Building simple probability models lets experienced traders turn several inputs into a structured estimate for a prediction market, instead of relying on gut feeling alone.
Choose Your Inputs
Pick a few factors with clear links to the outcome, such as a base rate, recent data and scheduled events. More inputs are not always better.
Weight the Inputs
Decide how much each factor should count and write the weights down. This makes your reasoning visible and testable later.
Keep It Simple
A transparent model you understand beats a complex one you cannot explain. Complexity often hides errors.
Worked Example
A trader combines a 40% base rate (weight 0.5), a polling signal of 60% (weight 0.3) and an expert survey of 50% (weight 0.2). The result is 0.20 + 0.18 + 0.10 = 48%. The market trades at 47¢, so the model shows no meaningful gap.
Key Takeaways
- Use few, well-understood inputs.
- Write down explicit weights.
- Simple models are easier to check.
- A model is still an estimate and can be wrong.