Understanding Market Prices

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How Market Prices Work

Understanding prices is crucial for successful trading on Predicta. This guide explains everything you need to know about market prices.

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Price Basics

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YES and NO Prices

Every binary market has two prices that always add up to 100:

• YES Price: Current price to buy one YES share (0-100)
• NO Price: Current price to buy one NO share (0-100)
• Key Rule: YES price + NO price = 100 (always)

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Price Interpretation

The price represents the market’s collective probability:

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Understanding Price Values

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Cost Per Share

• If YES price = 75, it costs $0.75 to buy one YES share
• If NO price = 25, it costs $0.25 to buy one NO share

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Payout Per Share

• If you’re right, each winning share pays $1.00
• If you’re wrong, each losing share is worth $0.00

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Profit Calculation

Example 1: Buying YES at 75

• Cost: 100 shares × $0.75 =$75.00
• If YES wins: 100 shares × $1.00 =$100.00
• Profit: $100.00 -$75.00 = $25.00

Example 2: Buying NO at 25

• Cost: 100 shares × $0.25 =$25.00
• If NO wins: 100 shares × $1.00 =$100.00
• Profit: $100.00 -$25.00 = $75.00

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How Prices Change

Prices update in real-time as:

• New information arrives: Breaking news affects prices
• People place orders: Supply and demand drive prices
• Trades execute: Completed trades move prices
• Market sentiment shifts: Collective opinion changes

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Price Movement Example

Scenario: Breaking news makes an event more likely

• Before: YES = 50, NO = 50
• After news: YES = 70, NO = 30
• Result: Early YES buyers profit, NO holders lose value

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Reading Price Charts

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Price History Chart

The price history chart shows:

• YES Price Line: How YES price has changed over time
• NO Price Line: How NO price has changed over time
• Volume Bars: Trading activity at different times

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What to Look For

• Trends: Is the price moving up or down consistently?
• Volatility: How much is the price swinging?
• Volume Spikes: When did most trading happen?
• Support/Resistance: Price levels that seem to hold

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Chart Patterns

Uptrend: YES price consistently rising

• Market becoming more confident event will happen
• Good time to buy YES if you agree, or sell if you disagree

Downtrend: YES price consistently falling

• Market becoming less confident
• Good time to buy NO if you agree, or buy YES if you think market is wrong

Sideways: Price moving in a range

• Market uncertain, waiting for information
• Good for range trading strategies

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Price and Probability

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Converting Price to Probability

The price directly represents probability:

• YES at 60 = 60% chance event happens
• NO at 40 = 40% chance event doesn’t happen

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Expected Value

Calculate expected value to make informed decisions: Formula: (Probability × Payout) - Cost Example: Buying YES at 60

• Probability: 60%
• If you win: $1.00 per share
• Cost: $0.60 per share
• Expected value: (0.60 × $1.00) -$0.60 = $0.00

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Price Strategies

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Buying at Low Prices

Advantage: Higher profit if you’re right Disadvantage: Lower probability of being right

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Buying at High Prices

Advantage: Higher probability of being right Disadvantage: Lower profit if you’re right

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Finding Value

Look for markets where:

• You think the price is wrong
• You have information others don’t
• The market is mispricing the probability

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Common Price Scenarios

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Near Expiration

As markets approach expiration:

• Prices move toward 0 or 100
• Uncertainty decreases
• Less opportunity for profit
• More certainty about outcome

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High Volume Trading

When volume is high:

• Prices may be more accurate
• More liquidity (easier to buy/sell)
• Faster price movements
• More competition

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Low Volume Trading

When volume is low:

• Prices may be less accurate
• Less liquidity (harder to buy/sell)
• Slower price movements
• More opportunity to find mispriced markets

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Price Alerts

Set up price alerts to:

• Get notified when prices hit certain levels
• Track markets you’re interested in
• Act quickly on opportunities

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Next Steps