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Psychology

Falsification Criterion

A specific, observable condition that, if it occurred, would prove the trader's thesis wrong. Popper's test for whether a belief is conviction or faith. Before entry: write down 'I would exit this position if ___.' If the blank cannot be filled with something specific, the position is hope, not conviction.

See also
Psychology Conviction A thesis held with explicit falsification criteria — specific, observable conditions that, if triggered, would prove the thesis wrong. Articulable in plain language. Held in light rather than in defense: disconfirming evidence sharpens or kills the position, and both outcomes are wins. → Psychology Delusion A thesis without falsification criteria. Sunk cost wearing conviction's clothes. No observable outcome would trigger an exit, which means the position cannot be wrong — it is faith, not analysis. Popper's test: a claim that explains every possible outcome is not a strong claim. → Psychology Implementation Intention A pre-committed if-X-then-Y plan (Gollwitzer, 1999). Delegates action control to a situational cue, removing real-time deliberation from the requirement. Meta-analysis across 94 studies found effect size d=0.65 on goal attainment. The structural mechanism behind every effective trading defense. →
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