No, that wasn’t what she said, the psychologist, but I will use it as an example to show how stupid I think it is. One of the parential tasks is to educate the child about the world. Children are newbies in the world, and although they have a stunning capability of makeing sense of it, they do need guidance.
So when the child aproches you with a green ball and tell you that it is blue, you tell him/her that it looks more like blue to you. And maybe you show her a blue item so she can see the difference. Is this to be unsupportive? No, I don’t think so. Would it traumatize the child? Not very likely. What if I am colourblind? Then she would certainly get her misconceptions corrected by other people. We do not live isolated in a bubble.
When my daughter asked if I was a woman or a man, I replied that I am a man, because that is what I am. It takes time for a child to sort out gender, but it doesn’t seem like my daughter had a harder time with it than any other child her age.
Then we went to see the psycologist who would decide if I was worthy of treatment. My daughter states that «Mommy is a man» without hesitation. Later, the shrink tells me that I will always be a woman to the child because I am her mother. I know that my daughter doesn’t mix gender and parental role, so I try to object. My daughter is fully capable of thinking of me as her mother and a man. Then the shrink tells me that I should encourage my daughter’s belief that I am a woman. She doesn’t even have such a misconception, but the shrink refuses to listen. She could might as well told me to encourage the belief that the world is flat, that the sky could fall down, that red is green and green is blue.
Tarald Stein 
Your shrink really is clueless isn’t she.
I wondered how old your daughter is and how much cognitive complexity she can handle. My approach (if my daughter were able to process it) might be to simply be honest: «I was born with a woman’s body but I’m really a man, so I’m having an operation to fix it.» It might be important to note that I’ve done no reading on the question of helping children with a transgender transition and I’m not a clinical psychologist. Still, as a mother I’ve found honesty (at a level appropriate to the child’s cognitive development) usually works pretty well.
It’s also important to remember there are a lot of shrinks out there that don’t know their elbows from their ears, unfortunately.
yuck.