Glossary

Prediction market & Polymarket terms.

32 definitions covering the market structure, exchange mechanics, execution details and strategy names that come up when you automate trading on Polymarket. Each one is written to stand on its own, and links to the guides, datasets and strategies that go deeper.

If you are new to the venue, the useful reading order is prediction market → binary outcome share → CLOB → TWAP settlement. That last one is the mechanic most often missed by people building their first bot.

Markets

What is being traded and where.

Prediction marketA prediction market is an exchange where people trade contracts whose payout depends on the outcome of a future event. Each contract settles at a fixed value if the event happens and zero if it does not, so the trading price can be read as the market's collective probability estimate for that outcome.
PolymarketPolymarket is a prediction-market exchange running on Polygon, where every market is a set of outcome shares that settle at $1.00 for the winning outcome and $0.00 for the others. Orders are matched on a central limit order book and settled on-chain in USDC.
Binary outcome shareA binary outcome share is one of the two tokens in a yes/no market. Exactly one of them pays $1.00 at resolution and the other pays $0.00. Buying a YES share at $0.62 risks $0.62 to win $1.00; the two shares together always represent the full $1.00 payout.
Up/Down marketUp/Down markets are recurring crypto binaries asking whether an asset's price will be higher or lower at the end of a fixed window — commonly 5 minutes, 15 minutes or one hour. A new market opens every cycle, and its market and token identifiers change each time.
CycleA cycle is one instance of a recurring market — a single 15-minute BTC Up/Down window, for example, from the moment it opens to the moment it resolves. Each cycle is a distinct market on-chain with its own identifiers, even though it looks like a continuation of the last one.

Exchange mechanics

How Polymarket actually works underneath.

Complement invariant (YES + NO = $1)In a binary market the YES and NO shares together are guaranteed to pay exactly $1.00, so their prices should sum to $1.00. When the two sides sum to more than $1.00 you can sell both and keep the excess regardless of the outcome; when they sum to less, you can buy both.
CLOB (central limit order book)A central limit order book is a matching system that keeps every resting buy and sell order sorted by price, then matches incoming orders against the best available price. Polymarket runs a CLOB, so bots place limit orders at chosen prices rather than trading against an automated market maker curve.
Tick sizeTick size is the smallest price increment an order can be placed at. Polymarket order books quote on a tenth-of-a-cent grid — $0.001 — across a range of roughly $0.001 to $0.999, not on whole cents. Rounding prices to cents corrupts quotes near the extremes of the range.
TWAP settlement (60-second)Polymarket crypto Up/Down cycles resolve against a 60-second time-weighted average of the reference price feed, not against the live spot tick. A bot reading the last trade price will disagree with settlement near a close, because spot and the 60-second average are different numbers.
ResolutionResolution is the process of determining which outcome of a market actually occurred, after which the winning shares become redeemable for $1.00 each and the losing shares become worthless. Until a market resolves, positions are open exposure rather than realised profit or loss.
UMA Optimistic OracleThe UMA Optimistic Oracle is the dispute-based mechanism Polymarket uses to resolve markets. A proposer asserts an outcome, and if nobody disputes it within a challenge window the assertion stands. If it is disputed, UMA token holders vote to decide.
condition_idA condition_id is the identifier for a market's underlying condition in the Conditional Tokens Framework. Every distinct market — including every individual cycle of a recurring Up/Down market — has its own condition_id, which is how a bot addresses the correct market at runtime.
token_idA token_id identifies one specific outcome token within a market — the UP side or the DOWN side, for example. Orders are placed against a token_id, not against the market as a whole, so getting the mapping from outcome to token backwards places a trade on the opposite side.
Conditional Tokens Framework (CTF)The Conditional Tokens Framework is the on-chain standard Polymarket uses to represent outcome shares. It allows $1.00 of collateral to be split into a complete set of outcome tokens, and a complete set to be merged back into $1.00 — which is what enforces the arithmetic relationship between prices.
Negative risk (NegRisk)Negative risk is Polymarket's mechanism for multi-outcome events where exactly one outcome can win. It lets a NO position in one outcome be converted into YES positions across the others, so a trader who is short every candidate does not need to fund each leg independently.
Polygon (chain ID 137)Polymarket settles on Polygon, an Ethereum-compatible chain with chain ID 137. Bots must be configured for Polygon mainnet rather than Ethereum: the same client library pointed at the wrong chain ID will fail to find markets or produce signatures the exchange rejects.

