In this guide
Key takeaway: Liquidity stands as the paramount consideration for anyone trading prediction markets. When a market has substantial liquidity, you benefit from compressed spreads, rapid order execution, and pricing that accurately reflects true probabilities. Polymarket dominates this space with over $1.5B in total traded volume; rival platforms typically operate at considerably lower levels.
Prediction market liquidity shapes your entire trading experience — influencing both the cost of entry and your ability to unwind positions swiftly. Yet novice traders often prioritise market selection over liquidity assessment. This article clarifies why liquidity fundamentally outweighs other considerations.
What is liquidity?
Within financial markets, liquidity refers to the ease with which you can acquire or dispose of an asset whilst minimising price impact. For prediction markets, 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 bid (best purchase offer) from the lowest ask (best sale offer)
- Volume: The total number of shares transacted within a specified timeframe
Consider a market offering 10,000 shares at 48 cents on the buy side and 10,000 shares at 50 cents on the sell side — this represents genuine liquidity. By contrast, a market with merely 50 shares per side separated by a 10-cent gap exhibits poor liquidity.
Why liquidity matters for traders
Insufficient liquidity erodes your returns through multiple channels:
- Wider spreads: Transaction costs rise when you initiate and close trades
- Slippage: Substantial orders push prices unfavourably as you execute
- Locked-in positions: Absence of willing counterparties prevents you from exiting before market resolution
- Distorted pricing: Sparse markets generate prices divorced from genuine probability assessments
How to measure prediction market liquidity
Prior to executing any trade, evaluate these metrics:
- Order book depth: On PolyGram, the depth chart displays the distribution of buy and sell interest visually
- 24h volume: Elevated trading activity correlates with improved fill rates and execution quality
- Number of unique traders: Markets attracting 100+ distinct participants typically supply 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 buy and sell quotations, capturing the spread differential whilst supplying depth to the broader trading community. Polymarket incentivises these participants through fee reductions and MATIC token distributions. PolyGram's proprietary liquidity engine synchronises with Polymarket's order book, guaranteeing PolyGram participants access to equivalent market depth as those trading directly on Polymarket.
Tips for trading illiquid markets
- Employ limit orders exclusively — avoid market orders when order books are sparse
- Divide sizeable orders into smaller tranches across multiple price points
- Exercise patience: establish your desired price and allow fills to arrive rather than accepting unfavourable execution
- Evaluate the remaining time — thin markets frequently deepen as resolution approaches
Trade on the most liquid prediction market platform. Start trading on PolyGram →