Prediction Market Glossary 2026: Every Term You Need to Know

Whether you're new to prediction markets or a seasoned trader, this comprehensive glossary covers every term you need to know in 2026 — from basic concepts to advanced trading terminology.

A–C

Arbitrage: Exploiting price differences for the same event across different platforms (e.g., Polymarket vs Kalshi) for risk-free profit.

Ask: The lowest price a seller is willing to accept for a share.

Bid: The highest price a buyer is willing to pay for a share.

Binary market: A market with only two outcomes — Yes or No. Most Polymarket and Kalshi markets are binary.

CLOB: Central Limit Order Book — the matching engine that pairs buy and sell orders.

Copy trading: Automatically mirroring the trades of another trader. Polifly offers self-custody copy trading for Polymarket.

Conditional token: A token representing a specific outcome in a prediction market, used by Polymarket.

D–F

Edge: The difference between your estimated probability and the market price. Positive edge means the market is underpricing the true probability.

Event contract: A financial contract based on the outcome of an event. Kalshi specializes in event contracts.

Exit strategy: Your plan for closing a position — at what price, under what conditions.

Fair value: The "true" probability of an outcome, often estimated using AI analysis tools like Polifly.

G–K

Gas fees: Transaction fees on the Polygon blockchain, paid when trading on Polymarket.

Implied probability: The probability implied by the current market price. A price of 65¢ implies 65% probability.

Kalshi: A CFTC-regulated prediction market platform focused on event contracts.

Kelly Criterion: A mathematical formula for optimal position sizing based on your edge and odds.

L–O

Limit order: An order to buy or sell at a specific price or better.

Liquidity: The depth of buy and sell orders. Higher liquidity means easier execution with less slippage.

Market order: An order to buy or sell at the current best available price.

Market maker: A trader who provides liquidity by placing both buy and sell orders.

Opinion: A prediction market platform that competes with Polymarket and Kalshi.

P–R

Paper trading: Simulated trading with virtual money for practice. Available on Polifly.

PnL: Profit and Loss — the total gains or losses from your trading activity.

Polymarket: The largest decentralized prediction market platform, built on Polygon.

Position: Your stake in a particular market outcome.

Resolution: The process of determining which outcome occurred and settling the market.

S–W

Self-custody: A trading model where your funds stay in your own account. Polifly uses self-custody for copy trading.

Sentiment: The collective mood of traders — bullish or bearish — on a particular outcome.

Slippage: The difference between the expected price and the actual execution price.

Smart wallet: A wallet created by a third-party service (like some Telegram bots) to hold and trade your funds.

Spread: The difference between the bid and ask price.

USDC: A stablecoin pegged to the US dollar, used for trading on Polymarket.

Whale: A trader with large positions or trading volume. Tracking whales can reveal smart money flows.

Key Takeaways

• Understanding terminology is essential for prediction market success
• Key concepts: edge, implied probability, position sizing, and self-custody
• Bookmark this glossary and reference it as you learn
• Use Polifly to put these concepts into practice

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