Glossary
55 prediction-market terms, defined for builders.
Backtest
Simulating a trading strategy on historical data to estimate its performance before deploying real capital.
Binance
The world's largest crypto exchange by volume, used by predtools bots as a primary real-time price feed via WebSocket for BTC and ETH signals.
Binary Market
A prediction market with exactly two mutually exclusive outcomes, typically YES and NO, each paying $1 or $0 at resolution.
Builder Key
A signing key registered with Polymarket that identifies orders as coming from a specific builder application, enabling API access and order attribution.
CFTC
The US Commodity Futures Trading Commission, the federal regulator for derivatives markets including event contracts on platforms like Kalshi.
Chainlink
A decentralized oracle network that aggregates real-world data for smart contracts; Polymarket uses Chainlink's RTDS product to resolve crypto binary markets.
Chainlink RTDS
Chainlink's Real-Time Data Streams oracle, used by Polymarket to resolve short-duration crypto binary markets.
CLOB
Central Limit Order Book — Polymarket's matching engine for limit + taker orders.
CLOB API
Polymarket's order-management REST API at clob.polymarket.com, used to place, cancel, and query orders on the Central Limit Order Book.
Coinbase
A major US-regulated crypto exchange whose real-time price feed is used by poly5m-v4 as part of a multi-exchange median signal.
Conditional Tokens
ERC-1155 tokens representing binary outcome positions on Polymarket, issued and settled by the Conditional Tokens Framework smart contracts.
Contrarian Strategy
A trading approach that bets against recent momentum, buying when the crowd sells and selling when the crowd buys, expecting mean reversion.
Copy Trading
A strategy that automatically mirrors the trades of identified profitable traders (whales) in real time.
CTF
Conditional Tokens Framework — Gnosis's ERC-1155 smart-contract standard that Polymarket uses to represent binary outcome tokens on-chain.
Data API
Polymarket's on-chain activity API that exposes wallet positions, trade history, and large holder data used for whale copy-trading.
Drawdown
The peak-to-trough decline in account value over a period, used to measure the worst-case loss a strategy inflicts on the bankroll.
Dry Run
Bot execution mode where no real orders are placed; the default behavior of all predtools bots unless the --live flag is passed.
Expected Value
The probability-weighted average outcome of a bet, measuring whether a trade has positive or negative long-run profitability.
FOK
Fill-or-Kill — an order type that must be filled in its entirety immediately or cancelled outright.
Gamma API
Polymarket's market-discovery REST API at gamma-api.polymarket.com, used to list markets, fetch metadata, and poll resolution status.
GTC
Good-Til-Cancelled — an order that rests on the book until it is matched, manually cancelled, or the market resolves.
Hit Rate
A synonym for win rate — the fraction of trades that resolve as profitable, used interchangeably in prediction market trading contexts.
IOC
Immediate-or-Cancel — an order that fills whatever quantity is available at the limit price right now and cancels the remainder.
Kalshi
A US-regulated CFTC-designated contract market for event-based binary futures, legally distinct from decentralized prediction markets.
Kelly Criterion
A formula for sizing bets to maximize long-run bankroll growth based on estimated win probability and payout odds.
Kraken
A major crypto exchange whose real-time price feed is included in poly5m-v4's multi-exchange median alongside Binance and Coinbase.
L1 Signature
An EIP-712 signature from the root EOA wallet used to authenticate high-privilege CLOB API operations like API key registration.
L2 Signature
A meta-transaction signature from a Polymarket API key registered to a proxy wallet, used for routine order placement without exposing the root EOA.
Maker
A trader who places a resting limit order on the book, adding liquidity and earning a rebate when matched by a taker.
Maker Rebate
A small credit paid to resting limit-order providers on Polymarket when their order is filled by a taker.
Mid-Price
The average of the best bid and best ask, used as a reference price for quoting and PnL calculation.
Neg-Risk
Polymarket's mechanism for multi-outcome markets where exactly one outcome wins, allowing collateral to be shared efficiently across mutually exclusive outcomes.
Oracle
An external data source that provides real-world information to smart contracts, used by prediction markets to determine resolution outcomes.
Order Book
The live list of all resting bid and ask limit orders for a market, organized by price level.
Outcome Token
An ERC-1155 token representing one side of a prediction market position, redeemable for $1 USDC if its outcome resolves winning.
Paper Trading
Running a strategy in simulation mode that tracks hypothetical trades and PnL without placing real orders or risking capital.
Payout
The USDC amount received per outcome token at settlement — $1.00 for a winning token, $0.00 for a losing token.
Polygon
The Ethereum L2 network on which Polymarket's smart contracts are deployed, providing fast finality and low transaction costs for prediction market settlement.
Polymarket
The largest decentralized prediction market, running on Polygon with USDC settlement and a CLOB for limit orders.
Position Sizing
The process of determining how many shares to buy per trade based on edge, bankroll, and risk tolerance — typically derived from Kelly criterion.
Prediction Market
A market where participants trade on the probability of a future event, with prices that reflect crowd-estimated likelihood.
Proxy Wallet
A Polymarket smart-contract wallet deployed per user that holds outcome tokens and USDC, enabling L2 meta-transaction signing without exposing the root EOA.
Relayer
Polymarket's off-chain transaction batcher that bundles signed orders and submits them to Polygon on behalf of traders, enabling gasless trading.
Resolution
The process by which a prediction market determines and records the winning outcome, triggering payout to winning token holders.
RTDS
Real-Time Data Streams — Chainlink's low-latency oracle product used by Polymarket to resolve short-duration crypto binary markets.
Settlement
The on-chain process of transferring USDC from losing to winning outcome token holders after market resolution.
Signature
A cryptographic proof that an Ethereum wallet authorized a specific message or transaction, required by Polymarket's CLOB API for all order submissions.
Slippage
The difference between the expected fill price and the actual fill price, caused by moving through multiple price levels on the order book.
Spread
The difference between the best ask price and the best bid price in an order book, representing the cost of an immediate round-trip trade.
Taker
A trader who submits an order that immediately matches against resting liquidity, removing it from the order book.
Taker Fee
The fee charged to the order-taker side of a trade on Polymarket, calculated as a function of shares, price, and market type.
USDC
USD Coin — the dollar-pegged stablecoin used as the sole deposit, collateral, and settlement currency on Polymarket.
Whale Wallet
A wallet address on Polymarket known for placing unusually large trades, often monitored by copy-trading bots for replication signals.
Win Condition
The specific real-world criterion that must be met for a prediction market's YES outcome token to pay $1 at resolution.
Win Rate
The percentage of trades that resolve profitably, one of the two components (with average payout) that determine a strategy's edge.