Etherdrake
5.0 KiB
Documentation Index
Fetch the complete documentation index at: https://docs.polymarket.com/llms.txt Use this file to discover all available pages before exploring further.
Prices & Orderbook
How prices work and how the order book enables peer-to-peer trading
Polymarket uses a Central Limit Order Book (CLOB) for trading. Prices aren't set by Polymarket—they emerge from supply and demand as users trade with each other.
Prices Are Probabilities
Every share on Polymarket is priced between $0.00 and $1.00. The price directly represents the market's belief in the probability of that outcome.
| Price | Implied Probability |
|---|---|
| $0.25 | 25% chance |
| $0.50 | 50% chance |
| $0.75 | 75% chance |
Example
If the best bid for "Yes" is $0.34 and the best ask is $0.40:
Displayed price = ($0.34 + $0.40) / 2 = $0.37 (37% probability)
You won't necessarily trade at $0.37—you'll pay the ask ($0.40) when buying or receive the bid ($0.34) when selling.
The Order Book
The order book is a list of all open buy and sell orders for a market. It has two sides:
| Side | Description |
|---|---|
| Bids | Buy orders—the highest prices traders are willing to pay |
| Asks | Sell orders—the lowest prices traders are willing to accept |
The spread is the gap between the highest bid and lowest ask. Tighter spreads mean more liquid markets.
Order Types
Market Orders
Execute immediately at the best available price. Use when you want instant execution and are willing to pay the spread.
- Buying: You pay the lowest ask price
- Selling: You receive the highest bid price
Limit Orders
Execute only at your specified price or better. Use when you want price control and are willing to wait.
- Your order sits in the book until someone trades against it
- Orders can partially fill as different traders match portions of your order
- You can cancel unfilled orders at any time
How Trades Work
Polymarket's CLOB is hybrid-decentralized:
- Offchain matching — An operator matches compatible orders
- Onchain settlement — Matched trades settle via smart contracts
This design gives you the speed of centralized matching with the security of onchain settlement. You always maintain custody of your funds.
Price Discovery
When a new market launches, there's no initial price. The first price emerges when:
- Someone places a limit order to buy Yes at a price (e.g.,
$0.60) - Someone places a limit order to buy No at the complementary price (e.g.,
$0.40) - Since
$0.60+$0.40=$1.00, the orders match
When matched, $1.00 is converted into 1 Yes token and 1 No token, each going to their respective buyers.