trade classification

Inferring which side of a trade was the aggressor (buy or sell) from prices and quotes rather than observing it, and the errors that arise when the inferred sign is wrong.

Cluster: Liquidity & Trading

Related Concepts

• 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.
• 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.
• market structure — The organization and stratification of prediction market platforms into distinct layers — rails (settlement/execution), wrappers (distribution/user access), and product archetypes — and the competitive dynamics between them.
• order book — A list of outstanding buy and sell orders at various prices, showing available liquidity at each level.

Articles about trade classification

• Measuring Trade Direction in a Prediction Market: Settlement Ground Truth and Trading-Cost Measurement on Polymarket by Philipp D. Dubach