🗂️ Trading FAQ

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🗂️ Trading FAQ
Commonly Asked Trading Questions
​What does 'Invalid Market' Mean?​
​How is the Outcome of a Market Determined on Augur?​
​Can I Sell Shares Before the Event Ends?​
​How Do Payouts Work on Augur?​
​How Do I Claim Payout?​
​How Do I Withdraw?​
​How Do Scalar Markets Work?​
​What determines the price of shares?​
​How Does an Order Book Work?
​What are the Market Phases on Augur?​
​What is a Complete Set?​
What does 'Invalid Market' mean?
A market may resolve as Invalid Market if its terms or end outcome are ambiguous, subjective or unknown. 
Warning: If a market resolves as Invalid Market, shares in any other outcome do not pay. 
Traders may buy or sell Invalid shares, and If a market resolves as Invalid, shares in any other outcome do not pay, while each Invalid share pays out one DAI.
The Invalid order book, in theory, can be used as a signal of the risk of Invalid resolution. Higher bids or a higher last-traded-at price may indicate a greater risk of Invalid resolution. Lower offers or a lower last-traded-at price may indicate a lesser risk or Invalid resolution. Traders may buy Invalid shares to hedge against these resolution risks. 
The Market List page attempts to filter out markets at high risk of resolving as Invalid, and Augur attempts to disincentivize market creators from creating these markets. However, the risk of Invalid resolution remains.
A market is invalid if:
The market question, resolution details or its outcomes are ambiguous, subjective or unknown.
The result of the event was known at market creation time.
The outcome was not known at event expiration time.
It can resolve without at least one of the outcomes listed being the winner, unless it is explicitly stated how the market will otherwise resolve in the resolution details.
The title, details and outcomes are in direct conflict with each other.
The market can resolve with more than one winning outcome.
Any of the outcomes don’t answer the market question ONLY. (outcomes cannot introduce a secondary question)
If using a resolution source (a source is a noun that reports on or decides the result of a market), the source's URL or full name is NOT in the Market Question, regardless of it being in the resolution details.
If using a resolution source, it is not referenced consistently between the Market Question and Resolution Details e.g. as either a URL or its full name.
Player or team is not in the correct league, division or conference, at the time the market was created, the market should resolve as invalid.
Augur Markets:
Should resolve using general knowledge if the market does not have a resolution source in market question.
Cover events that occur between market start time and end time in the market question. If start time is not specificed in the market quetion, market creation date/time is used. If no end time is specified in market question, the event expiration is to be used. If the event occurs outside of these bounds, the market should resolve as invalid
Outcomes must be unique from one and other within a market. If multiple outcomes share a common name, they must be easily distinguishable (ie. Serena Williams and Venus Williams)
How is the outcome of a market determined on Augur?
On centralized betting platforms, determining the outcome is simple. The market’s operator reports that X or Y outcome occurred. Since Augur markets have no operator, it’s a bit more complex. Augur uses a communal reporting system driven by incentives to resolve market outcomes. 
After a market enters reporting, an Initial Reporter (typically the market creator), selects which outcome occurred. This becomes the “Tentative Winning Outcome.”
Any user may then dispute the Tentative Winning Outcome by staking Reputation (REP), Augur’s native token, on an alternative outcome that they believe to be correct. An alternative outcome requires a specified threshold of REP, which is called the Dispute Bond, to be staked on it in order to become the new Tentative Winning Outcome.
Disputers that stake REP in favor of the outcome that the market ends up resolving to, receive a 40% ROI on their REP stake (except in the case of an unused pre-stake). Disputers that stake on an outcome that the market does not end up resolving to forfeit their entire REP stake.
With each successive dispute round, a higher Dispute Bond is needed to shift the Tentative Winning Outcome. A user may contribute the full Dispute Bond or fill it partially, along with other users.
The first dispute window is 24 hours. If the market’s Initial Report goes undisputed for 24 hours after the initial reporting window ends, the market will finalize and resolve to that outcome.After that, windows switch to 7 days and a market’s Tentative Winning Outcome must go a full 7 days without being successfully disputed in order to finalize, except in the unlikely event that it reaches a fork.
Can I Sell Shares Before the Event Ends?
Yes, you can sell shares any time after you buy them (before the market finalizes); If the price moves against you and you want to cut losses, the price stays the same over time, or if the price moves in your favor and you'd like to take profits.
