In this guide
Key takeaway: Liquidity stands as the paramount consideration for anyone trading prediction markets. When liquidity runs deep, traders benefit from compressed bid-ask spreads, rapid order execution, and market prices that accurately reflect true probabilities. Polymarket dominates the landscape with cumulative trading volume exceeding $1.5B; rival platforms typically operate at substantially lower volume levels.
Prediction market liquidity shapes every aspect of your trading journey — spanning the execution price you receive through to your ability to unwind positions swiftly. Regrettably, newcomers frequently prioritise market selection over liquidity considerations. This article clarifies why liquidity eclipses all other factors in importance.
What is liquidity?
Within financial markets, liquidity refers to the ease with which one can acquire or dispose of an asset whilst minimising price movement. When applied to prediction markets, liquidity encompasses three distinct dimensions:
- Depth: The quantity of shares obtainable at successive price points within the order book
- Spread: The differential separating the highest purchase offer (bid) from the lowest sale price (ask)
- Volume: The aggregate number of shares transacted throughout a specified timeframe
A market presenting 10,000 shares available for purchase at 48 cents and 10,000 for sale at 50 cents demonstrates robust liquidity. Conversely, a market with merely 50 shares on either side separated by a 10-cent gap exhibits poor liquidity.
Why liquidity matters for traders
Insufficient liquidity erodes profitability through multiple channels:
- Wider spreads: Transaction costs escalate both when initiating and closing positions
- Slippage: Substantial orders push market prices unfavourably against your direction
- Trapped positions: Absence of willing buyers prevents you from liquidating holdings before market settlement
- Price inaccuracy: Sparse trading activity produces prices that diverge from genuine probability assessments
How to measure prediction market liquidity
Prior to executing any trade, examine these metrics:
- Order book depth: Leverage PolyGram's depth visualisation tools to assess the magnitude of buy and sell interest
- 24h volume: Elevated trading activity correlates with improved order fulfilment probability — essential for retail participants
- 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, capturing the spread whilst furnishing trading counterparties with immediate execution. Polymarket incentivises these participants through fee reductions and MATIC token distributions. PolyGram's proprietary matching system replicates Polymarket's order flow, guaranteeing PolyGram participants access to identical order book depth as those trading directly on Polymarket.
Tips for trading illiquid markets
- Restrict yourself to limit orders exclusively — avoid market orders when book depth is minimal
- Distribute sizable trades across multiple price tiers
- Exercise patience: establish your desired price and await fulfilment rather than accepting unfavourable crossing prices
- Account for timing dynamics — sparse markets frequently attract greater participation as settlement approaches
Trade on the most liquid prediction market platform. Start trading on PolyGram →