How markets work · 4 min read
How Prediction Markets Work
How markets are created, how prices shift in real time, and exactly what happens when a market resolves.
Peer-to-peer markets
Prediction markets are peer-to-peer markets. You are not betting against Predictor. You are trading with other market participants who may have the same or a different view of the event.
Most event contracts are structured around a clear question, such as whether an event will happen before a stated deadline. Prices may move as new information becomes available and as buyers and sellers update their views.
Example
A market asks: “Will [event] happen by [date]?”
You may be able to buy “Yes” if you think it will happen, or “No” if you think it will not happen. If the contract settles in your favor, it pays according to the contract terms. If it settles against you, you may lose the amount you put at risk.
Key principles
- Prices can change before settlement.
- You may be able to exit before settlement if there is market liquidity.
- Settlement is based on the market’s official rules and sources.
- You should read each contract’s terms before trading.