A market begins with a question and a rulebook. The rulebook names which outcomes count, when trading closes, what evidence settles the result and what happens if the event changes or is cancelled. The headline question is only a shorthand; settlement follows the terms.
From quote to order
A screen may show the best price someone offers to buy and the best price someone offers to sell. Those prices form a spread. On an exchange, an order is matched with another participant if the prices agree; otherwise it may wait in an order book. A displayed price is not necessarily available for the whole amount you want. Thin books can change quickly.
While a market is open
New information can alter participants’ views and orders. Depending on the product, a participant may close a position before the outcome, remain exposed until settlement, or be unable to exit at an acceptable price. An unrealised gain on a screen is not the same as money received. Market suspensions, fees and transaction rules differ between operators.
At resolution
An operator applies the pre-published settlement criteria to a cited source. If a question is ambiguous, an event is postponed or the nominated source changes, the dispute process matters. Look for the operator’s market rules and appeals policy rather than assuming common-sense wording will prevail. See our deeper guide to liquidity and resolution.
A deliberately simple illustration
Suppose a hypothetical yes contract settles at £1 if a precisely defined event happens, and zero otherwise. Buying one at 40p gives a maximum gross settlement of £1 and a 40p stake at risk. Before any charges, the outcome is either a 60p gross gain or a 40p loss. Actual products may use different units, commissions and settlement structures; this is an explanation, not a suggestion to trade.
The mechanics in observed data
The difference between a posted order and an immediate trade matters beyond this illustration. A US study in our maker-versus-taker evidence guide reports materially different average losses. For the wider evidence base, browse the prediction markets research hub; the findings do not imply UK product access.