Master the math behind prediction markets and learn how to calculate probabilities and potential profits.
In prediction markets, the price of a share directly represents the market's belief about the probability of an event occurring. This is the fundamental concept you need to understand.
Price (in cents) = Probability (%)
A share priced at 65¢ means the market thinks there's a 65% chance the event will happen.
Understanding how much you can win or lose is crucial for making informed trading decisions.
Profit = $1.00 - Purchase Price
Each winning share pays out exactly $1.00
Loss = Purchase Price
Losing shares become worthless ($0.00)
Price movements tell you a story about what the market is thinking. Here's how to interpret them.
When prices go from 40¢ → 60¢, it means:
When prices go from 70¢ → 45¢, it means:
The key to profitable trading is finding markets where your assessment differs from the market's implied probability.
Example: Market price is 30¢ (30% chance), but you think there's a 50% chance. This could be a good buying opportunity.
Buying at 10¢ means big profits if you're right, but low probability of winning.
Buying at 90¢ means small profits but high probability of winning.
The best way to understand odds is to start trading with small amounts and see how the math works in practice.
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