Etherdrake
117 lines
5.0 KiB
Markdown
117 lines
5.0 KiB
Markdown
> ## Documentation Index
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> Fetch the complete documentation index at: https://docs.polymarket.com/llms.txt
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> Use this file to discover all available pages before exploring further.
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# Prices & Orderbook
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> How prices work and how the order book enables peer-to-peer trading
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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.
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<Frame>
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<img src="https://mintcdn.com/polymarket-292d1b1b/FOMte3ewbG-LVy3k/images/core-concepts/orderbook.png?fit=max&auto=format&n=FOMte3ewbG-LVy3k&q=85&s=119174bcaaeb3b9abbd4c2d94b7bdae6" alt="" className="dark:hidden" width="1540" height="952" data-path="images/core-concepts/orderbook.png" />
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<img src="https://mintcdn.com/polymarket-292d1b1b/FOMte3ewbG-LVy3k/images/dark/core-concepts/orderbook.png?fit=max&auto=format&n=FOMte3ewbG-LVy3k&q=85&s=b940f4b5f28ab6ed5845dda2bfe03edb" alt="" className="hidden dark:block" width="1540" height="952" data-path="images/dark/core-concepts/orderbook.png" />
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</Frame>
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## Prices Are Probabilities
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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.
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| Price | Implied Probability |
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| ------ | ------------------- |
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| \$0.25 | 25% chance |
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| \$0.50 | 50% chance |
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| \$0.75 | 75% chance |
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<Note>
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The displayed price is the **midpoint** of the bid-ask spread. If the spread
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is wider than \$0.10, the last traded price is shown instead.
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</Note>
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### Example
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If the best bid for "Yes" is `$0.34` and the best ask is `$0.40`:
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```
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Displayed price = ($0.34 + $0.40) / 2 = $0.37 (37% probability)
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```
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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.
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## The Order Book
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The order book is a list of all open buy and sell orders for a market. It has two sides:
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| Side | Description |
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| ---- | ----------------------------------------------------------- |
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| Bids | Buy orders—the highest prices traders are willing to pay |
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| Asks | Sell orders—the lowest prices traders are willing to accept |
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The **spread** is the gap between the highest bid and lowest ask. Tighter spreads mean more liquid markets.
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## Order Types
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### Market Orders
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Execute immediately at the best available price. Use when you want instant execution and are willing to pay the spread.
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* **Buying**: You pay the lowest ask price
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* **Selling**: You receive the highest bid price
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### Limit Orders
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Execute only at your specified price or better. Use when you want price control and are willing to wait.
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* Your order sits in the book until someone trades against it
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* Orders can **partially fill** as different traders match portions of your order
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* You can cancel unfilled orders at any time
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<Note>
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All orders on Polymarket are technically limit orders. A "market order" is
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simply a limit order priced to execute immediately against resting orders.
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</Note>
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## How Trades Work
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Polymarket's CLOB is **hybrid-decentralized**:
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1. **Offchain matching** — An operator matches compatible orders
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2. **Onchain settlement** — Matched trades settle via smart contracts
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<Frame>
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<img src="https://mintcdn.com/polymarket-292d1b1b/FOMte3ewbG-LVy3k/images/core-concepts/trade-lifecycle.png?fit=max&auto=format&n=FOMte3ewbG-LVy3k&q=85&s=2acec8befdfbba57fb554170f7d5813c" alt="" className="dark:hidden" width="1540" height="952" data-path="images/core-concepts/trade-lifecycle.png" />
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<img src="https://mintcdn.com/polymarket-292d1b1b/FOMte3ewbG-LVy3k/images/dark/core-concepts/trade-lifecycle.png?fit=max&auto=format&n=FOMte3ewbG-LVy3k&q=85&s=d18b22ad7629820ad554dda8cb83ec18" alt="" className="hidden dark:block" width="1540" height="952" data-path="images/dark/core-concepts/trade-lifecycle.png" />
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</Frame>
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This design gives you the speed of centralized matching with the security of onchain settlement. You always maintain custody of your funds.
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## Price Discovery
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When a new market launches, there's no initial price. The first price emerges when:
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1. Someone places a limit order to buy Yes at a price (e.g., `$0.60`)
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2. Someone places a limit order to buy No at the complementary price (e.g., `$0.40`)
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3. Since `$0.60` + `$0.40` = `$1.00`, the orders match
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When matched, `$1.00` is converted into 1 Yes token and 1 No token, each going to their respective buyers.
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## Next Steps
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<Note>
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Polymarket's orderbook has **no trading size limits** — it matches willing
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buyers and sellers of any amount. However, large orders may move the price
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significantly. Always check orderbook depth before trading in size.
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</Note>
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<CardGroup cols={2}>
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<Card title="Positions & Tokens" icon="coins" href="/concepts/positions-tokens">
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Learn about outcome tokens and how positions work.
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</Card>
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<Card title="Order Lifecycle" icon="arrows-spin" href="/concepts/order-lifecycle">
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Understand what happens from order placement to settlement.
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</Card>
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</CardGroup>
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