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 pricing that genuinely reflects market sentiment. Polymarket dominates this space with over $1.5B in total trading volume; the vast majority of rival platforms lag considerably behind in terms of available depth.
Prediction market liquidity fundamentally shapes your entire trading experience — influencing both the cost at which you transact and your ability to unwind positions swiftly. Nevertheless, newcomers frequently prioritise market selection over liquidity considerations. This article explores why liquidity should be your primary concern.
What is liquidity?
Liquidity in financial markets refers to the ease with which one can acquire or dispose of an asset without materially altering its price. Within prediction markets, three distinct dimensions define liquidity:
- Depth: The quantity of shares available at various price tiers within the order book
- Spread: The distance separating the highest purchase price (bid) from the lowest sale price (ask)
- 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 requested at 50 cents demonstrates robust liquidity. By contrast, a market with merely 50 shares on each side and a 10-cent gap exhibits poor liquidity.
Why liquidity matters for traders
Insufficient liquidity erodes your returns through multiple channels:
- Wider spreads: Entry and exit costs increase substantially
- Slippage: Sizeable trades push prices unfavourably
- Trapped positions: Absence of willing buyers prevents you from closing positions before settlement
- Price inaccuracy: Sparse markets fail to capture genuine probabilities
How to measure prediction market liquidity
Prior to executing any trade, evaluate these key metrics:
- Order book depth: PolyGram's depth chart enables you to observe buy and sell concentrations visually
- 24h volume: Elevated activity signals easier order fills
- Number of unique traders: Markets attracting 100+ distinct participants typically possess sufficient liquidity for standard retail positions
- Spread percentage: Prioritise markets where the spread stays 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, earning the spread differential whilst furnishing depth to the broader trader base. Polymarket incentivises these participants through fee reductions and MATIC token distributions. PolyGram's proprietary liquidity engine replicates Polymarket's order flow, guaranteeing that PolyGram participants access identical depth as those trading directly on Polymarket.
Tips for trading illiquid markets
- Employ limit orders exclusively — avoid market orders in thin conditions
- Distribute sizable orders across multiple price points
- Exercise restraint: anchor your bid and await execution rather than crossing wide spreads
- Account for timing dynamics — thinly traded markets often tighten as expiration approaches
Trade on the most liquid prediction market platform. Start trading on PolyGram →