Every price in a prediction market is an implied probability. A Yes contract trading at $0.73 is the market's way of saying: "There's a 73% chance this happens." Understanding exactly how these prices work — how they move, what drives them, and when they're wrong — is the foundation of profitable trading. This guide breaks it all down.
What prediction market prices mean
On platforms like Kalshi and Polymarket, each event contract has two sides:
- Yes: Pays $1.00 if the event occurs. Currently priced between $0.01 and $0.99.
- No: Pays $1.00 if the event does NOT occur. Price = $1.00 minus the Yes price.
The price IS the probability. There's no conversion needed. If a contract on "Will the US enter a recession in 2026?" is trading at $0.28 Yes, the market is pricing a 28% chance of recession. If you think the true probability is higher, you buy Yes. If you think it's lower, you buy No (or equivalently, sell Yes).
This is radically simpler than sports betting odds. No moneylines (+150, -200), no fractional odds (3/1), no decimal odds (2.50). Just a price between zero and one that directly represents probability.
Converting prices to probabilities
The math is straightforward:
Implied probability = Contract price x 100
A Yes at $0.45 = 45% implied probability
A No at $0.55 = 55% implied probability (same market, other side)
For traders coming from sports betting, here's a conversion reference:
| Prediction Market Price | Implied Probability | Sports Betting Equivalent |
|---|---|---|
| $0.10 | 10% | +900 |
| $0.25 | 25% | +300 |
| $0.50 | 50% | +100 / -100 (even) |
| $0.67 | 67% | -200 |
| $0.80 | 80% | -400 |
| $0.90 | 90% | -900 |
| $0.95 | 95% | -1900 |
The key advantage of prediction market pricing: it's intuitive. You don't need a calculator to know that $0.72 means about a 72% chance. Try doing that mental math with -257 moneyline odds.
How prediction market odds move
Prediction market prices change continuously as traders buy and sell. Understanding what drives price movement is critical:
- News and information: The biggest driver. When the Bureau of Labor Statistics releases jobs data, Fed rate contracts move within seconds. When a candidate drops out of a race, election contracts reprice immediately. Speed matters — informed traders who react first capture the most profit.
- Volume and momentum: Large buy orders push prices up. Large sell orders push prices down. Sometimes momentum feeds on itself as traders pile in, creating temporary overshoots.
- Time decay: As a contract approaches its resolution date, uncertainty decreases. Prices tend to converge toward $0.00 or $1.00 as the outcome becomes clearer. A contract at $0.60 six months out might jump to $0.85 or fall to $0.30 as the date nears.
- Liquidity changes: When big traders (whales) enter or exit, prices can move sharply. See our whale tracker guide for how to monitor large positions.
Order books explained
Prediction market exchanges use order books — the same mechanism used by stock exchanges. An order book shows all pending buy and sell orders at different price levels.
Here's how to read one:
- Bids (buy orders): These are orders from people wanting to buy Yes contracts. Listed on the left side, ordered from highest to lowest price. The highest bid is the best price you can immediately sell at.
- Asks (sell orders): These are orders from people wanting to sell Yes contracts. Listed on the right side, ordered from lowest to highest price. The lowest ask is the best price you can immediately buy at.
- Spread: The gap between the highest bid and lowest ask. A spread of $0.01-$0.02 means a liquid, efficient market. A spread of $0.05-$0.10 means thin liquidity and higher trading costs.
- Depth: How many contracts are available at each price level. Deep markets have many contracts stacked at each price; thin markets have only a few. Depth matters when you want to trade large sizes without moving the price against you.
For a detailed walkthrough of order book mechanics, see our order book guide.
Finding value: When the odds are wrong
The key to profitable trading is identifying when market prices are wrong. Here's how experienced traders spot mispriced contracts:
1. Compare across platforms. If Kalshi prices an event at 55% and Polymarket prices it at 62%, at least one of them is wrong. Cross-platform comparison is one of the most reliable ways to find value. Alphascope's Arbitrage tool automates this comparison across multiple platforms.
2. Use base rates. Historical base rates are powerful anchors. If a certain type of event happens 30% of the time historically, and the market is pricing it at 15%, there may be value in Yes — unless there's a clear reason this time is different.
3. Model it yourself. Build your own probability estimate using available data. For economic events, you might use leading indicators. For elections, you might combine polling data with fundamentals. If your model says 70% and the market says 55%, that's a potential trade — but only if you trust your model more than the crowd.
4. Watch for emotional overreaction. Markets overshoot after dramatic news. A political scandal might crash a candidate's contract from $0.50 to $0.20, even if the fundamentals suggest $0.35 is more accurate. These emotional overcorrections are some of the best trading opportunities.
5. Look for stale prices. In low-liquidity markets, prices can become stale — they haven't been updated to reflect recent information. If a contract was last traded three days ago and relevant news has broken since, the displayed price may be significantly off. Check volume and last-trade timestamps before assuming the price reflects current information.
Real examples of odds in action
Let's walk through concrete scenarios that show how prediction market pricing works in practice:
Example 1: Fed rate decision. In March 2026, the "Will the Fed cut rates in April?" contract was trading at $0.35 on Kalshi. The March CPI report came in hotter than expected — the price immediately dropped to $0.18 as traders repriced the likelihood of a near-term cut. Traders who saw the CPI data and sold Yes (or bought No) before the price fully adjusted captured a 17-cent move per contract.
Example 2: Election shift. A midterm primary candidate was trading at $0.65 on Polymarket. An endorsement from a major political figure was announced, and within an hour the price jumped to $0.78. Traders who anticipated the endorsement (or reacted within the first few minutes) profited from the repricing.
Example 3: Cross-platform arbitrage. In February 2026, a contract on whether Bitcoin would hit $90K by end of Q1 was priced at $0.42 on Kalshi and $0.51 on Polymarket. A trader could buy Yes on Kalshi and No on Polymarket, locking in a risk-free $0.09 spread regardless of the outcome. This is the purest form of finding mispriced odds.
Track markets with Alphascope
Alphascope uses AI to surface signals across prediction markets:
- News → Real-time news connected to market movements
- Predictions → AI-powered market analysis and forecasts
- Arbitrage → Cross-platform price gap detection