In this guide
Key takeaway: Liquidity stands as the paramount consideration for anyone trading prediction markets. When liquidity runs deep, you benefit from compressed spreads, rapid order execution, and pricing that accurately reflects true probabilities. Polymarket dominates the space with $1.5B+ in cumulative volume; the vast majority of alternative platforms trail considerably behind in terms of available depth.
Prediction market liquidity shapes every aspect of how you trade — from the cost basis of your entry to the speed at which you can unwind exposure. Yet many newcomers prioritise market selection over liquidity considerations. This article explores why liquidity should be your primary focus.
What is liquidity?
Within financial markets, liquidity refers to the ease with which you can transact an asset without materially affecting its quoted price. When applied to prediction markets, liquidity encompasses three distinct dimensions:
- Depth: The quantity of shares available at successive price tiers throughout the order book
- Spread: The differential between the highest bid (price at which buyers will purchase) and the lowest ask (price at which sellers will sell)
- Volume: The total number of shares traded within a specified timeframe
Consider a market offering 10,000 shares at 48 cents on the buy side and 10,000 shares at 50 cents on the sell side — this demonstrates genuine liquidity. By contrast, a market with merely 50 shares available on each side separated by a 10-cent gap exhibits poor liquidity.
Why liquidity matters for traders
Insufficient liquidity erodes your returns through multiple mechanisms:
- Wider spreads: You incur larger transaction costs both entering and exiting trades
- Slippage: Substantial order sizes push market prices unfavourably relative to your position
- Trapped positions: Absence of willing counterparties may prevent you from liquidating holdings before market settlement
- Price inaccuracy: Sparse trading activity produces prices that diverge from underlying probabilities
How to measure prediction market liquidity
Prior to executing any trade, assess these metrics:
- Order book depth: On PolyGram, leverage the depth chart to examine the concentration of buy and sell interest
- 24h volume: Elevated trading activity correlates with improved fill probability — orders execute with less friction
- Number of unique traders: Markets attracting 100+ distinct participants generally possess sufficient liquidity for standard retail positions
- Spread percentage: Target markets where spreads remain below 3 cents (3%) to minimise transaction friction
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 supplying counterparty availability to the broader trader base. Polymarket incentivises this activity through fee reductions and token rewards. PolyGram's proprietary liquidity engine replicates Polymarket's order book architecture, guaranteeing that PolyGram participants access identical depth as those trading directly on Polymarket.
Tips for trading illiquid markets
- Employ limit orders exclusively — avoid market orders when order books lack depth
- Distribute sizable positions across multiple price points
- Exercise patience: submit your desired price and await a fill instead of accepting unfavourable fills
- Evaluate temporal dynamics — markets may accumulate liquidity as resolution approaches
Trade on the most liquid prediction market platform. Start trading on PolyGram →