In this guide
Key takeaway: Liquidity stands as the cornerstone consideration for anyone trading prediction markets. When liquidity runs deep, you benefit from compressed spreads, rapid order execution, and prices that genuinely reflect market consensus. Polymarket dominates the space with $1.5B+ in cumulative volume; the vast majority of alternative platforms trail significantly behind in available depth.
Prediction market liquidity shapes your entire trading journey — it governs the cost of entry, the speed at which you can unwind exposure, and the quality of pricing you encounter. Yet newcomers routinely overlook this critical element, instead prioritising which markets exist rather than examining how much liquidity backs them. This article explores why liquidity outweighs all other considerations.
What is liquidity?
Within financial markets, liquidity refers to the ease with which you can acquire or dispose of an asset without materially affecting its quoted price. When applied to 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 buyer's offer from the lowest seller's asking price
- Volume: The total number of shares exchanged during a specified timeframe
A market displaying 10,000 shares offered at 48 cents and 10,000 shares sought at 50 cents demonstrates robust liquidity. Conversely, a market with merely 50 shares on each side separated by a 10-cent gap exhibits poor liquidity conditions.
Why liquidity matters for traders
Insufficient liquidity erodes your returns through multiple channels:
- Wider spreads: Transaction costs increase both when establishing and closing trades
- Slippage: Substantial positions push the market price in an unfavourable direction
- Trapped positions: Absence of willing counterparties can lock you into holdings until market settlement
- Price inaccuracy: Sparse trading activity produces quotes that diverge from genuine probability assessments
How to measure prediction market liquidity
Prior to executing any trade, examine these key metrics:
- Order book depth: PolyGram's depth chart lets you observe the concentration of bids and asks at different price points
- 24h volume: Elevated trading activity correlates with improved order fulfilment odds
- Number of unique traders: Markets attracting 100+ distinct participants typically possess sufficient liquidity for standard retail positions
- Spread percentage: Target markets where the gap between best bid and ask 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 asks, capturing the spread differential whilst supplying counterparty availability to retail traders. Polymarket rewards these participants through fee reductions and MATIC incentives. PolyGram's proprietary liquidity engine replicates Polymarket's order book architecture, guaranteeing PolyGram participants access to identical depth as those trading directly on Polymarket.
Tips for trading illiquid markets
- Restrict yourself to limit orders — avoid market orders when order book depth is minimal
- Distribute sizable orders across multiple price points rather than executing as one block
- Exercise patience: submit your target price and allow time for a match instead of paying the spread premium
- Factor in timeline dynamics — thin markets frequently tighten as the event approaches resolution
Trade on the most liquid prediction market platform. Start trading on PolyGram →