A prediction market looks simple from the outside — pick YES or NO, enter an amount, confirm. Underneath, four things are happening: the question is written so it can only have one answer, your order is priced from live probability, the probability moves as people trade, and at the end the market is resolved against a named source. Here is each stage.
1. The question is written to be unambiguous
Every market has to be settleable. That means a precise question, a deadline, and a source. "Will the bill pass before October 1?" can be answered yes or no on the date. "Will the economy improve?" cannot, so it is not a market. When you open a market you can see its close time and the source that will decide it — read both before you trade, because they are the contract.
2. Your order is priced from the live probability
Pick a side and enter your stake. The quote you see is built from the current probability of that side, and it already includes our margin. Nothing is added at confirmation. You are shown what you are risking and what the position pays if it wins, before you commit.
Two forces decide the exact price you get: the probability itself, and how much interest is sitting behind it. In a busy market your order fills close to the price on screen. In a thin one, a large order works through the interest available and fills at a slightly worse average — the same thing that happens in any market. Our lesson on depth and spread goes deeper.
3. The probability moves
Once you hold a position, its value moves with the market. If you bought YES at 40% and the probability climbs to 55%, your position is worth more than you paid — the crowd now agrees with you more strongly. If it falls to 25%, it is worth less.
What moves it? Anything that changes the real-world likelihood: team news, a resignation, a poll, a price breaking a level, an official statement. Prediction markets tend to react quickly because the people who care most about a subject are the ones trading it.
4. You can exit before the end
You do not have to wait for the result. Cash out and we quote the current value of your position from the live probability, so you can take profit while your side is strong or cut a loss when the story changes. See cashing out before an event ends.
5. Close, resolve, credit
At the close time the market locks — no new trades, no cash-outs. The outcome is then checked against the source named on the market, the market resolves, and winnings are credited to your wallet automatically. Losing positions simply end; the stake was the whole risk.
If the event is cancelled or cannot be verified, the market is voided and every stake is refunded in full. Our lesson on settlement, disputes and resolution sources covers the edge cases.
A worked example
- A market asks whether a named fixture ends in a home win. YES is trading at 50%.
- You think the home side is stronger than the price suggests, and buy YES at 50% — a position that pays about 2× if it wins.
- Team news lands in your favour and the probability moves to 65%. Your position is now worth more than you paid.
- You either cash out at that value, or hold to the final whistle and take the full payout if YES resolves true.
What decides whether you do well
Not picking winners — picking prices. You profit when your own estimate of the probability is better than the market's, and you sized the trade sensibly. That is why our next two guides are about reading odds as probability and sizing trades by edge.
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