In this guide
Key takeaway: Liquidity stands as the cornerstone consideration for anyone trading prediction markets. When liquidity runs deep, you benefit from compressed bid-ask gaps, rapid order execution, and market prices that genuinely reflect consensus. Polymarket dominates this space with $1.5B+ in total trading volume; the vast majority of rival venues operate with substantially thinner order books.
Prediction market liquidity shapes your entire trading experience — influencing both the cost at which you transact and your ability to unwind positions swiftly. Yet newcomers often prioritise available markets over the depth of those markets. This article explores why liquidity outweighs virtually every other consideration.
What is liquidity?
Within financial markets, liquidity refers to the ease with which you can purchase or dispose of an asset whilst keeping price movement to a minimum. For prediction markets, three distinct dimensions define liquidity:
- Depth: The quantity of shares accessible at successive price tiers throughout the order book
- Spread: The distance separating the highest purchase offer (bid) from the lowest sale offer (ask)
- Volume: The total number of shares traded during a specified timeframe
A market displaying 10,000 shares on the bid side at 48 cents alongside 10,000 on the ask side at 50 cents demonstrates strong liquidity. Conversely, a market with merely 50 shares on each side separated by a 10-cent gap exhibits poor liquidity.
Why liquidity matters for traders
Insufficient liquidity erodes your returns through multiple channels:
- Wider spreads: You forfeit additional capital upon entry and exit
- Slippage: Sizeable trades push pricing unfavourably in your direction
- Trapped positions: Absence of willing buyers may prevent you from liquidating shares before market settlement
- Price inaccuracy: Thin markets generate prices that diverge from genuine probability assessments
How to measure prediction market liquidity
Prior to executing any trade, evaluate these key metrics:
- Order book depth: PolyGram's depth chart enables you to observe concentrated buying and selling interest
- 24h volume: Elevated trading activity correlates with improved execution odds — your orders fill more readily
- 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 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 offers, capturing the spread differential whilst supplying depth to the broader trading community. Polymarket compensates these participants through fee reductions and MATIC incentives. PolyGram's proprietary liquidity engine replicates Polymarket's book structure, guaranteeing PolyGram participants access to equivalent order book depth as those trading directly on Polymarket.
Tips for trading illiquid markets
- Employ limit orders exclusively — refrain from market orders when dealing with sparse markets
- Distribute sizable positions across multiple price tiers
- Exercise restraint: establish your target price and await execution rather than accepting unfavourable terms
- Account for temporal dynamics — thin markets frequently deepen as settlement approaches
Trade on the most liquid prediction market platform. Start trading on PolyGram →