Prediction Market Risk
Prediction market risk is the possibility of losing money or experiencing an unexpected outcome when trading contracts linked to future events. Risk can come from the event itself, an inaccurate probability estimate, poor execution, insufficient liquidity, unexpected information, resolution uncertainty or the platform being used.
Why it matters to you
A trader may correctly identify an attractive price and still lose. Prediction markets deal in probabilities, not certainties. Understanding where the risk comes from helps traders decide whether the potential reward justifies taking the position.
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Resolution Risk
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