets and around major news.
Brier score
A standard accuracy score for probability forecasts: the average squared gap between your stated probability and what happened (lower is better). Useful for scoring your paper-trading journal.
Trading mechanics
Order book
The live list of everyone's buy and sell offers at each price. Reading it tells you what you'll actually pay, not just the headline price.
Bid / Ask
The bid is the highest price buyers offer; the ask is the lowest price sellers accept. You buy instantly at the ask and sell instantly at the bid.
Spread
The gap between bid and ask. It's the toll you pay for trading immediately, and it's widest in thin markets — a hidden fee beginners forget.
Market order
An order that executes immediately at the best available price. Fast but can cost more than expected in thin markets (see slippage).
Limit order
An order that only executes at your chosen price or better. Slower — it may never fill — but you control the price exactly. Beginners in thin markets should prefer limits.
Slippage
The difference between the price you expected and the price you actually got, caused by your own order eating through the order book. Big orders in small markets slip the most.
Liquidity
How much money is actively trading, visible as order-book depth and tight spreads. Liquid markets are cheap to enter and exit; illiquid ones quietly tax every move.
Market maker
A trader who posts both buy and sell offers, earning the spread while providing liquidity. Their presence is why busy markets have tight spreads.
Position
Everything you currently hold in a market, like "200 Yes shares at an average 33¢." Your position, not your opinion, is what gains or loses money.
Cash out / early exit
Selling your shares before the market resolves, locking in a profit or cutting a loss at the current price. The exit option is a key difference from a sportsbook bet.
Resolution and settlement
Resolution
The moment a market's outcome is officially decided and shares pay out $1 or $0. Everything before resolution is just prices moving.
Resolution criteria
The exact written rules for settling: what counts as Yes, by what deadline, according to which source. Experienced traders read this before the price — the fine print, not the headline, decides who gets paid.
Resolution source
The specific authority the market will consult: an official statistic, a news organization, a sports league. If the source and your assumption differ, the source wins.
Settlement
The mechanical payout after resolution: winning shares convert to $1 each in your balance. Timing varies by platform from minutes to days.
Oracle
On blockchain-based platforms like Polymarket, the system that feeds the real-world outcome onto the chain (Polymarket uses one called UMA, where token holders vote on disputed outcomes). Disputes are rare but real, which is why resolution wording matters.
Dispute
A formal challenge claiming a market was resolved wrongly. During disputes, payouts pause and prices can swing — a stressful place for a beginner to be.
Expiration / end date
The deadline in the market's rules. "Will X happen by March 31?" resolves No on April 1 even if X happens that afternoon — a top-three beginner mistake.
Money and risk
Stablecoin / USDC
A cryptocurrency designed to stay worth $1, used as the trading currency on Polymarket. Kalshi uses regular dollars instead — the practical difference is explained in Polymarket vs Kalshi.
Trading fees
What the platform charges per trade or on winnings; structures differ by platform and change over time. A small edge disappears under fees, so know them before you trade, not after.
Bankroll
The total money you've set aside for trading, fully separate from money you need. All sizing rules start from the bankroll, and the beginner bankroll should be an amount whose total loss wouldn't bother you.
Position sizing
Deciding how much of your bankroll one trade gets. Small, consistent sizes survive bad luck; oversized "sure things" are how bankrolls die — see the first-bet checklist.
Hedging
Taking an opposite position to reduce risk, like buying No on your own Yes after the price rose, locking some profit regardless of the outcome.
Arbitrage
Profiting from the same event being priced differently in two places. Sounds free; in practice fees, speed, and different resolution wording eat most of it — a large price gap usually signals different rules, not free money.
KYC
"Know Your Customer" — identity verification (name, ID, sometimes address) required before trading on regulated platforms. Expect it on Kalshi and on Polymarket's regulated US products.
Geo-restriction
Rules blocking users from certain countries or states. Availability changes over time, so check the platform's own eligibility page — workarounds usually mean trouble withdrawing later.
Behavior
Chasing losses
Raising stakes to win back what you just lost. It's the classic gambling spiral and it works identically in prediction markets; the defense is fixed position sizing decided in advance.
Overconfidence
The most expensive bias in forecasting: beginners' "90% sure" events happen far less than 90% of the time. Paper trading for a few weeks measures your personal gap before real money pays for the lesson.
Vocabulary is step one. Reflexes are step two.
Polywise turns these 40 terms into game-like drills on real market case studies — free, no account, no real money. Learn the words by using them.
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