You can also sell shares after the outcome is known but before the market finalizes. For example, if you'd like to collect your winnings on a market where your shares are known to have won, but before it officially finalizes, you should be able to sell your shares for near $1 on the order book.
How do payouts work on Augur?
YES/NO Markets

In a YES/NO market: If the market resolves as YES, the buyers of YES and sellers of NO receive one DAI per share; and receive nothing if the market resolves as NO or Invalid. If the market resolves as NO, the buyers of NO and sellers of YES receive one DAI per share; and receive nothing if the market resolves as YES or Invalid.
Multiple Choice Markets
A long share in any given outcome pays out one DAI if that outcome occurs and zero if the outcome does not. A short share in any given outcome pays out one DAI if that outcome does *not* occur and zero if it does.
For example If the market on the winner of the 2019 NBA Championship resolves as Toronto Raptors, buyers of the Toronto Raptors outcome as well as sellers of every other outcome (Warriors, Bucks, etc) would receive one DAI per share. In this instance, sellers of the Toronto Raptors, and buyers of every other outcome would receive zero.
Scalar Markets
A scalar market is one where various outcomes exist within a defined numerical range. One chooses a strike, or a price to go long or short at, within that range. 
If an outcome lands below the lower bound of the range, sellers receive one DAI per share and buyers receive zero. If an outcome lands above the higher bound, buyers receive one DAI, and sellers receive 0. 
If an outcome lands within the range, buyers of outcomes (strikes) below the settlement price and sellers above the settlement price are paid the difference between the price to open their position. 
Likewise, If the outcome lands within the range, buyers of outcomes (strikes) above the settlement price and sellers below the settlement price pay the difference between the price to open the position.
Winning and losing is capped to the range of the market. For example, if one goes long at the 25 outcome (strike) in a scalar market with a range between 10 and 50, and the market resolves at 40, the payout would be 15 per/share purchased. If one goes short and selling the outcome (strike) of 25 and it settles at 40, one would lose 15 per share.
How Do I claim payout?
Traders may claim their payouts as soon as a market finalizes. A market may finalize in as fast as 24 hours. It may, however, take longer if the initially reported outcome undergoes dispute. 
In this case, it may take days, or more rarely, longer. However, since you may trade shares at anytime, you may be able to sell shares at a slight discount to their ultimate payout on the open market.
How Do I Withdraw?
On Augur, once you've sold your shares or claimed your payout, the money in your wallet is entirely under your control and no one else's. From your wallet you are free to do with your funds as you wish.
There is never a need to withdraw, because Augur only holds your funds during the time that you are actively trading a market.
To send your funds from your current wallet, you'll simply find the 'SEND' form and enter the address that you'd like to send to. You can send your funds to a service where you can exchange your DAI for your local currency and withdraw to a bank account.
What determines the price of shares?
The short answer is however much buyers are willing to pay and sellers are willing to accept, as the price in any financial market is the meeting point of buyers and sellers. So then the question becomes: how do buyers and sellers decide how much they are willing to pay or accept?
Many things inform traders’ price points, but the primary factor in a prediction market is how likely they believe the event in question is to occur; or similarly how likely is it that other traders’ sentiment will change in the meantime.
The end payout for winning and losing shares in a prediction market is fixed and known from the beginning. A winning share pays out one DAI in a YES/NO market; losing shares pay out zero. 
So if you apply a 50% probability that an event likely to occur, then it makes sense to spend no more than .50 on YES shares, since your model assumes that there is a 50% chance you will get a payout of one DAI and a 50% chance you will get a payout of zero, which averages out to .50 DAI. 
So the current price that an outcome is trading at roughly equals the market’s present perceived probability that the event in question will occur. 
For example, if YES shares are currently trading at .75 in “Will the Dolphins Win on Sunday?” that signals a perceived 75% chance that the Dolphins will win. 
Prediction markets on real-world events contain uncertainty, market actors with differing information, views and intuitions, and any number of factors that may affect the outcome. The net result is that the perceived probability of the event occurring varies across individuals and across time, and shifts as the market absorbs more information, more participants and prices in new developments.
For instance, given a market on whether Candidate X will be elected president, if some scandal surfaces that diminishes his chances, the price for YES shares may adjust downward as buyers will now be willing to pay less.
In a Scalar market, the price signals the expected numerical outcome. For example, in a market on how many points the Dolphins will score on Sunday, if the current price is 21, that signals that the market “thinks” the Dolphins will score ~21 points. Remember, “the market” is simply a group of buyers and sellers expressing their varying information, intuitions and insights.
