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How Do We Correct Our Faulty Assumptions?

Tony Peterson

This is a series. Read the previous article before continuing.

Hopefully, you have written down your expectations of trading. The list below is from my own experience; however, many of these items are quite universal and may match many of your own expectations that you wrote down.   

  • Get rich quick: I thought it would take about 6 months, little did I know it would take 7 years to even make a living by day trading.

  • Easy to learn: I could master it in a few weekends because trading seemed so “easy.”

  • More free time: By just trading a couple of hours a day, I could make as much money as I wanted which would give me more time for friends, family, travel, and hobbies.

  • I’m very smart: I heard that 95% of the people who try trading, fail, but they aren’t smart like me. I could out-think the market.

  • I’m good with numbers: As a small business owner I kept track of the numbers, and trading is all about numbers, isn’t it?

  • I want to replace my current income with trading income: Since I assumed that trading was easy, I believed that I could replace my monthly income in just a couple of months with trading income. But it took many years of experience, expertise, and education to get to that income level in my previous profession. Why did I assume that day trading would be any different?

  • Real traders always win: The moderators in the trading rooms didn’t seem to take losses, so when I become a “real” trader, I wouldn’t lose either.

  • Trading is exciting: I thought I would start my trading day full of anticipation of what the day would bring as though I was gambling in Las Vegas.

  • I can trade while I’m doing other things: All I have to do is keep one eye on the market and click the button when I’m supposed to. The rest of the time I can do whatever I want.

  • The markets are ready to trade when I am: I just have to wander over to the computer and hit the button a few times and that’s it. The reality, of course, is that we have to make ourselves available for when the market provides trading opportunities to us.

  • I’ll know it when I see it: How hard can it be to spot the Holy Grail? If I just keep searching and experimenting with everything I come across, I’ll eventually just know when I’ve found “the answer” that fits my expectations.

  • I’ve got great instincts: My business instincts—my gut—helped me to succeed in other businesses. I’m sure “my gut” will be accurate in trading too.

  • I Just need someone to tell me when to push the button: Since I am not moving forward on my own (thanks to my faulty assumptions), I just need an “expert” to tell me NOW!

Having given our list some thought, we are ready to proceed.

Our early assumptions have become a running message that we subconsciously play over and over in our minds. And since all of these assumptions are inter-linked, we can’t cherry pick which assumptions to keep and which to throw out. We have to re-evaluate everything we think we know from the bottom-up and replace it with a solid foundation. I will break down this process into the steps that have worked for me, as well as for the traders that I mentor. The process basically falls into three main steps:

Step 1: Psychological preparation

(Don't get ahead of yourself. Read these in order.)

Step 2: Change how we approach trading

Step 3: Build experience with a new set of positive concepts