Execution

Getting an order onto the book and filled.

MakerA maker is an order that rests on the book instead of executing immediately, adding liquidity that someone else can trade against. Makers choose their price and wait for a counterparty, which means better prices than crossing the spread but no guarantee of a fill.
TakerA taker is an order that executes immediately against liquidity already resting on the book, crossing the spread to do so. Takers pay for certainty: the fill happens now, at a price at least one tick worse than the maker on the other side received.
SpreadThe spread is the gap between the highest price a buyer will pay and the lowest a seller will accept. It is the immediate cost of trading now rather than waiting: a taker crosses it, a maker collects it. On thin prediction markets the spread is often the largest single cost in a strategy.
Split and mergeSplitting converts $1.00 of collateral into one of each outcome token in a market; merging converts a complete set back into $1.00. Both operate at exactly $1.00 regardless of what the tokens are trading at, which is the mechanism that anchors outcome prices to their sum.
Proxy wallet (funder)The proxy wallet is the address that actually holds a Polymarket account's positions and USDC, distinct from the externally owned account that signs orders. API clients take it as the funder parameter, and it must be set correctly or orders sign as one identity while settling against another.
Signature type (sigType)The signature type tells Polymarket's exchange which wallet arrangement is signing an order — a plain externally owned account, the proxy wallet created by the Polymarket interface, or a Safe-based smart wallet. Sending the wrong type causes signature validation to fail even when the signature itself is correct.
SlippageSlippage is the difference between the price a strategy expected and the price it actually got. It comes from crossing the spread, from consuming more than one level of book depth, and from the market moving between the decision and the fill.
RedeemRedeeming converts winning outcome shares into USDC after a market resolves, at $1.00 per share. Until shares are redeemed the profit exists on-chain as tokens rather than as spendable collateral, so an automated strategy that never redeems slowly starves itself of working capital.

Data

The feeds and files a bot reads.

TWAP (time-weighted average price)A time-weighted average price is the average of an asset's price over a window, weighting each observation by how long it stood. Because it averages across time rather than taking a single instant, a TWAP is far harder to move with one trade than a spot print is.
Order book depthDepth is how much size rests at each price level on either side of the book. It determines how large an order can be before it moves the price, and it is the difference between a quoted price and an achievable one for anything bigger than a token trade.
Reference price feedThe reference price feed is the external price source a market resolves against. For Polymarket crypto Up/Down cycles it is the feed underlying the settlement calculation — which matters because a bot trading off a different exchange's ticker is trading a correlated but non-identical number.

Strategy

The named plays and the risks in them.

BacktestA backtest replays a strategy against historical data to estimate how it would have performed. Its usefulness depends almost entirely on whether the data reflects what was actually observable and executable at each moment, rather than what is knowable in hindsight.
Market makingMarket making means quoting both sides of a book and earning the spread when both quotes fill. The market maker is compensated for providing liquidity and for carrying the inventory risk that arises whenever one side fills and the other does not.
Adverse selectionAdverse selection is the tendency for a passive quote to be filled precisely when it is wrong. The counterparty crossing into your order is more likely to be better informed or faster, so the fills a market maker actually receives are a biased sample of the ones it offered.
Latency arbitrageLatency arbitrage is trading on a price signal that has moved before the order book has repriced to match it. The edge is speed rather than insight: the trader is acting on public information the resting quotes have not yet reflected.
ArbitrageArbitrage is capturing a price inconsistency between related instruments rather than taking a view on an outcome. On prediction markets that usually means the two sides of one market, the same event on two venues, or two markets whose outcomes are logically linked.