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# Polymarket Glossary
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Complete terminology reference for Polymarket prediction markets.
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## Core Concepts
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### Prediction Market
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A market where participants trade contracts based on the outcome of future events. Prices represent the market's collective probability assessment.
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### Market
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A specific question with binary or multiple outcomes. Each market resolves to one outcome based on real-world events.
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### Event
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A collection of related markets. For example, an election event may contain multiple markets for different races.
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### Outcome
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A possible result of a market. Binary markets have two outcomes: "Yes" and "No".
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### Token
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A conditional token representing a position in a specific outcome. Each outcome has its own token (e.g., "Yes Token", "No Token").
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### CLOB Token ID
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A unique identifier for a conditional token in the CLOB (Central Limit Order Book) system. Used for trading and order placement.
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## Trading Terms
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### Bid
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An offer to buy tokens at a specified price. The highest bid is the best bid.
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### Ask
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An offer to sell tokens at a specified price. The lowest ask is the best ask.
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### Spread
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The difference between the best ask and best bid prices. Represents the cost of immediate execution.
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### Mid Price
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The average of the best bid and best ask: `(bid + ask) / 2`. Often used as a fair value estimate.
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### Order Book
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A list of all open buy (bids) and sell (asks) orders for a token, sorted by price and time.
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### Market Depth
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The total volume available at each price level in the order book. Indicates liquidity.
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### Price Impact
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The change in price caused by executing a trade of a given size. Larger trades typically have higher price impact.
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### Slippage
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The difference between expected execution price and actual execution price. Caused by consuming multiple order book levels.
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### Liquidity
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The ease with which tokens can be bought or sold without significantly affecting the price. High liquidity = tight spreads and deep order books.
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## Position Management
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### Position
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An open trade holding tokens in a specific outcome. Can be long (holding Yes tokens) or short (holding No tokens).
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### Entry Price
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The average price at which a position was opened.
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### Exit Price
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The price at which a position is closed.
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### Unrealized PnL
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Profit or loss on an open position, calculated from current market price.
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### Realized PnL
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Profit or loss from a closed position.
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### Equity
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Total account value: `balance + unrealized_pnl`
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### Balance
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Available USDC (USD Coin) for trading.
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## Market Resolution
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### Resolution Date
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The date and time when a market resolves based on the outcome of the event.
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### Resolution Source
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The authoritative source used to determine the outcome (e.g., official election results, sports league data).
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### Disputed Resolution
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A market resolution that is challenged by participants. May require manual review.
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### Settlement
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The process of distributing payouts to winning positions after market resolution.
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## Performance Metrics
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### Win Rate
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Percentage of profitable trades: `(winning_trades / total_trades) * 100`
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### Profit Factor
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Ratio of total profit to total loss: `abs(total_profit / total_loss)`. Values > 1 indicate profitability.
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### Sharpe Ratio
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Risk-adjusted return metric. Higher values indicate better risk-adjusted performance.
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### Sortino Ratio
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Similar to Sharpe ratio but only considers downside volatility.
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### Maximum Drawdown
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The largest peak-to-trough decline in equity during a trading period. Expressed as a percentage.
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### Calmar Ratio
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Return divided by maximum drawdown. Higher values indicate better risk-adjusted returns.
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### Expectancy
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Expected profit per trade: `(win_rate * avg_win) - ((1 - win_rate) * avg_loss)`
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## API Terms
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### Rate Limit
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Maximum number of API requests allowed per time period. Exceeding limits results in 429 errors.
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### API Key
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Authentication credential for accessing authenticated endpoints.
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### Signature Type
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Method of authentication:
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- `0`: EOA (Externally Owned Account) - standard wallet
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- `1`: POLY_PROXY - proxy contract
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- `2`: GNOSIS_SAFE - Gnosis Safe multisig
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### Funder Address
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Wallet address used to fund trades and pay gas fees.
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### Chain ID
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Blockchain network identifier:
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- `137`: Polygon mainnet (production)
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- `80001`: Mumbai testnet (testing)
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## Strategy Terms
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### Signal
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A trading recommendation generated by a strategy, including:
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- Action: BUY, SELL, or HOLD
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- Token ID: Which outcome to trade
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- Size: Position size
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- Confidence: Strategy's confidence level (0.0 to 1.0)
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### Confidence
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A strategy's assessment of signal quality, typically between 0.0 (low) and 1.0 (high). Used to filter trades.
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### Risk Management
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Rules and limits to protect capital:
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- Maximum position size
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- Maximum total exposure
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- Stop losses
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- Position limits
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### Backtesting
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Simulating strategy performance on historical data to evaluate profitability before live trading.
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### Paper Trading
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Trading with simulated funds to test strategies without financial risk.
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## Market Types
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### Binary Market
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A market with exactly two outcomes: Yes and No. Most common market type.
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### Scalar Market
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A market with a range of possible outcomes (e.g., "Bitcoin price will be between $50k-$60k").
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### Multi-Outcome Market
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A market with more than two discrete outcomes (e.g., "Which team will win?" with multiple teams).
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## Tag Categories
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Common market categories identified by tag IDs:
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- **Crypto** (tag_id: 21): Cryptocurrency-related markets
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- **Politics** (tag_id: varies): Political events and elections
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- **Sports** (tag_id: varies): Sports betting markets
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- **Economics** (tag_id: varies): Economic indicators and events
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- **Technology** (tag_id: varies): Tech industry events
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## Common Abbreviations
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- **CLOB**: Central Limit Order Book
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- **PnL**: Profit and Loss
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- **USDC**: USD Coin (stablecoin)
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- **EOA**: Externally Owned Account
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- **API**: Application Programming Interface
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- **REST**: Representational State Transfer (API protocol)
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- **WebSocket**: Real-time communication protocol
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- **JSON**: JavaScript Object Notation (data format)
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## Price Notation
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Prices in Polymarket are represented as probabilities between 0.0 and 1.0:
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- `0.50` = 50% probability = $0.50 per share
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- `0.75` = 75% probability = $0.75 per share
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- `1.00` = 100% probability = $1.00 per share (guaranteed outcome)
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For binary markets, Yes + No prices should sum to approximately 1.0 (accounting for spread).
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