Prediction markets look similar to traditional financial markets on the surface, but there is one obvious structural difference that affects every metric we use.
In prediction markets, prices represent probabilities. A contract trades between 0 and 1, where the price reflects the market’s current estimate of the likelihood that an event occurs.
Traditional markets measure price on an open scale (0 to infinity). Prediction markets measure probability.
This changes how charts and indicators should be interpreted. The mechanics are similar, but the meaning behind the numbers is different.
Below is a quick overview of the core metrics available on our platform.
Metrics Overview
- OHLC (Candlestick Chart)
- Open Interest
- Yes / No Order Book Depth
- Liquidity Metrics (Spread)
- Volume at Probability (VAP)
- Regime Identification
OHLC (Candlestick Chart)
The OHLC chart shows four pieces of information for each time interval:
- Open – the probability at the start of the interval
- High – the highest probability reached
- Low – the lowest probability reached
- Close – the probability at the end of the interval
In traditional markets this represents price movement. In prediction markets it represents changes in implied probability.
Candlestick charts allow you to quickly see how probability is evolving over time. You can observe whether a market is:
- Range bound, with probability moving within a tight band
- Trending, with probability steadily increasing or decreasing
- Experiencing rapid repricing, usually due to new information entering the market
The chart itself does not explain why probability is moving, but it provides the most direct view of how the market has priced the event over time.
Open Interest
Open interest (OI) represents the number of contracts currently open in the market.
Every contract requires two sides: a Yes position and a No position. When a new pair of positions is created, open interest increases. When positions close against each other, open interest decreases.
Because of this, OI can help explain how probability is moving.
For example:
Probability decreasing while OI decreases
→ Existing Yes positions are closing.
Probability decreasing while OI increases
→ New No positions are opening.
The same logic applies in the opposite direction when probability rises.
In prediction markets, this relationship between probability and open interest can give insight into whether traders are exiting positions or establishing new ones.
Yes / No Order Book Depth
Order book depth shows where buy and sell orders are currently resting.
In prediction markets this typically appears as two sides:
- Yes liquidity
- No liquidity
These orders represent the prices where traders are willing to provide liquidity. Studying the depth of the book can reveal several things:
- Liquidity concentrations where trading activity may slow
- Thin liquidity zones where price may move quickly
- Order book imbalances between buyers and sellers
Unlike in many traditional markets, prediction markets often have thinner books. This makes these structures easier to see and sometimes more influential on short-term price movement.
Order book depth therefore provides a snapshot of current market positioning.
Liquidity Metrics (Spread)
The spread is the difference between the best bid and best ask.
This metric reflects how easy it is to trade at the current moment.
Narrow spreads generally indicate healthy liquidity.
Wide spreads suggest liquidity is limited or uncertainty is high.
Prediction markets often experience wider spreads than traditional markets because professional market-making participation is still relatively limited. As a result, spreads can expand quickly when traders become uncertain about fair probability.
Monitoring spread changes helps identify when markets are liquid and when they are fragile.
Volume at Probability (VAP)
Volume at Probability (VAP) shows how much trading occurred at each probability level.
This concept is closely related to volume profile in traditional markets, but the horizontal axis represents probability rather than price.
VAP highlights several useful areas:
- High volume zones where many trades occurred
- Low volume zones where trading activity was limited
- Potential fair value regions where the market repeatedly traded
High volume areas often represent agreement among traders about probability. Low volume areas may represent prices that the market moved through quickly.
These patterns can provide insight into where the market has historically been comfortable trading.
Regime Identification
Prediction markets move through different structural phases. Our regime identification system helps classify these conditions.
The four regimes currently identified are:
Range Bound
Probability is moving sideways within a relatively stable range. No strong directional pressure is present.
Information Active
Probability is reacting aggressively to new information. Rapid repricing often occurs in these periods.
Thin Liquidity
Available liquidity is limited. Order books are shallow and spreads may widen.
Terminal Phase
A condition unique to prediction markets. As resolution approaches, the probability must converge toward either 0 or 1. Liquidity often changes significantly during this phase as traders close positions and uncertainty declines.
Understanding which regime a market is in can help explain why probability is behaving the way it is.
Final Thoughts
Prediction markets share many structural similarities with traditional markets, but the interpretation of metrics changes when everything is expressed in terms of probability rather than price.
The metrics above aim to provide a clear view of how these markets function:
how probability moves
where traders are positioned
where liquidity exists
and how market conditions are changing
Taken together, they offer a structured way to understand how prediction markets discover probability.