Trading Guide

Learn how to trade on Oracle AI prediction markets.

Understanding Prediction Markets

A prediction market lets you trade on future event outcomes:

• YES tokens: Pay $1 if outcome is YES, $0 otherwise
• NO tokens: Pay $1 if outcome is NO, $0 otherwise

The price reflects the market's probability estimate.

How Pricing Works

Oracle AI uses an Automated Market Maker (AMM) with the constant product formula:

reserveYES × reserveNO = k (constant)

Example

Market with 1000 YES and 1000 NO tokens:

• YES price = 1000 / (1000 + 1000) = 0.50 (50%)
• NO price = 1000 / (1000 + 1000) = 0.50 (50%)

After someone buys 100 YES tokens:

• New reserves: 909 YES, 1100 NO
• YES price = 1100 / (909 + 1100) = 0.55 (55%)
• NO price = 909 / (909 + 1100) = 0.45 (45%)

Step-by-Step Trading

Buying Tokens

1. Connect Wallet

   • Click "Connect Wallet" in the navbar
   • Select MetaMask or WalletConnect
   • Approve the connection

2. Find a Market

   • Browse markets on the Markets page
   • Click a market to view details

3. Place Order

   • Select YES or NO
   • Enter the amount of tokens
   • Review the cost (including 1% fee)
   • Click "Buy" and confirm in wallet

4. Monitor Position

   • Your tokens appear in your wallet
   • Watch the price change over time

Selling Tokens

1. Navigate to the market
2. Click "Sell" tab
3. Select which tokens to sell
4. Enter amount
5. Review payout and confirm

Trading Strategies

Probability Arbitrage

If you believe the true probability differs from the market price:

• Market shows YES at 30% but you think it's 60%
• Buy YES tokens at 0.30
• If correct, receive 1.00 per token
• Profit: 0.70 per token (233% return)

Hedging

Reduce risk by taking positions on both sides:

• Buy 100 YES at 0.50 = 50 ORACLE
• Buy 100 NO at 0.50 = 50 ORACLE
• Total cost: 100 ORACLE
• Guaranteed return: 100 ORACLE (break even minus fees)

Early Exit

Don't wait for resolution - sell your position anytime:

• Bought YES at 0.40
• Price rises to 0.70
• Sell for 0.70 profit without waiting

Understanding Slippage

Large orders move the price significantly:

Tip: Split large orders into smaller chunks.

Fees

After Resolution

When a market resolves:

1. Winning tokens: Worth 1 ORACLE each
2. Losing tokens: Worth 0
3. INVALID outcome: Refunded at fair value

Redeeming Winnings

1. Go to the resolved market
2. Click "Redeem"
3. Confirm transaction
4. Receive ORACLE tokens

Risk Warnings

• Price Risk: Prices can move against you
• Resolution Risk: Outcome may be INVALID
• Smart Contract Risk: Code bugs possible
• Liquidity Risk: Low liquidity = high slippage

Tips for Success

1. Research the question and resolution criteria
2. Check evidence URLs for reliability
3. Start small while learning
4. Diversify across multiple markets
5. Set limits on position sizes