🛒Market Mechanics

How Are Prices Formed on PREDICTA?

🟢 Initial Price When a market is created, it has no preset prices or odds—the price is determined by users through limit orders.

📌 Makers (traders placing limit orders in the order book) set the price at which they are willing to buy Yes or No outcomes. 📌 The market buy price is the lowest available sell price in the order book, while the market sell price is the highest available buy price. 📌 A limit buy order placed at $0.55 for Yes will execute when a seller is willing to sell at this price, or when a buyer places a No order at $0.45. This happens because the price in cents reflects the perceived probability (in %) of the outcome occurring. For example, buying Yes at $0.55 means the user believes the probability of the event occurring is greater than 55% and expects to profit either by holding until resolution or selling at a higher price later. This is equivalent to selling No at $0.45, as it reflects confidence that the probability of No is less than 45% (assuming one of the two outcomes must occur).

⚠️ PREDICTA does not set prices or odds—they are determined purely by supply and demand in the order book.

🔄 How Is Event Probability Measured? The current probability on PREDICTA is determined as the average of the best bid (buy offer) and best ask (sell offer) in the order book.

📌 Just like in the stock market, prices fluctuate based on supply and demand.

🎯 Price = Probability 📌 Suppose a market is predicting a candidate’s election victory. If the best bid (buy price) is $0.48 and the best ask (sell price) is $0.52, the implied probability is 50%.

⚠️ You can’t always buy at the displayed price because there is a spread between bid and ask prices.

📌 For example, if the ask price is $0.85, a trader placing a buy order at that price will only get as many shares as are available at that level. 📌 Once those shares are bought, the next available price might rise to $0.90, as there are no more lower-priced orders in the book.