Dr van Tharp, trading coach and author of Trade Your Way to Financial Freedom
His point is that we operate from a starting point of what we take as facts but are actually assumptions. Even if 99% evidence backs them up and they are reasonable assumptions, an alternative could still be proposed.
Do you know your assumptions? Can you pinpoint your beliefs and how they help and hinder you?
Some example assumptions from the world of football betting:
- Results are predictable
- The odds are usually correct (efficient market hypothesis)
- Past performance helps us gauge future performance
- The favourite is usually backed too low
- You get better value by laying than backing
- Odds-on prices are always poor value
- You can’t beat the bookie
- Teams that need to win are more likely to win than if the result was irrelevant
It is important to be aware of your assumptions, to measure their truth and to challenge them. Are you missing something in your approach? Could you improve your results by changing your criteria?
Agree with yourself to regularly review what your assumptions are and how they work for you.
