TL;DR

Polymarket operates as a decentralized prediction marketplace where share prices reflect crowd-sourced probability estimates for real-world events. Users buy shares at prices between $0.01-$0.99, and winning shares pay out $1.00 when markets resolve. The difference between purchase price and payout determines profit or loss.

The Mechanics of Prediction Markets

Prediction markets function as information aggregation mechanisms, converting collective knowledge and analysis into probability-based prices. Understanding these mechanics is essential for effective participation on Polymarket.

Understanding Market Pricing

On Polymarket, every market presents a question with defined possible outcomes. Each outcome has associated shares that trade at prices reflecting their implied probability:

Share prices range from $0.01 to $0.99
A $0.70 share price implies a 70% probability the outcome occurs
A $0.30 share price implies a 30% probability the outcome occurs
For binary markets (Yes/No), prices typically sum to approximately $1.00

Prices continuously adjust as traders buy and sell based on their assessments. When significant news breaks, you'll often see rapid price movements as participants incorporate new information.

Share Price	Implied Probability	Potential Profit (if correct)
$0.10	10%	$0.90 per share (900%)
$0.25	25%	$0.75 per share (300%)
$0.50	50%	$0.50 per share (100%)
$0.75	75%	$0.25 per share (33%)
$0.90	90%	$0.10 per share (11%)

How Outcomes Are Determined

Market resolution follows predetermined criteria established when the market is created. This transparency ensures all participants understand how outcomes will be determined:

Resolution sources: Markets specify which sources determine the outcome (e.g., official election results, government data releases)
Resolution timing: Markets indicate when resolution will occur
Edge cases: Well-designed markets address potential ambiguities in advance

Polymarket uses oracle systems to verify real-world outcomes and trigger market resolution. This process ensures objective, verifiable settlement based on actual events.

Trading on Polymarket

Trading on Polymarket involves buying and selling outcome shares across various markets. Understanding the trading mechanics helps users make informed decisions.

Buying and Selling Positions

Polymarket supports several trading actions:

Buying Yes shares: You profit if the event occurs
Buying No shares: You profit if the event does not occur
Selling positions: Exit your position before market resolution at current market prices

The platform operates as a continuous market where you can enter or exit positions whenever markets are open. This liquidity allows traders to adjust positions as their analysis evolves or as new information becomes available.

Understanding Share Prices

Share prices on Polymarket represent more than just probability—they determine your potential returns:

Entry price: The price you pay when purchasing shares
Current price: The live market price at any given moment
Unrealized P&L: Paper profit or loss based on current price versus entry price
Exit price: The price you receive when selling before resolution

Smart traders monitor both probability assessments and risk/reward ratios. A position might be directionally correct but still represent poor value if the entry price doesn't offer adequate expected returns.

Market Resolution

When the event concludes and the outcome is determined:

Winning shares are redeemed for $1.00 each
Losing shares become worthless ($0.00)
Profits are calculated as: $1.00 - Purchase Price = Profit per Share
Funds become available for withdrawal or reinvestment

Step-by-Step Trading Process

Follow this process to execute trades on Polymarket:

Select a Market

Browse Polymarket's available markets across categories including politics, economics, sports, and entertainment. Read the market description and resolution criteria carefully before proceeding.

Choose Your Position

Decide whether to buy "Yes" or "No" shares based on your analysis. Consider the current price, implied probability, and your assessment of the actual probability. Only take positions where you believe the market is mispriced.

Enter Trade Amount

Specify how much you want to invest. The interface will show the number of shares you'll receive and your potential payout if correct. Consider position sizing relative to your total portfolio.

Confirm Transaction

Review the trade details including shares received, average price, and potential outcomes. Confirm the transaction to execute your position. The trade settles immediately on the blockchain.

Ready to Start Trading?

Visit the official Polymarket platform to explore active markets and practice navigating the trading interface.

Go to Polymarket

Fees and Costs

Understanding the fee structure helps traders accurately calculate expected returns and make informed decisions.

Trading Fees

Polymarket's fee structure includes:

Trading fees: Small percentage charged on trades
Spread: Difference between buy and sell prices in the order book
No deposit fees: Polymarket does not charge for deposits (network fees apply)

Fees impact profitability, especially for smaller positions or tight margins. Factor fees into your expected value calculations when deciding whether to enter positions.

Withdrawal Considerations

When withdrawing funds from Polymarket:

Blockchain network fees apply based on current network conditions
Higher network congestion results in higher transaction fees
Consider timing withdrawals during lower-fee periods when possible
Minimum withdrawal amounts may apply depending on chosen cryptocurrency

Risk Management

Successful prediction market participation requires disciplined risk management. Consider these principles:

Position Sizing

Never allocate more than a small percentage of your portfolio to any single market. Diversification across multiple uncorrelated markets reduces overall risk.

Expected Value

Only take positions with positive expected value. If you believe an outcome has a 60% probability but shares trade at $0.70, the expected value is negative.

Information Edge

Ask yourself what you know that the market doesn't. Markets often incorporate available information efficiently—ensure you have genuine insight before trading.

Loss Limits

Define maximum acceptable losses before entering positions. Markets can move against you, and the ability to exit at predetermined levels preserves capital.

Remember that prediction markets involve inherent uncertainty. Even well-researched positions can result in losses when unexpected outcomes occur. Only participate with funds you can afford to lose.

Common Trading Approaches

Traders on Polymarket employ various strategies based on their skills, time availability, and risk tolerance:

Research-Based Trading

This approach involves deep analysis of specific markets:

Develop expertise in specific categories (elections, economics, sports)
Conduct original research to identify mispriced markets
Monitor relevant news sources and data releases
Take concentrated positions when conviction is high

Arbitrage and Market Making

More sophisticated traders may pursue technical strategies:

Identify price discrepancies across related markets
Provide liquidity by maintaining buy and sell orders
Capture spread between bid and ask prices
Requires significant capital and technical infrastructure

Event-Driven Trading

React to breaking news and scheduled events:

Monitor markets around scheduled announcements
Take positions before events based on analysis
Quickly incorporate new information as it becomes available
Requires real-time awareness and quick decision-making

Explore Polymarket's Markets

See prediction markets in action on the official Polymarket platform.