execution quality

How favorably a trader transacts relative to the prevailing market price. In prediction markets, execution quality separates profitable from unprofitable traders: automated participants systematically obtain better prices than manual traders, and this edge outweighs directional forecasting skill as a determinant of returns.

Cluster: Liquidity & Trading

Related Concepts

• retail flow — Trading activity from non-professional participants, generally considered less informed and more predictable.
• adverse selection — Risk that counterparties trade because they have superior information, causing losses for the market maker.
• bid-ask spread — The difference between the highest price a buyer will pay and the lowest price a seller will accept, representing the cost of immediacy for traders.
• market making — Continuously quoting bid and ask prices to facilitate trading, earning the spread while managing inventory risk.

Articles about execution quality

• Who Profits from Prediction Markets? Execution, Not Information by Joshua Della Vedova