How do scalar markets work?
Scalar Markets work a little bit differently than YES/NO or Categorical markets.
Scalars may be denominated in any numerical measure such as $USD, degrees Fahrenheit, points or Electoral votes. For example, “What will the price of Gold be on January 1st?” or “How many points will the Dolphins score on Sunday?”
In scalar markets, outcomes vary within a defined upper and lower numerical bound. Within that range, one chooses an increment or “strike” as an outcome, to go long or short at. The increments between outcomes are called “precisions.”
For example, if there is a market on “How much will it rain in Chicago in April?” If the Denomination is inches, the range is 0 to 5, and the precision is set to 1, then traders may buy or sell shares at 1, 2, or 3 or 4. If the precision is set to .1, traders may buy or sell shares at .1, .2 … 4.8, 4.9. 
Unlike YES/NO and Multiple Choice markets, Scalar markets are not winner-take-all. The payout for long and short shares is based on where the price falls within the range relative to the outcome or “strike” chosen. For more info on how payouts are calculated in a Scalar market, see here.
How Does an Order Book Work
An order book is a list of buy orders (bids) and sell orders (offers) for an asset on a financial exchange, organized by price level. In the case of a prediction market, an order book indexes buy and sell orders for shares in a market outcome. Bids, displayed in green, are the price at which someone is willing to purchase shares in an outcome; and offers, displayed in red, are offers to sell shares in an outcome. 
An Augur order book lists three things: the price of all unmatched orders, quantity (how many shares are available to buy or sell at each price point), and user’s open orders.
The order book displays bids on the bottom and offers on the top in red. Orders are listed in ascending order, by price, from bottom to top, The highest buy order is called the “best bid,” as it is the best bid for sellers and the lowest sell order is called the “best offer,” as it is the best deal for buyers. 
Any trader may add an order to the book or may fill an existing order. The party that creates an order is sometimes called the “maker,” while the party that fills an order is called a “taker.” 
When a bettor places an order, he specifies a limit price and quantity, for example, 5 shares at .49 DAI. The limit price, .49, is the highest price a buyer would be willing to pay for the shares, or the lowest price a seller would be willing to sell the shares for. An order will never be filled above the buyer’s limit price nor below the seller’s limit price.
If the price and quantity in the limit order is available on the order book, the order will be executed immediately. If the order cannot be filled or can only be partially filled, then any remainder that is unfilled will be added as a new order on the order book. 
For example, if a bettor places a limit buy order for 5 shares at .49 DAI and the best offer on the order book is 3 shares at .49 DAI. Those 3 shares will be immediately filled, and the remaining 2 will be added as bids to the order book at .49 DAI.
In matching unmatched orders on the book, orders are executed on a price/time priority. The best price order will be matched first. If multiple orders are placed at the best price, the earliest orders are executed first. An order creator may cancel an unfilled order at any time.
Market phases on Augur
Markets on Augur go through three phases: Open, Reporting, and Finalized.
Once a market is created, it enters the Open phase. This is when most trading generally occurs and when the outcome of the event in question is not yet known.
The market enters its next phase, Reporting, at a time specified by the market creator during market creation. Typically, this occurs after the outcome in question is known. 
During Reporting, a market undergoes a reporting process to determine its outcome. This process can complete in as soon as a day, though may take longer if users dispute the initial reported outcome. During this phase, trading may still take place, and traders may seek to settle shares on the open market if they do not want to wait for the market to finalize.
Once a market completes reporting and its outcome is determined, it is considered Finalized. At this time, traders may claim payouts for any shares of value. Markets may still be traded at this time, though it is unlikely to occur in practice, as the value of all shares is already known. 
In rare cases, a market may also undergo a Forking phase.
What is a Complete Set?
A Complete Set is a collection of shares, one each, in all of market's outcomes. A complete set is always worth one DAI and is created when an order's creator and filler pay with currency (DAI) to complete a trade and take a position in a market. 
If only one party uses DAI and the other uses shares to make a trade, no new complete sets are created. Rather, existing shares are transferred. If both parties use shares to make the trade, then complete sets are settled (destroyed).
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On this page
What does 'Invalid Market' mean?
How is the outcome of a market determined on Augur?
Can I Sell Shares Before the Event Ends?
How do payouts work on Augur?
How Do I claim payout?
How Do I Withdraw?
What determines the price of shares?
How do scalar markets work?
How Does an Order Book Work
Market phases on Augur
What is a Complete Set?