# 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).