Prediction market glossary

Plain definitions of the terms you meet when building on Kalshi and Polymarket.

Last updated Oct 23, 2026.

Prediction market: A market where people trade contracts whose value depends on whether a future event happens.
Event contract: A contract tied to a specific event outcome, such as whether a number is above a threshold on a date.
Binary contract: A contract with two outcomes, usually YES and NO, that settles at full value if correct and zero if not.
YES / NO shares: The two sides of a binary market. Buying YES is a bet the event happens; buying NO is a bet it does not.
Implied probability: The probability suggested by a contract’s price. A YES price of 62¢ on a $1 contract implies roughly 62%, before fees.
Order book: The list of open buy (bid) and sell (ask) orders for a market at each price.
CLOB: Central limit order book: a single order book that matches buy and sell limit orders by price and time. Polymarket’s trading API is a CLOB.
Limit order: An order to buy or sell at a set price or better. It may rest on the book until filled or canceled.
Market order: An order that fills immediately against the best available prices.
Bid–ask spread: The gap between the highest bid and the lowest ask. Market makers aim to earn it.
Liquidity: How much can be traded near the current price without moving it much.
Slippage: The difference between the expected price and the price actually filled, usually from thin liquidity.
Market maker: A trader or bot that continuously quotes both buy and sell prices, providing liquidity.
Arbitrage: Trading the same or equivalent outcome at different prices to lock in a difference. In practice fees, rule differences and timing make it riskier than it sounds.
Resolution: How and when a market is settled, based on a stated source and rules.
Resolution source: The data source named in a market’s rules that decides the outcome.
Settlement: Paying out contracts after resolution. On Polymarket, matched trades also settle on-chain.
Position: The contracts you currently hold in a market.
API key: Credentials that let a program access an exchange account. Kalshi uses signed requests with a key pair.
WebSocket: A persistent connection that streams live updates such as order book changes.
Demo environment: A test environment with mock funds. Kalshi provides one for API testing.
Backtesting: Testing a strategy on historical data before using it live.
Forecasting agent: Software, often LLM-based, that estimates event probabilities from information it gathers.
Calibration: How well stated probabilities match outcomes over many forecasts: events called 70% should happen about 70% of the time.
Brier score: A common accuracy score for probability forecasts: the mean squared error between forecast and outcome (lower is better).
Copy trading: Automatically mirroring another trader’s positions.

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