Tier 6 · Advanced Literacy
What is an order book
A plain-language guide to the order book behind a prediction market exchange: bids, asks, the spread, depth, limit versus market orders, and why liquidity is the real price you pay.
Updated 2026-08-02
Behind every price on a prediction market exchange sits an order book: a live list of what people are willing to buy and sell a contract for, and in what size. A sportsbook hands you one number and takes your bet. An exchange shows you the whole ledger of offers. Learning to read that ledger is what separates a confident trader from someone clicking a price they do not understand.
Bid, ask, and the spread
The order book has two sides. The bid is the highest price anyone is currently willing to pay to buy the contract. The ask is the lowest price anyone is willing to sell it for. The gap between them is the spread.
Coastline Kings to win the group Best bid: 0.58 (buyers waiting here) Best ask: 0.61 (sellers waiting here) Spread: 3 cents
In this made-up book, buyers of a Kings contract are lined up at 58 cents and sellers at 61 cents. Nobody trades until someone accepts the other side. The "price" you might quote as 0.60 is really a range, and which end you touch depends on whether you are buying or selling.
Depth is the third piece. Behind the best bid and ask sit more orders at worse prices. A book with lots of size stacked near the top is deep; one with a few small orders is thin. Depth decides whether the nice price you see survives contact with your order.
Limit orders, market orders, and slippage
You interact with the book in two ways. A limit order names your price and waits. You might offer to buy the Kings at 0.59, sitting between the current bid and ask, and you fill only if a seller comes to you. You control the price; you do not control whether it happens.
A market order takes whatever is there now. You buy at the ask, sell at the bid, and you fill immediately. The risk is slippage: if your order is bigger than the size available at the best price, it eats into the next level and the next, and your average fill lands worse than the top-of-book number you saw.
Crossing the spread is the exchange vig
Buy at the ask and immediately sell at the bid and you have lost the spread, plus any fee, without the event moving at all. That round-trip cost is the exchange's version of the margin a sportsbook bakes into its odds. On a busy contract it is tiny; on a quiet one it can dwarf a sportsbook vig.
Liquidity is a first-class fact
A great price you cannot actually fill at size is not a price. This is the lesson finance-curious readers underestimate. If the best ask is 0.61 but only a few contracts sit there, a larger order sweeps up to 0.64 or 0.67, and your real cost is the average, not the headline.
Read the size, not just the number
Before trusting a quoted price, look at how much sits at it and how deep the book runs behind it. Thin markets produce beautiful-looking numbers that evaporate the moment you try to trade meaningful size.
Liquidity also decides whether you can leave. A market you entered cheaply but cannot exit without moving the price against yourself is a trap dressed as a bargain. Treat depth and spread as part of the price itself, every time, before you click.
Tier 6 · Advanced Literacy
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