Any forecast consists of five steps.
It sounds simple. In practice — it’s discipline.
1. Problem definition.
Not “what to predict?”, but how it will be used.
For prediction markets: which event, what horizon, what success criterion.
2. Information gathering.
Two sources: data and context.
Sometimes the data are scarce — then understanding the mechanism matters more.
3. Preliminary analysis.
Plots, trends, jumps, seasonality, outliers.
You need to see the structure before you build a model.
4. Model selection and fitting.
Simple or complex — depends on the data and the goal.
Compare options and understand their assumptions.
5. Use and evaluation.
A forecast is a hypothesis.
Only the future shows how honest the model was.
Errors are part of the process: measure them and update the model.
This is especially clear on Polymarket: the quality of a forecast is the quality of the process.
— S. Praevis