Polymarket looks simple—buy Yes or No on an event—but understanding the mechanics helps you trade better. This guide breaks down exactly how Polymarket works under the hood.
Binary markets: Yes and No shares
Every Polymarket market is a binary question. Two outcomes: Yes or No. Each outcome has its own shares that trade independently.
Key insight: Yes shares + No shares always equal $1. If Yes trades at $0.65, No trades at $0.35. This is enforced by the smart contract.
When you buy Yes at $0.65:
- You pay $0.65 per share
- If the event happens, you get $1.00 (profit: $0.35)
- If it doesn't, you get $0.00 (loss: $0.65)
The order book
Polymarket uses a central limit order book (CLOB), not an AMM. This means:
- Limit orders: You can set the exact price you want to buy or sell at.
- Market orders: You can buy/sell instantly at the best available price.
- Depth: You can see all resting orders and their sizes.
The order book shows bids (buy orders) and asks (sell orders). The spread is the gap between the best bid and best ask.
Tight spread = liquid market, easy to trade
Wide spread = illiquid market, harder to get good prices
Placing a trade: step by step
- Pick a market: Find an event you have a view on.
- Choose Yes or No: Which outcome do you think is more likely than the price implies?
- Set your price: Market order (instant) or limit order (your price).
- Enter size: How many dollars you want to risk.
- Confirm: Sign the transaction. It settles in seconds.
Your position shows up in your portfolio. You can sell anytime before resolution.
How prices move
Prices move based on supply and demand. When more people buy Yes:
- Yes price goes up (more demand)
- No price goes down (since Yes + No = $1)
Big news causes rapid repricing. The market aggregates everyone's information into a single price. This is why prediction markets are often more accurate than polls or pundits.
How markets resolve
When the event happens (or doesn't), the market resolves:
- Yes resolves to $1: Yes holders get $1 per share. No holders get $0.
- No resolves to $1: No holders get $1 per share. Yes holders get $0.
Resolution is based on trusted sources defined in the market rules (AP for elections, official data for economics, etc.). Polymarket's UMA oracle handles disputes.
Important: Always read the resolution criteria before trading. Edge cases matter.
Fees on Polymarket
Polymarket's fee structure:
- Trading fees: Currently 0% on most markets (Polymarket subsidizes this).
- Gas fees: Near-zero on Polygon. You won't notice them.
- Deposit fees: Card deposits may have a small fee. Crypto deposits are free.
- Withdrawal fees: Minimal (just Polygon gas).
No fees on trades is a big advantage over traditional exchanges.
Selling before resolution
You don't have to hold until the event resolves. You can sell anytime:
- Lock in profit: If you bought Yes at $0.40 and it's now $0.70, you can sell for $0.30 profit without waiting.
- Cut losses: If your position moves against you, exit early instead of going to zero.
- Trade the volatility: Some traders don't care about the final outcome—they trade the price swings.
This flexibility is what makes prediction markets different from sports betting.
Example trade walkthrough
Let's say "Fed cuts rates in March" is trading at Yes: $0.45 / No: $0.55.
You think the market underestimates a cut. You buy $100 of Yes shares at $0.45.
- You get ~222 shares ($100 / $0.45)
- If Fed cuts: 222 × $1.00 = $222 (profit: $122)
- If Fed doesn't cut: 222 × $0.00 = $0 (loss: $100)
Two weeks later, new CPI data comes in soft. Yes jumps to $0.68. You can:
- Sell now: 222 × $0.68 = $151 (profit: $51, locked in)
- Hold: Wait for resolution, risk the price dropping back
This is the core mechanic. Buy low, sell high—or hold to resolution if you're confident.
Finding edges with Alphascope
Understanding mechanics is step one. Finding mispriced markets is step two.
Alphascope helps you spot opportunities:
- News → See breaking stories linked to Polymarket contracts before the price moves.
- Predictions → Compare Polymarket prices to Kalshi. When they diverge, one is wrong.
FAQ
How does Polymarket make money?
Polymarket has raised venture capital and is building toward a sustainable fee model. Currently, trading fees are subsidized to grow liquidity.
Can I short a market?
Yes. Buying No shares is effectively shorting Yes. If you think Yes is overpriced, buy No.
What happens if the event is ambiguous?
Markets resolve based on predefined rules. If there's a dispute, UMA's oracle system handles it. In rare cases, markets can resolve as invalid (everyone gets refunded).
Is there slippage on large orders?
Yes. Large market orders eat through the order book. For big positions, use limit orders or break up your trade.
How fast do trades settle?
Instantly. Polygon block times are ~2 seconds. Your position updates in real time.