# Polymarket Glossary

Complete terminology reference for Polymarket prediction markets.

## Core Concepts

### Prediction Market
A market where participants trade contracts based on the outcome of future events. Prices represent the market's collective probability assessment.

### Market
A specific question with binary or multiple outcomes. Each market resolves to one outcome based on real-world events.

### Event
A collection of related markets. For example, an election event may contain multiple markets for different races.

### Outcome
A possible result of a market. Binary markets have two outcomes: "Yes" and "No".

### Token
A conditional token representing a position in a specific outcome. Each outcome has its own token (e.g., "Yes Token", "No Token").

### CLOB Token ID
A unique identifier for a conditional token in the CLOB (Central Limit Order Book) system. Used for trading and order placement.

## Trading Terms

### Bid
An offer to buy tokens at a specified price. The highest bid is the best bid.

### Ask
An offer to sell tokens at a specified price. The lowest ask is the best ask.

### Spread
The difference between the best ask and best bid prices. Represents the cost of immediate execution.

### Mid Price
The average of the best bid and best ask: `(bid + ask) / 2`. Often used as a fair value estimate.

### Order Book
A list of all open buy (bids) and sell (asks) orders for a token, sorted by price and time.

### Market Depth
The total volume available at each price level in the order book. Indicates liquidity.

### Price Impact
The change in price caused by executing a trade of a given size. Larger trades typically have higher price impact.

### Slippage
The difference between expected execution price and actual execution price. Caused by consuming multiple order book levels.

### Liquidity
The ease with which tokens can be bought or sold without significantly affecting the price. High liquidity = tight spreads and deep order books.

## Position Management

### Position
An open trade holding tokens in a specific outcome. Can be long (holding Yes tokens) or short (holding No tokens).

### Entry Price
The average price at which a position was opened.

### Exit Price
The price at which a position is closed.

### Unrealized PnL
Profit or loss on an open position, calculated from current market price.

### Realized PnL
Profit or loss from a closed position.

### Equity
Total account value: `balance + unrealized_pnl`

### Balance
Available USDC (USD Coin) for trading.

## Market Resolution

### Resolution Date
The date and time when a market resolves based on the outcome of the event.

### Resolution Source
The authoritative source used to determine the outcome (e.g., official election results, sports league data).

### Disputed Resolution
A market resolution that is challenged by participants. May require manual review.

### Settlement
The process of distributing payouts to winning positions after market resolution.

## Performance Metrics

### Win Rate
Percentage of profitable trades: `(winning_trades / total_trades) * 100`

### Profit Factor
Ratio of total profit to total loss: `abs(total_profit / total_loss)`. Values > 1 indicate profitability.

### Sharpe Ratio
Risk-adjusted return metric. Higher values indicate better risk-adjusted performance.

### Sortino Ratio
Similar to Sharpe ratio but only considers downside volatility.

### Maximum Drawdown
The largest peak-to-trough decline in equity during a trading period. Expressed as a percentage.

### Calmar Ratio
Return divided by maximum drawdown. Higher values indicate better risk-adjusted returns.

### Expectancy
Expected profit per trade: `(win_rate * avg_win) - ((1 - win_rate) * avg_loss)`

## API Terms

### Rate Limit
Maximum number of API requests allowed per time period. Exceeding limits results in 429 errors.

### API Key
Authentication credential for accessing authenticated endpoints.

### Signature Type
Method of authentication:
- `0`: EOA (Externally Owned Account) - standard wallet
- `1`: POLY_PROXY - proxy contract
- `2`: GNOSIS_SAFE - Gnosis Safe multisig

### Funder Address
Wallet address used to fund trades and pay gas fees.

### Chain ID
Blockchain network identifier:
- `137`: Polygon mainnet (production)
- `80001`: Mumbai testnet (testing)

## Strategy Terms

### Signal
A trading recommendation generated by a strategy, including:
- Action: BUY, SELL, or HOLD
- Token ID: Which outcome to trade
- Size: Position size
- Confidence: Strategy's confidence level (0.0 to 1.0)

### Confidence
A strategy's assessment of signal quality, typically between 0.0 (low) and 1.0 (high). Used to filter trades.

### Risk Management
Rules and limits to protect capital:
- Maximum position size
- Maximum total exposure
- Stop losses
- Position limits

### Backtesting
Simulating strategy performance on historical data to evaluate profitability before live trading.

### Paper Trading
Trading with simulated funds to test strategies without financial risk.

## Market Types

### Binary Market
A market with exactly two outcomes: Yes and No. Most common market type.

### Scalar Market
A market with a range of possible outcomes (e.g., "Bitcoin price will be between $50k-$60k").

### Multi-Outcome Market
A market with more than two discrete outcomes (e.g., "Which team will win?" with multiple teams).

## Tag Categories

Common market categories identified by tag IDs:

- **Crypto** (tag_id: 21): Cryptocurrency-related markets
- **Politics** (tag_id: varies): Political events and elections
- **Sports** (tag_id: varies): Sports betting markets
- **Economics** (tag_id: varies): Economic indicators and events
- **Technology** (tag_id: varies): Tech industry events

## Common Abbreviations

- **CLOB**: Central Limit Order Book
- **PnL**: Profit and Loss
- **USDC**: USD Coin (stablecoin)
- **EOA**: Externally Owned Account
- **API**: Application Programming Interface
- **REST**: Representational State Transfer (API protocol)
- **WebSocket**: Real-time communication protocol
- **JSON**: JavaScript Object Notation (data format)

## Price Notation

Prices in Polymarket are represented as probabilities between 0.0 and 1.0:
- `0.50` = 50% probability = $0.50 per share
- `0.75` = 75% probability = $0.75 per share
- `1.00` = 100% probability = $1.00 per share (guaranteed outcome)

For binary markets, Yes + No prices should sum to approximately 1.0 (accounting for spread).
