Simple Guide to Buy/Sell, Market vs. Limit Orders, and AMM Logic
If you’ve ever Googled “how does Polymarket work” or wondered How Polymarket Works, you’ll notice that the platform behaves very differently from typical stock or crypto exchanges. Furthermore, the intricacies of how Polymarket prices work can be quite enlightening. The first thing many users find confusing is the structure of the order interface:
- Buy orders ask for how much money you want to spend, while
- Sell orders ask for how many shares you want to sell.
And there’s another important detail that most people don’t realize at all:
Not every order affects the market price.
Only certain types of orders actually move the price on Polymarket.
This happens because Polymarket uses two systems at the same time:
- An AMM (Automated Market Maker) that sets prices for market orders, and
- A CLOB-style orderbook (Central Limit Order Book) that handles limit orders between users.
In this guide, we’ll walk through the key mechanics that explain:
- Why Buy uses $ input and Sell uses share input
- Which orders move the price
- Why Limit orders do not affect the market price
- How Market orders change YES/NO probabilities
- How the AMM calculates prices
- Real numerical examples that show how price shifts happen
Understanding how Polymarket prices works with these two systems explains everything:
why prices move, why limit orders sit untouched, and why Buy/Sell have different inputs.
How Polymarket Prices Work: Understanding the Mechanics
1. How Polymarket Prices Works: AMM Buckets Determine the Price
Polymarket’s AMM maintains two internal liquidity values:
- A YES(or Up) pool
- A NO(or Down) pool
Example:
Understanding how Polymarket prices work is essential for effective trading.
| Item | Value |
|---|---|
| YES(or Up) pool | 700 |
| NO(or Down) pool | 300 |
The probability of YES is simply:
So the market currently believes YES has a 70% chance of happening.
Very important:
These 700 and 300 numbers are not share counts.
They are internal liquidity values used by the AMM to compute prices.
2. How Polymarket Prices Works When You Buy or Sell
This is one of the biggest points of confusion for new users.
Buy = the AMM mints new shares
When you BUY YES:
- You spend money
- The AMM mints new YES shares
- The YES pool increases
- The probability rises
Because of this minting process, BUY asks:
“How much money do you want to spend?”
Sell = AMM burns existing shares
When you SELL YES:
- You return your existing shares to the AMM
- The shares get burned
- The YES pool shrinks
- The probability falls
That’s why SELL asks:
“How many shares do you want to sell?”
This is the fundamental reason the BUY and SELL interfaces look completely different.
3. Only Market Orders Move the Price
Market orders go directly into the AMM.
Market Buy
Understanding How Polymarket Prices Works
→ YES shares are minted
→ YES pool rises
→ Price increases
Market Sell
→ Shares are burned
→ YES pool decreases
→ Price decreases
So:
If you’ve ever wondered “how does Polymarket work when the price jumps immediately?”
the answer is: Market orders caused it.
4. Limit orders do NOT interact with the AMM
Limit orders are never sent to the AMM
They are user-to-user trades, similar to OTC.
So:
- Limit orders are never sent to the AMM
- They do NOT mint or burn shares
- They do NOT change liquidity
- They do NOT move the AMM price
BUT:
Limit orders DO match with other users at the best available price.
This is the important part most users don’t know.
Example:
Market Sell price(from AMM): YES = 69¢
What if you place limit order:
“Sell YES at 60¢”
Orderbook shows:
- No Buy limit orders at 60¢
- All Buy limit orders are below 50¢
What happens?
→ Absolutely nothing.
→ Your order sits in the book.
→ Market price stays 70¢.
→ AMM pools do not move.
→ No minting or burning occurs.
Why?
Because limit orders never interact with the AMM.
They only execute if another user chooses to match your price (or better).
Even if your limit price is far cheaper than the AMM price,
the AMM simply ignores it.
5. Numerical example: how Market orders move the price
Starting state:
| YES | NO | Probability |
|---|---|---|
| 700 | 300 | 70% |
Now let’s BUY $115 of YES (Market Buy).
Market Buys mint new YES based on the AMM curve.
That’s why the pool increased by ~115.47 instead of exactly 115.
| YES | NO | Probability |
|---|---|---|
| ~815.47 | ~257.65 | 75% |
A single $115 Market Buy pushed the price from 70% → 75%.
Now let’s SELL 65 shares of YES (Market Sell):
Market Sells burn YES based on the AMM curve.
That’s why selling 65 shares reduces the pools to ~750 and ~280.
| YES | NO | Probability |
|---|---|---|
| ~750 | ~280 | ~72.8% |
You can clearly see how Market orders shift the AMM ratio, which shifts the price.
6. Limit orders do not change liquidity
(but DO change who holds shares)
Liquidity = YES pool + NO pool
Market orders
✔ Change liquidity
✔ Move price
✔ Affect volatility
Limit orders
✘ Do not change liquidity
✘ Do not move the AMM price
✔ Match users inside the orderbook
✔ Execute at best available price
This is why Market orders shape the market, while Limit orders are for execution only.
Limit orders are like Saylor buying Bitcoin OTC, big trades, zero chart movement.
7. Practical takeaways for real traders
✔ Limit walls don’t move price
Price only moves if someone executes a Market order.
✔ Limit orders can execute at better prices
Buy 25¢ can fill 24¢ orders automatically.
✔ The AMM determines actual market probability
NOT the limit orderbook.
✔ Liquidity explains volatility
Low liquidity markets move fast.
Final Summary:
To understand Polymarket, you must understand its order mechanics
- Buy = dollars → minting shares → price can rise
- Sell = shares → burning shares → price can fall
- Market orders = interact with AMM → move price
- Limit orders = user-to-user → no price impact
- Price = ratio of YES/NO liquidity buckets
- Liquidity determines price sensitivity
Once you internalize these concepts, Polymarket stops being mysterious.
You can finally see why the price moves — and when it won’t.