Market States

#Definition

Market States are the distinct operational phases a prediction market transitions through during its lifetime. Each state determines what actions traders can take and what's happening with the market. The standard progression is: Unopened → Open → Closed → Resolved → Settled.

#The Five Market States

#State 1: Unopened

Status: Created but not yet trading

What it means:

• Market exists and is visible
• Rules are set and published
• Cannot trade yet
• May show "Coming Soon" or start time
• Pre-market preparation phase

Example:

Nov 1: Market created for Dec 15 Fed meeting
Nov 1-14: UNOPENED (visible but no trading)
Nov 15: Opens for trading

What you can do: ✅ View market details ✅ Read rules ✅ Research the event ✅ Set alerts for opening ✅ Prepare trading strategy

What you cannot do: ❌ Trade ❌ Place orders ❌ Earn fees (no volume yet)

Why this state exists:

• Allows review of rules before trading starts
• Gives time for promotion and awareness
• Prevents front-running market creation
• Scheduled openings (e.g., "opens 1 month before event")

#State 2: Open

Status: Active trading

What it means:

• 🟢 Market is live
• Trading fully enabled
• Prices fluctuate based on orders
• Liquidity available
• Information being aggregated

Example:

Market: "Will Bitcoin reach $100k in 2025?"
Nov 15, 2024: Opens
Dec 31, 2025: Closes
Open duration: 13+ months

What you can do: ✅ Buy shares (YES or NO) ✅ Sell shares you own ✅ Place limit orders ✅ Cancel orders ✅ Add/remove liquidity (AMM markets) ✅ Monitor prices ✅ React to news

What you cannot do: ❌ Change market rules ❌ Redeem shares yet (event hasn't resolved) ❌ See final outcome (unknown)

Price dynamics:

Opening price: Often 50¢ (uncertain)
Mid-life: Prices fluctuate with news
Near close: Converges toward outcome (e.g., 95¢ or 5¢)

This is the core state where prediction markets serve their purpose:

• Aggregating information
• Price discovery
• Risk transfer
• Speculation and hedging

#State 3: Closed

Status: Trading stopped, awaiting outcome

What it means:

• 🔴 Trading disabled
• Positions frozen
• Event occurring or about to occur
• Outcome not yet official
• Waiting for resolution

Example:

Election market:
8:00 PM: Polls close → CLOSED
11:30 PM: Race called → Still CLOSED
Next morning: Official confirmation → Moves to RESOLVED

What you can do: ✅ View your frozen positions ✅ Monitor real-world event ✅ Wait for outcome ✅ Calculate potential returns ✅ Trade other markets

What you cannot do: ❌ Trade this market ❌ Modify positions ❌ Add/remove liquidity ❌ Place new orders ❌ Cancel existing orders (already canceled at close)

Why this state exists:

• Prevents manipulation during outcome determination
• Allows fair resolution process
• No last-second insider trading
• Clean break between trading and settlement

Duration: Minutes to weeks

• Sports: 10-60 minutes
• Elections: 2-24 hours
• Economic data: 1-7 days
• Disputed outcomes: Days to weeks

#State 4: Resolved

Status: Outcome determined, processing payouts

What it means:

• ✅ Winner declared
• Outcome official
• Oracle/platform confirmed result
• Payouts being processed
• May have dispute window

Example:

9:00 AM: BLS releases jobs data → Outcome known
9:15 AM: Platform confirms → RESOLVED to YES
9:30 AM: Payouts sent → Moves to SETTLED

What you can do: ✅ See resolution outcome ✅ Know your profit/loss ✅ File dispute (if allowed, time-limited) ✅ Await payout ✅ Plan next trades

What you cannot do: ❌ Trade ❌ Modify position ❌ Withdraw winnings yet (processing) ❌ Change outcome (too late)

Substates:

• Proposed: Outcome suggested, can be challenged
• Final: Dispute period passed, outcome confirmed
• Settling: Payouts being distributed

Duration: Minutes to days (usually <1 hour)

#State 5: Settled

Status: Complete, final, permanent

What it means:

• 🏁 Market finished
• Payouts distributed
• Winners got $1.00 per share
• Losers got $0.00
• Historical record preserved
• Cannot reopen

Example:

10:00 AM: Payouts hit accounts → SETTLED
Status: Permanently complete

What you can do: ✅ Withdraw funds ✅ Reinvest in other markets ✅ Review market history ✅ Check accuracy (price vs outcome) ✅ Update tax records ✅ Learn from results

What you cannot do: ❌ Trade (market closed forever) ❌ Dispute outcome (too late, rare exceptions) ❌ Reverse settlement (permanent)

This is the end state: Market will remain in this state forever, serving only as historical data.

