What edge actually is in a prediction market
Edge is a disagreement you can defend, priced after costs. Everything else is a feeling.
If you cannot state a probability, you cannot have an edge — you have an opinion about direction, which is not the same object. Edge is the arithmetic difference between the probability you believe and the price you actually pay.
The computation
Per share on a contract paying $1: edge = q − pall-in, where q is your probability and pall-in is the price you paid plus the fee you paid to pay it. On 100 shares of a politics market bought at 38¢ with a 0.04 fee rate, the all-in price is 38.94¢. If your honest estimate is 45%, your edge is 6.06¢ a share — and your break-even is 38.94%, not 38%.
Note what is doing the work. The price is a fact. The fee is a fact. Your probability is the only soft number in the equation, and it carries the entire claim.
The four things that eat it
- The feeSmall, certain, and paid on every taker fill. Price it.
- The spreadYou do not trade at the mid. On a thin book you can lose more to the spread than to the fee, and you lose it again on the way out if you do not hold to resolution.
- TimeCapital locked until settlement earns nothing else. Price that too.
- Resolution riskThe chance the market does not settle the way its wording implied. Rare, not zero, and concentrated in exactly the markets whose wording looked obvious.
How to know whether you have it
You cannot tell from a run of results; that is what variance is for. You can tell from a large enough settled record, which is why the only honest way to answer “do I have edge” is to read your own history in bulk rather than remember it. Your fills are public if you trade on Polymarket. The free scan reads them and returns your realised record, your percentile against the field and the most expensive habit in it — it costs nothing and it is the same battery we run on the wallets we track.
Questions
What is edge in betting or prediction markets?
The difference between your own probability estimate and the all-in price you pay, including fees. Positive edge means you think the market is wrong in your favour by more than the cost of trading it.
How do I calculate my edge?
Edge per share equals your probability minus the price plus fee. On a $1-payout contract bought at 38.94 cents all-in with a 45% estimate, the edge is 6.06 cents a share.
How do I know if my edge is real?
Not from a winning streak. From a settled record large enough that luck is an unlikely explanation — enough distinct markets, over enough time, with the losses counted.