READING AN ORDER BOOK ON A PREDICTION MARKET
Plain English
The order book on a prediction market shows what buyers are willing to pay for Yes and No contracts. The best Yes bid and best No offer tell you the current market price. Volume and open interest tell you how actively this event is being traded. Thin markets (low volume) mean wider spreads and more price impact from your trades.
Going deeper
Prediction market order books display: Best Yes Bid (highest price someone will pay for Yes), Best No Bid (highest price someone will pay for No — equivalent to lowest Yes offer), Volume (contracts traded today), Open Interest (total contracts outstanding), and Last Trade Price. Since Yes price + No price ≈ $1.00, the bid-ask spread on Yes contracts reflects the liquidity of that market. Popular economic event contracts on Kalshi typically have 1-3 cent spreads. Thinly traded contracts might show 5-10 cent spreads. You should generally use limit orders on prediction markets — market orders can fill at significantly worse prices in thin books. The time until resolution also affects liquidity: contracts resolving today are often highly liquid; contracts resolving months away may be thin.
Examples
Interpreting the Book
CPI contract book: Yes Bid $0.62 / Yes Ask $0.64. The market-implied probability is approximately 63% (midpoint). The 2-cent spread means you pay an implicit 2% cost to trade (relative to a $1.00 payout). Volume: 50,000 contracts. Open Interest: 120,000 contracts. High volume and OI = liquid, narrow spread = good market.
Thin Market Warning
An obscure weather contract shows: Yes Bid $0.40 / Yes Ask $0.55 — a 15-cent spread! Your 'edge' needs to exceed 7.5 cents just to break even on the spread. Thin markets extract a heavy cost. Stick to liquid contracts until you understand PM market structure well.