In this guide
Key takeaway: For traders in prediction markets, liquidity stands as the paramount consideration. When liquidity runs deep, you benefit from compressed bid-ask spreads, rapid order execution, and pricing that accurately reflects true probabilities. Polymarket dominates the landscape with $1.5B+ in total traded volume; virtually all other venues lag considerably behind in terms of available depth.
Prediction market liquidity shapes your entire trading experience — influencing the cost of entry, the speed at which you can unwind positions, and the quality of price discovery. Regrettably, newcomers often prioritise which outcome markets exist instead of assessing their liquidity characteristics. This article explores why liquidity eclipses all other considerations.
What is liquidity?
Within financial trading, liquidity refers to the ease with which you can acquire or dispose of an asset without materially affecting its price. For prediction markets in particular, three distinct dimensions define liquidity:
- Depth: The quantity of shares available at successive price tiers within the order book
- Spread: The distance separating the highest bidding price from the lowest asking price
- Volume: The total number of shares traded during a specified timeframe
Consider a market displaying 10,000 shares offered at 48 cents and 10,000 shares sought at 50 cents — that represents genuine liquidity. By contrast, 50 shares on each side with a 10-cent gap signals poor liquidity.
Why liquidity matters for traders
Insufficient liquidity erodes your returns through multiple channels:
- Wider spreads: Entry and exit costs rise substantially
- Slippage: Sizeable trades push prices unfavourably in your direction
- Trapped positions: Absent buyer interest leaves you unable to liquidate before market settlement
- Price inaccuracy: Sparse trading prevents prices from converging on genuine probabilities
How to measure prediction market liquidity
Evaluate these metrics before committing capital:
- Order book depth: PolyGram's depth chart displays the distribution of buy and sell interest across price levels
- 24h volume: Elevated trading activity correlates with improved fill probability — retail orders get matched faster
- Number of unique traders: Markets attracting 100+ distinct participants typically possess sufficient liquidity for standard retail positions
- Spread percentage: Target markets where spreads remain 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, earning the spread whilst supplying counterparties to other market participants. Polymarket incentivises these providers through fee reductions and MATIC token distributions. PolyGram's proprietary liquidity engine replicates Polymarket's order book architecture, guaranteeing PolyGram traders access to equivalent depth as those trading directly on Polymarket.
Tips for trading illiquid markets
- Restrict yourself to limit orders — avoid market orders in thin order books
- Divide substantial positions across multiple price levels
- Exercise patience: place your desired price and await execution rather than paying the spread
- Account for timing — illiquid markets frequently deepen as they approach settlement
Trade on the most liquid prediction market platform. Start trading on PolyGram →