Module 04 · Paper Decision Logic
Precommitted Paper Entry and Exit Rules
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Course outline
Module 1 · Prediction Markets 101
Module 2 · Market Research
Module 3 · Signal Aggregation
Module 4 · Paper Decision Logic
Module 5 · Risk and Responsible Research
Precommit paper rules before viewing later prices or outcomes. The rules define when a simulated decision is recorded, the hypothetical fill model, what evidence allows an update, and when the paper position closes. They cannot remove emotion entirely, but they make hindsight and rule changes visible.
// concept
Define a Paper Entry Card
Include:
- market/contract snapshot and resolution rules;
- evidence cutoff UTC and source-packet version;
- frozen forecast/range and method version;
- observed bid/ask/depth and hypothetical paper fill calculation;
- no-action gates and cluster exposure;
- invalidation conditions;
- maximum review frequency;
- simulated close rule and maximum duration;
- reviewer/sign-off before later data.
Never record a midpoint fill when visible depth would not support it. Use the paper VWAP from the captured book and label fees/slippage limitations.
// concept
Choose Evidence-Based Update Rules
Valid triggers might be: named resolution source publishes a new version, a verified independent primary source appears, contract wording/status changes, or a scheduled review occurs. Price movement alone should not be called evidence; it may prompt source review but not an invented story.
For each update, append prior/new forecast, sources, reason, timestamp, and whether the method permits the change. Preserve old entries.
// concept
Define Paper Exit Without Outcome Knowledge
Possible educational exits:
- fixed review date/time;
- contract resolution/closure;
- evidence invalidates the thesis;
- no-action gate becomes true;
- paper loss/cluster/time limit hits;
- data or rules become unreliable;
- scheduled study window ends.
Do not optimize exits after seeing which would have produced the best result. Use separate development and held-out periods when tuning rules.
// worked_example
Worked Example
A paper entry uses a best-ask/depth-based hypothetical fill rather than midpoint. Two days later the displayed price jumps, but no primary source changes. The rule triggers investigation, not an automatic paper update. Later the named agency publishes a final notice, satisfying an evidence trigger; the new forecast is appended.
At review, analysts can distinguish signal timing from price chasing.
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Handle Missing and Delayed Data
If snapshots fail, mark the observation unavailable. Do not carry forward a stale price without a staleness label. If hypothetical exit depth is missing, record “not paper-fillable” rather than a convenient close. A research system should prefer incomplete truth over fabricated execution.
// failure_cases
Failure Cases
7 cases to diagnose
Creating entry rules after seeing a favorable outcome.
Using price movement as proof of an event.
Assuming every paper fill occurs at midpoint.
Editing instead of appending forecast changes.
Retuning and evaluating on the same markets.
Ignoring invalid/cancelled/delayed resolution.
Mapping paper rules directly to automated real orders.
// pakistan_angle
Pakistan Angle
Store UTC and show PKT; contract deadlines may use other zones. Internet outages can create stale snapshots, so use explicit freshness limits. Do not use a VPN to evade platform geographic controls.
Precommit a no-funds boundary in the project README. No private keys, wallets, KYC data, exchange accounts, or payment methods belong in the exercise.
// hands_on
Hands-On Exercise
Write entry/update/exit rules, then replay them on 20 historical snapshots in chronological order without future data. Use paper fills from bid/ask/depth, record unavailable fills, append all updates, and lock the rules for a five-market held-out test.
// completion_rubric
Completion Rubric
3 grading bands
- Complete
rules, evidence cutoff, fill model, append-only updates, staleness, and held-out evaluation prevent hindsight.
- Needs revision
decisions are precommitted but hypothetical execution or update triggers are vague.
- Not complete
later outcomes shape earlier rules or paper logic connects to real orders.
// sources
Sources
3 official sources — check every claim yourself