In this guide
Key takeaway: Liquidity stands as the paramount consideration for anyone trading prediction markets. When liquidity runs deep, you benefit from compressed bid-ask spreads, swift order execution, and market prices that genuinely reflect consensus. Polymarket dominates this space with $1.5B+ in total traded volume; rival platforms typically operate at substantially lower levels of activity.
Prediction market liquidity shapes your entire trading experience — from the cost at which you enter trades to how readily you can unwind positions. Yet newcomers often prioritise available markets over the depth of those markets. This article explores why liquidity outweighs nearly every other consideration.
What is liquidity?
Within financial markets, liquidity describes the ease with which you can transact in an asset whilst keeping price movement minimal. For prediction markets in particular, three distinct dimensions define liquidity:
- Depth: The quantity of shares sitting at various price tiers within the order book
- Spread: The distance separating the highest bid price (what buyers will pay) from the lowest ask price (what sellers demand)
- Volume: The total number of shares traded across a specified timeframe
A market displaying 10,000 shares available to purchase at 48 cents and 10,000 shares for sale at 50 cents exhibits strong liquidity. Conversely, a market with merely 50 shares on each side and a 10-cent gap between them shows poor liquidity.
Why liquidity matters for traders
Insufficient liquidity erodes your returns through multiple channels:
- Wider spreads: Transaction costs rise both when entering and exiting trades
- Slippage: Substantial orders push prices in directions unfavourable to your position
- Trapped positions: Absence of willing buyers may lock you into shares until market settlement
- Price inaccuracy: Sparse trading environments fail to generate prices aligned with genuine probabilities
How to measure prediction market liquidity
Prior to committing capital, examine these metrics:
- Order book depth: PolyGram's depth chart allows you to observe concentrated buy and sell interest
- 24h volume: Elevated trading activity correlates with faster order fills and tighter execution
- Number of unique traders: Markets attracting 100+ distinct participants typically offer sufficient liquidity for standard retail positions
- Spread percentage: Target markets where the bid-ask gap stays 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 quote both buy and sell orders, earning profit from the spread whilst supplying liquidity to the broader trading community. On Polymarket, these professionals receive fee reductions and MATIC incentives in exchange for their participation. PolyGram's proprietary liquidity engine synchronises with Polymarket's order book, guaranteeing PolyGram participants access to equivalent depth as those trading directly on Polymarket.
Tips for trading illiquid markets
- Restrict yourself to limit orders — avoid market orders when order books are thin
- Divide sizeable positions across multiple price points
- Exercise patience: post your desired price and await a counterparty rather than accepting unfavourable fills
- Account for timing — illiquid markets frequently attract greater participation as settlement approaches
Trade on the most liquid prediction market platform. Start trading on PolyGram →