Glossary

Prediction market terms, without the hand-waving

30 terms you'll meet on Polymarket and Kalshi, defined by what they actually mean for your money rather than by dictionary paraphrase.

The basics

# Contract: The unit you trade. A contract pays $1 if the event happens and $0 if it doesn't. Its price is therefore the market's probability estimate: 62¢ means 62%.
# YES / NO: The two sides of a binary market. Buying NO at 38¢ is equivalent to selling YES at 62¢ — on a single venue the two always sum to about $1.
# Implied probability: The probability a price corresponds to. On prediction markets it's the price itself; on sportsbooks you have to strip out the margin first. Our converter does both. Tool →
# Resolution criteria: The written rules that decide how a contract pays. This is the contract — not the headline. Two venues can list the same-sounding market and resolve it differently.
# Settlement: When the outcome is determined and contracts pay out. Until then your capital is locked, which is why a 3% locked return over four months isn't a 3% return.

# Edge: The gap between your probability estimate and the market price, in cents. Buying at 28¢ when you believe the true probability is 41% is a 13¢ edge — before fees.
# Expected value (EV): Average profit per trade if you repeated it many times. Positive EV doesn't guarantee this trade wins; it means the bet is worth taking repeatedly.
# Kelly criterion: A formula for position size that maximizes long-run growth: f = (p − price) / (1 − price). Most traders use half or quarter Kelly, because full Kelly assumes your estimate is exactly right. Tool →
# Break-even probability: The win rate needed for a trade to be neutral. At 28¢ with fees you need slightly above 28% — the payout multiple matters less than this number. Tool →
# Longshot bias: The tendency for cheap contracts to trade above their true probability and near-certainties below theirs. People overpay for lottery tickets and underpay for near-locks, on every market ever studied.
# Mispricing: A price that differs from the true probability. The usual cause isn't stupidity — it's that news arrived and the book hasn't finished repricing yet.
# Stale quote: A price that hasn't updated after relevant information became public. The window can be milliseconds on a watched macro release or minutes on a Saturday sports market.

# Spread: The gap between the best bid and best ask. A quoted 62¢ backed by a 61/63 spread means your real entry is 63¢, not 62¢.
# Depth / liquidity: How much size you can trade without moving the price. A great edge in a $400 book is a thought experiment, not a trade.
# Slippage: The difference between the price you expected and the price you got, caused by insufficient depth at your size.
# Maker / taker: A maker posts a resting limit order and adds liquidity; a taker crosses the spread and removes it. On Kalshi, maker fees are 25% of taker fees — often more than the edge itself.
# Order book: The live list of bids and asks. Sniping bots watch it for threshold crossings; news-driven systems watch the world and check the book second.

# Kalshi fee formula: 0.07 × contracts × price × (1 − price), rounded up to the next cent. It peaks at 1.75¢ per contract at 50¢ and falls toward both extremes, so longshots are cheap to trade and coin flips aren't. Tool →
# Notional value: The dollar size of a position: contracts × price. Matters because Kalshi reports volume in contracts while Polymarket reports dollars — comparing the raw numbers is meaningless.
# Designated contract market (DCM): A CFTC-regulated exchange. Kalshi is one; that regulatory status is the structural difference from Polymarket, and it's why Kalshi requires identity verification.
# Optimistic oracle: Polymarket's resolution mechanism, via UMA. Outcomes are proposed, then challengeable within a dispute window rather than decided by a central authority.

# Cross-venue arbitrage: Buying YES on one venue and NO on another when the combined cost is under $1. Locked profit in theory; in practice fees, execution risk and resolution mismatch eat most visible gaps. Tool →
# Sniping: Firing the instant a price crosses a threshold. Fast and completely blind to why the price moved — snipers regularly buy dips caused by real information.
# Copy trading: Mirroring wallets with a profitable history. The catch is capacity: by the time the trade is copied the price has moved, so you inherit the drawdowns without the context.
# Market making: Quoting both sides and earning the spread. A volume game — on small size, fees exceed the spread.

# Position cap: A hard limit on how much can go into one contract. On FluxrBot these are enforced in code before every order rather than checked afterwards.
# Drawdown: The decline from a peak in account value. The number that decides whether a strategy is survivable in practice, not the average return.
# Custody: Who can move the money. A bot connected through revocable API keys scoped to placing and closing orders has no custody — it cannot withdraw. Any tool asking for a seed phrase does, and should be closed. Tool →
# API key scope: The permissions attached to a key. 'Trade only' is the safe scope for automation; 'withdraw' should never be granted to third-party software.
# Correlation risk: Several positions that depend on the same underlying event. Five contracts on one Fed decision are one bet — sizing each independently multiplies your real exposure.

If you're new to these markets, start with how to read the odds — it covers the three ways a quoted price stops being the true probability.

If you're choosing between venues, the Polymarket vs Kalshi breakdown has the current volume split. And everything with a calculator attached is in free tools.