What is edge in prediction markets? The complete explanation

In prediction markets, edgeis the gap between what you believe and what the market believes. If you think an event has a 70% chance and it's priced at 55¢ YES, you have a +15 percentage-point edge. Over enough trades at that edge, you make money — guaranteed by math, not hope.

The simple math

Edge (in pp) = your probability − market price.

Market prices are between 0 and 1 (or 0¢ and 100¢). Your probability estimate is also between 0 and 1. Subtract one from the other and that's your edge. Positive edge → bet YES. Negative → bet NO (or equivalently, “your probability on NO” beats the implied NO price).

The expected value per $1 bet:

• If YES at price p: EV = (your_prob × (1/p − 1)) − (1 − your_prob)
• For small edges at moderate prices, this simplifies roughly to edge × $1.

How much edge is “good enough”?

A useful threshold depends on your costs:

• Polymarket gas (~$0.20/bet) and slippage (~2% on liquid markets) eat edge.
• A 2% edge pre-costs is basically break-even post-costs.
• 5% edgeis the minimum we use as a filter inside PolyGuru's pipeline. Below that, noise in the probability estimate dominates.
• 10%+ edgeis genuinely rare and worth acting on — usually only when the market is under-liquid or the crowd hasn't caught up with fresh information.

Why edge alone isn't enough

Edge assumes your probability estimate is right. If your estimate is noisy (±15pp of error), a 5% edge is meaningless. That's why PolyGuru publishes calibration data — you need evidence that your probability estimates are accurate, not just confident.

Two more numbers matter:

1. Confidence — how much data backs your probability. Low-confidence 10% edges are lottery tickets; high-confidence 5% edges are real opportunities.
2. Conviction (for sports) — for near-coin-flip markets (45-55%), even a 5% edge is noisy. Weight edge by |probability - 0.5|.

How PolyGuru surfaces edge

On every market we analyse, you see:

• Market price (implied probability)
• Our calibrated probability
• Edge in pp (the difference)
• Confidence score (how strongly the data supports our probability)
• Net EV after slippage + gas
• Cited sources so you can audit the reasoning

We filter the daily pick list to markets with 5%+ edge AND 55%+ confidence. Below those thresholds, noise outweighs signal.