How Are Prices Determined?
Unlike traditional forecasting where probabilities are set by analysts, prediction market prices are determined by supply and demand from forecasters like you.
The Order Book
Every market has an order book showing:
- Bids - Prices buyers are willing to pay
- Asks - Prices sellers are willing to accept
The current price is where buyers and sellers meet.
Example Order Book:
| Bids (Buyers) | Asks (Sellers) | |
|---|---|---|
| 100 shares @ 57¢ | 50 shares @ 59¢ | |
| 200 shares @ 56¢ | 150 shares @ 60¢ | |
| 150 shares @ 55¢ | 200 shares @ 61¢ |
- Current YES price: ~58¢ (midpoint of best bid/ask)
- If you want to buy immediately, you pay 59¢ (best ask)
- If you want to sell immediately, you get 57¢ (best bid)
Why Prices Move
Prices change when new information affects probability estimates:
Price increases when:
- News makes the event more likely
- More buyers than sellers
- Expert analysis supports YES
Price decreases when:
- News makes the event less likely
- More sellers than buyers
- Expert analysis supports NO
Example:
- Market: "Will UAE host the 2036 Olympics?"
- Current YES price: 25¢
Breaking news: UAE advances to final bidding round
- Traders rush to buy YES
- Price jumps to 45¢
The Spread
The spread is the difference between the best bid and best ask:
- Best bid: 57¢
- Best ask: 59¢
- Spread: 2¢
Narrow spread (1-2¢) = Liquid market, easy to trade Wide spread (5-10¢) = Less liquid, harder to get good prices
MANSHUR's market makers work to keep spreads tight on popular markets.
Price vs. Probability
Remember: Price = Probability
| Price | Implied Probability | What It Means |
|---|---|---|
| 10¢ | 10% | Unlikely to happen |
| 25¢ | 25% | Probably won't happen |
| 50¢ | 50% | Coin flip |
| 75¢ | 75% | Probably will happen |
| 90¢ | 90% | Very likely |
Finding value: If you believe an event has a 70% chance but the market shows 50¢, that's a buying opportunity.
Price Limits
Prices can range from:
- Minimum: 1¢ - Very unlikely but not impossible
- Maximum: 99¢ - Almost certain but not guaranteed
Prices of 0¢ or 100¢ only occur after the market resolves.
Impact of Your Trade
Large orders can move prices:
Small order (10-100 shares): Minimal impact Medium order (100-1000 shares): May move price 1-2¢ Large order (1000+ shares): May move price significantly
To minimize price impact:
- Use limit orders instead of market orders
- Break large orders into smaller pieces
- Trade during high-volume periods
Live Price Updates
MANSHUR shows real-time prices that update every second:
- Green arrow (↑) - Price increasing
- Red arrow (↓) - Price decreasing
- Percentage - Change in last 24 hours
Watch prices to understand market sentiment and find trading opportunities.
Key Takeaways
- Prices are set by traders, not by MANSHUR
- Supply and demand determine current prices
- Order book shows available bids and asks
- Spread is the cost of trading immediately
- Prices move as new information emerges
- Large orders can impact the price
Learn more about reading the order book.