In this guide
Key takeaway: Liquidity stands as the cornerstone consideration for anyone trading prediction markets. When liquidity runs deep, traders benefit from compressed bid-ask spreads, rapid order execution, and pricing that genuinely reflects market sentiment. Polymarket dominates the landscape with $1.5B+ in cumulative volume; the majority of rival platforms operate with substantially lower trading depth.
Prediction market liquidity shapes your entire trading experience — influencing both the cost of entry and your capacity to unwind positions swiftly. Nevertheless, newcomers often prioritise market selection over liquidity assessment. This article unpacks why liquidity outweighs virtually every other consideration.
What is liquidity?
Within financial markets, liquidity describes the ease with which an asset can be transacted without materially affecting its price. For prediction markets, liquidity comprises three distinct dimensions:
- Depth: The quantity of shares accessible at successive price points across the order book
- Spread: The distance separating the highest bid (purchase price) from the lowest ask (sale price)
- Volume: The total number of shares exchanged throughout a specified timeframe
A market offering 10,000 shares at 48 cents on the buy side and 10,000 at 50 cents on the sell side demonstrates strong liquidity. Conversely, 50 shares on either side with a 10-cent gap indicates poor liquidity conditions.
Why liquidity matters for traders
Insufficient liquidity erodes your returns through multiple channels:
- Wider spreads: Transaction costs increase both when establishing and closing trades
- Slippage: Substantial positions push market prices unfavourably
- Trapped positions: Absence of willing buyers prevents you from exiting before the market settles
- Price inaccuracy: Sparse markets fail to accurately represent underlying probabilities
How to measure prediction market liquidity
Prior to executing any trade, evaluate these metrics:
- Order book depth: PolyGram's depth chart displays the scale of buy and sell interest at various price tiers
- 24h volume: Elevated turnover signals robust participation — facilitating easier order completion
- Number of unique traders: Markets attracting 100+ distinct participants typically possess sufficient liquidity for standard retail positions
- Spread percentage: Target markets where the bid-ask gap remains below 3 cents (3%) to minimise transaction expenses
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, earning the spread whilst furnishing other participants with tradeable depth. Polymarket incentivises these participants through fee reductions and MATIC incentives. PolyGram's proprietary liquidity engine replicates Polymarket's order flow, guaranteeing PolyGram participants access to equivalent market depth as those trading directly on Polymarket.
Tips for trading illiquid markets
- Employ limit orders exclusively — refrain from market orders when book depth is thin
- Distribute sizeable orders across multiple price tiers
- Exercise restraint: establish your target price and await execution rather than paying the spread
- Assess the timeline — sparse markets frequently gain depth as resolution approaches
Engage with the most liquid prediction market platform. Start trading on PolyGram →