#State Transition Diagram

[UNOPENED]
    ↓
    Opening time reached
    ↓
[OPEN] ←─────────┐
    ↓            │
    Close time   │ (Can stay open for months)
    ↓            │
[CLOSED] ─────────┘
    ↓
    Outcome determined
    ↓
[RESOLVED]
    ↓
    Payouts processed
    ↓
[SETTLED]
    ↓
    (Permanent)

#State-by-State Comparison

#Alternative State Progressions

#Fast-Track (Simple Markets)

UNOPENED → OPEN → CLOSED → SETTLED
                           (resolved + settled simultaneously)

Example: Play-money market resolves instantly

#Disputed Outcome

UNOPENED → OPEN → CLOSED → DISPUTED → RESOLVED → SETTLED
                                ↑
                          (Extended review period)

Example: Contested election with recounts

#Voided Market

UNOPENED → OPEN → VOIDED → REFUNDED
                     ↑
              (Market canceled, all funds returned)

Example: Market had critical rule error, platform voids it

#Pre-Trading

Some platforms allow pre-market trading:

UNOPENED (with pre-trading) → OPEN (official) → CLOSED → RESOLVED → SETTLED
    ↑                              ↑
(Limited trading)           (Full trading)

#State Indicators

#Visual Indicators

Platforms typically show state with:

Unopened:

• 🔵 Blue or gray indicator
• "Opens in X days" countdown
• Grayed-out trade button

Open:

• 🟢 Green indicator
• "Trading Active" badge
• Live price updates

Closed:

• 🔴 Red indicator
• "Trading Closed" badge
• Frozen price display

Resolved:

• ⚠️ Yellow or orange indicator
• "Settled: YES" or "Settled: NO"
• Settlement processing message

Settled:

• ⚫ Gray or black indicator
• "Settled" badge
• Final outcome displayed
• Historical data view

#State and Strategy

#Best Time to Enter (Open State)

Early (just opened):

• Wide uncertainty
• Potentially mispriced
• Long time to expiry
• High risk/reward

Mid-life:

• More information available
• Narrower spreads
• Moderate risk/reward

Late (near close):

• Outcome becoming clear
• Converging to 0¢ or 100¢
• Low risk/reward
• Quick resolution

#Best Time to Exit (Before Close)

Exit strategies:

• Take profit early: Lock in gains, avoid risk
• Hold to close: Maximum profit if confident
• Partial exit: Sell some, hold rest

Consider exiting before close if:

• You've made good profit
• New information increases uncertainty
• You need capital for other trades
• Event risk is high

#State Transitions You Cannot Control

As a trader, you cannot:

• ❌ Force a market to open early
• ❌ Extend trading past close time
• ❌ Prevent market from closing
• ❌ Speed up resolution
• ❌ Delay settlement

You must work within the state system the platform provides.

#State Information Sources

#Where to Check State

✅ Market page: Shows current state prominently ✅ Portfolio view: Lists states of your positions ✅ Email notifications: Alerts on state changes ✅ API endpoints: Programmatic state checking ✅ Smart contract: On-chain state (crypto platforms)

#State Change Notifications

Good platforms notify you:

• "Market opening in 1 hour"
• "Market closing in 24 hours"
• "Market closed, awaiting resolution"
• "Market resolved: YES"
• "Settlement complete, funds available"

#State and Risk Management

#Unopened

• Risk: None (cannot trade yet)
• Action: Research and prepare

#Open

• Risk: High (price can move against you)
• Action: Active monitoring and management

#Closed

• Risk: Medium (outcome uncertain, capital locked)
• Action: Wait patiently, prepare dispute if needed

#Resolved

• Risk: Low (outcome known, just awaiting funds)
• Action: Verify correct resolution

#Settled

• Risk: None (complete)
• Action: Withdraw or reinvest

#The Importance of Understanding States

Knowing market states helps you:

✅ Time your trades: Enter/exit at optimal times ✅ Manage expectations: Know when you'll get paid ✅ Avoid errors: Don't expect to trade closed markets ✅ Plan capital: Account for locked periods ✅ Reduce stress: Understand what's happening ✅ Maximize returns: Strategic positioning across states

New traders often get confused because they don't understand states - seeing a market as "closed" and wondering why they can't trade, or expecting instant payment when a market "closes" not realizing they need to wait for resolved → settled transition.

Master the states, master the markets.