> ## Documentation Index
> Fetch the complete documentation index at: https://docs.numera.trade/llms.txt
> Use this file to discover all available pages before exploring further.

# How prices work

> What a price means, why it moves, and why your payout is always covered.

## A price is a probability

Every outcome trades somewhere between 0 and \$1.

An outcome at **62 cents** means the market thinks it's about **62% likely**. That's the whole translation — a price *is* the crowd's estimate, written as money.

It works that way because a winning share is worth exactly \$1. If you believe something is 80% likely and you can buy it at 62 cents, you're getting it below what you think it's worth. Enough people acting on views like that is what pulls the price toward the truth, and it's why prediction markets tend to forecast better than polls or pundits.

## There's always someone to trade with

You never wait for another person to take the other side of your bet.

Numera runs an **automated market maker** — a system that continuously quotes a price to buy and a price to sell, on every outcome, instantly. It's the counterparty to every trade.

So the market is open whenever you are. Big trade or small, busy afternoon or quiet 3am, there's always a live price and always a fill.

## Why prices move

Buying pushes a price up. Selling pushes it down. Every trade is a little bit of information, and the price absorbs it immediately.

How far it moves depends on two things:

**The size of the trade.** A small bet nudges the price. A large one moves it meaningfully.

**How much money is in the market.** A well-traded market absorbs even large orders smoothly. A brand-new one responds more to each trade, since there's less behind it.

<Note>
  Across all outcomes, prices add up to slightly more than \$1. That small difference is what funds having a counterparty available at every moment — the same idea as a bookmaker's margin or the gap between the buy and sell price at a currency desk.

  It narrows as a market grows, so the busier a market is, the better the pricing you get.
</Note>

## Your payout is always covered

This is the strongest guarantee Numera makes, and it's worth understanding.

A winning share is worth exactly \$1, so the most a market could ever need to pay is the number of shares held on whichever outcome wins. **Numera always holds more than that.** Every market is fully funded for every possible result, at every moment, from the first trade to the last.

That isn't a target or a reserve policy. It falls directly out of how prices are calculated — the pricing formula and the funding requirement are the same piece of maths, so a fully-funded market is the only kind the system can produce. As a market tilts toward one outcome, the price of that outcome rises, which brings in exactly the money needed to cover it.

Numera confirms it independently too: after every trade, it verifies the market still covers every possible payout before accepting the result.

This is what makes early exits possible. Systems that pool everyone's money together can't safely let people leave partway, because paying someone out early might leave too little for the winners at the end. Numera's funding holds no matter who leaves or when — so you can always take your money out.

## The spread

Every trade includes a small spread, from **0.5% to 3%**.

That's the cost of instant, always-available liquidity. Most of the time you'll pay near the minimum — the spread sits at its lowest in calm conditions, well before a deadline, when odds are reasonably balanced.

It widens in two situations: as a deadline gets close, and when an outcome sits far from even. Both are moments when whoever is trading is more likely to know something the market hasn't caught up with yet, so pricing adjusts to keep the market fair for everyone else.

<Note>
  Prices update continuously, so a quote you looked at a while ago may have moved. Numera always refreshes and shows you the current price before you confirm, so what you see at the moment you approve is what you get.
</Note>

## For the curious

<Accordion title="The maths behind it" icon="function">
  Numera uses a **damped liquidity-sensitive logarithmic market scoring rule** — LS-LMSR, a well-established design used in prediction markets and studied in academic literature.

  A single formula describes how much money the market holds for any given set of positions. Any trade costs the difference between that formula's value before and after.

  Two useful properties come straight out of it:

  **Path independence.** Reaching a given position costs the same however you get there — one large trade or ten small ones, same total. Prices are consistent no matter how you trade.

  **Guaranteed funding.** The formula's value is always greater than the largest possible payout. It's a mathematical identity, which is why full funding holds automatically rather than needing to be managed.

  The "damped" part gives brand-new markets extra depth so they quote sensible prices from the very first trade, then eases off as real volume arrives.
</Accordion>