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Step 1: Psychological preparation
This is a series. Read the previous articles before continuing.
The first thing I had to do was drop all my previous assumptions and expectations about trading and start from scratch as though I had never heard of trading before. And this included completely removing everything that I had relied on up to that point—things that in my mind, had so much value. This included every indicator, system, and chart. As a group, these were just disparate pieces of information packaged together. The end result was that they created so many conflicting stories, that they ultimately gave me nothing useful with which to trade. Sounds familiar, doesn’t it? Go ahead and take some time to do this now. Take that sheet of expectations you wrote down and toss it. Take out a new sheet and start taking some notes on your new expectations and assumptions of day trading.
In tandem to starting over, I had to begin to change my perspective of what it actually means to trade for a living; that is, I needed to consider the fact that I might have been looking at it in the wrong way to begin with, and I needed to be open to altering my perspective.
As a simple example, let’s take the Penrose stairs pictured above. If we go clockwise, it appears that we go perpetually down; and if we go counter-clockwise we continuously go up. Now, we know that we can’t go up or down indefinitely, but we don’t fully understand what we are seeing. Rather than admit this is impossible, we tend to ignore the obvious in order to move forward. If someone tried to convince me that it was possible to have a set of perpetual stairs, I might tend to believe them since it agreed with what I was seeing.
This is how I was approaching trading; I knew that it didn’t offer what I thought it did, but I didn’t know what it did offer either. Now when we look at the figure below, we can see that if we change our perspective ever so slightly, suddenly the picture becomes crystal clear. At this point, in terms of trading, we may not yet have a complete idea of what this “new” perspective is or should be. At this stage, we are just beginning to actively look at something and participate in the process of empirically constructing a new view.