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 spreads, rapid order execution, and market prices that genuinely reflect consensus. Polymarket dominates with over $1.5B in total trading activity; rival platforms typically operate at substantially lower volumes.
Prediction market liquidity shapes your entire trading experience — affecting both the rates at which you transact and how readily you can unwind positions. Yet newcomers often prioritise market selection over assessing liquidity depth. This explainer demonstrates why liquidity fundamentally outweighs other considerations.
What is liquidity?
Within financial markets, liquidity refers to the ease with which you can purchase or dispose of an asset whilst avoiding substantial price movement. For prediction markets, liquidity encompasses three distinct dimensions:
- Depth: The quantity of shares available at successive price tiers within 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 within a specified timeframe
A market displaying 10,000 shares bidding at 48 cents alongside 10,000 shares offered at 50 cents exhibits strong liquidity. Conversely, a market with merely 50 shares on each side separated by a 10-cent gap demonstrates poor liquidity.
Why liquidity matters for traders
Insufficient liquidity erodes your profitability through multiple channels:
- Wider spreads: You incur greater costs upon both entry and exit
- Slippage: Substantial orders push market prices unfavourably for your position
- Trapped positions: Absence of willing buyers prevents you from liquidating holdings before market settlement
- Price inaccuracy: Sparse trading prevents market quotations from capturing genuine probability assessments
How to measure prediction market liquidity
Prior to executing any trade, evaluate these metrics:
- Order book depth: PolyGram's depth chart displays cumulative buy and sell interest across price levels
- 24h volume: Elevated activity correlates with improved order fulfilment odds — your orders execute more readily
- Number of unique traders: Markets attracting 100+ distinct participants typically possess adequate 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 buy orders and sell orders, capturing the spread differential whilst supplying trading counterparties with needed depth. Polymarket attracts such providers through fee reductions and MATIC token incentives. PolyGram's proprietary liquidity engine replicates Polymarket's order book in real time, ensuring PolyGram participants access identical depth as those trading directly on Polymarket.
Tips for trading illiquid markets
- Employ limit orders exclusively — refrain from market orders when book depth is sparse
- Divide sizeable orders into tranches across multiple price points
- Exercise patience: submit your desired price and await execution rather than accepting unfavourable spread costs
- Account for timing — markets often thicken as they approach settlement dates
Trade on the most liquid prediction market platform. Start trading on PolyGram →