A prediction market turns a question about the future into something people can trade. Instead of simply saying an event is likely, participants buy and sell contracts tied to its outcome. The resulting price gives readers a useful signal about expectations, provided they understand what the contract actually promises.
Start with a question that can be settled
Consider a fictional market: “Will the temperature at Central Airport reach 30°C tomorrow?” The headline sounds simple, but the contract needs a precise location, a measurement period, an official weather source, and a rule for whether exactly 30°C counts. Those details determine the result.
The key distinction is between predicting a broad story and predicting the condition in the rules. A hot day elsewhere in the city would not necessarily satisfy this airport contract. Before looking at the price, make sure you can explain what would make the answer Yes.
Understand what Yes and No mean
In a standard binary contract with a $1 payout, a Yes contract pays $1 if the market resolves Yes and $0 if it resolves No. A No contract has the opposite payoff. Platforms may call these units shares or contracts, and exceptions such as cancellations follow the specific market rules. Polymarket’s introductory guide describes this basic outcome-share structure. Polymarket: What is Polymarket
Read the price as an implied probability
A Yes price of 60¢ on a $1 contract is commonly read as roughly a 60% implied probability. It is a market estimate, not a promise, and it does not mean 60% of people voted Yes. Prices emerge from orders and trades.
Also check what the displayed number represents. Polymarket, for example, generally displays the midpoint between the best bid and ask, using the last traded price when the spread exceeds 10¢. A headline probability therefore may not be a price available for your purchase. Polymarket: How prices are calculated
Work through the payout
For this hypothetical example, assume you buy 10 Yes contracts at exactly 60¢ each, with no fees, and hold them until normal settlement. Your purchase costs $6.
- If the market resolves Yes, the contracts pay $10 in total. Your profit is $4: the $10 payout minus the $6 purchase cost.
- If it resolves No, the contracts pay $0. You lose the $6 you paid.
The payout includes your original stake; it is not all profit. A low contract price also does not mean low total risk: buying more contracts increases the amount you can lose.
You may be able to sell before the result
You do not always need to wait for settlement. While trading remains open, a position can be sold if there is a matching buyer. Using the same example, selling all 10 contracts at 75¢ would return $7.50, producing a $1.50 profit before costs. Selling at 40¢ would return $4, producing a $2 loss. These are illustrative fills, not guaranteed exit prices. Polymarket: Trading outcome shares
Check the cost of the actual order
The spread is the gap between the best buying and selling prices. Slippage occurs when your order fills at a different price from the one you expected, including when its size consumes several price levels. Both can make the headline probability a poor guide to the cost of a whole position.
Fees add another layer. Kalshi notes that fees can differ by market and that some resting orders incur maker fees when they execute. Review the applicable schedule and order preview instead of assuming every contract has the same costs. Kalshi: Fees
Separate the event from settlement
An event ending does not always mean the payout arrives immediately. Trading may close at one time, while determination and settlement happen later. Kalshi explains that official data, revisions, or a contract’s determination schedule can affect timing. The named source and written rules take precedence over an early headline. Kalshi: Market settlement
A simple checklist for reading a market
- State the exact Yes condition, including its deadline and official source.
- Check the payout and distinguish the displayed probability from an available trade price.
- Calculate the total purchase cost, possible payout, and loss if the contract pays zero.
- Review fees, the spread, and whether enough orders exist for the size you are considering.
- Read the settlement and cancellation rules before treating two similar markets as equivalent.
You can use this checklist without placing a trade. Follow a market, record its price and rules, and compare what happens with what you expected. That exercise helps turn a changing percentage into something you can interpret.