The summary of ‘Market Therapy with Dr. Andrew Menaker – End of Year Reflections’

00:00:00

In this part of the video, hosts John Hoagland and Dr. Andrew Meniker introduce themselves and the session, focusing on reviewing trading psychology over the past year. Dr. Meniker, a licensed clinical psychologist and performance coach for traders, emphasizes the importance of evaluating trading performance not just by profit and loss (P&L) but also by adherence to one’s trading process. They discuss the difficulties traders face in consistently following their plans, suggesting that maintaining fidelity to a strategy is crucial for long-term success, regardless of immediate financial outcomes. The session aims to help traders consolidate their mental gains and prepare for improved performance in the coming year.

00:05:00

In this segment of the video, the discussion centers around the emotional challenges and psychological discomfort inherent in trading. The speakers highlight the difficulty of sticking to a trading plan, particularly when traders experience financial outcomes that contradict their actions—such as making money on impulsive trades or losing money on well-planned trades. They emphasize the importance of learning to tolerate discomfort and understanding that both good and bad trades can yield opposite results financially. The notion of “productive” versus “unproductive” trades is introduced to reframe how losses and gains are perceived, encouraging traders to view losing trades that align with their plan as learning experiences rather than failures. This mindset shift is identified as a critical developmental milestone for achieving long-term success in trading.

00:10:00

In this segment, the discussion focuses on how psychological factors, such as emotional well-being and the fear of missing out, impact trading behaviors and decisions. The speakers emphasize the importance of recognizing when one is in a detrimental mindset and the necessity of sometimes stepping away to avoid poor decisions driven by emotional imbalance. They discuss the common pitfall of getting overly fixated on potential profits, which can lead to confirmation bias, where traders only see information that supports their desired outcome and ignore contradictory signals. Additionally, they mention how early in a trading career, strict adherence to rules is crucial for capital preservation, but as traders gain experience, these rules can evolve into more flexible guidelines. However, maintaining self-trust and not completely disregarding guidelines is essential. The segment also touches on the benefits of using market-generated information for making discretionary trading decisions.

00:15:00

In this part of the video, the speakers discuss their trading strategies and experiences. They emphasize the importance of applying discretion based on market structure and market-generated information rather than relying solely on algorithms. They reminisce about their early learning experiences with auction market theory and market profile, acknowledging the difficulties of understanding older, poorly edited trading books.

The conversation shifts to trading specific instruments like the Nasdaq (NQ) and the use of trading zones instead of precise levels due to the large price swings. One speaker describes their preference for trading NQ, noting its volatility and the need for a sizable cushion in one’s account for such trades.

They touch on the psychological aspects of trading, admitting to having biases, and explain a hedging strategy involving simultaneous long and short positions in full-size and micro contracts. They acknowledge the challenges and discomfort associated with trading the Nasdaq.

Finally, the conversation covers the practice of journaling trades. The speakers question whether traders actually review their journals and criticize the practice of writing random, non-specific thoughts that don’t contribute to learning or improvement.

00:20:00

In this part of the video, the discussion focuses on the importance of maintaining and reviewing a trading journal. The speakers emphasize that writing and re-reading what you’ve documented over time helps you identify personal patterns in thoughts and behaviors, which is crucial for traders. The key is to be honest and detailed about what you think and feel during trades, not just about market movements. This introspection can reveal tendencies such as becoming overly aggressive when profitable, which can lead to losses. They argue that such honest journaling is more beneficial for addressing psychological issues than simulated trading (sim trading), which lacks real consequences and discomfort. The segment concludes by acknowledging that recognizing and changing these ingrained patterns can be challenging but essential for improvement.

00:25:00

In this part of the video, the speaker discusses the challenges and psychological aspects of trading, particularly focusing on impulse trades. They highlight the difficulty in recognizing that impulsive trades, even if profitable, are detrimental in the long run. This lesson was a crucial yet challenging part of their development as a trader, despite their background in psychology. They emphasize the concept of “reward scheduling,” where intermittent and random rewards make it hard to extinguish certain behaviors, likening it to gambling addiction. This explains why traders might continue making impulse trades despite knowing their negative consequences. The speaker also touches on how trading platforms are designed to be enticing and how they can trigger similar dopamine hits as those experienced in impulsive actions.

00:30:00

In this part of the video, the speaker discusses the importance of simplicity in trading charts and price action screens. He emphasizes avoiding too many indicators or distractions to prevent cognitive dissonance and confirmation bias. They agree that layering too many elements can lead to confusion and poor decision-making. Both acknowledge that no single strategy works all the time, and it’s crucial to avoid constantly shifting between strategies. They also touch upon the significance of journaling in trading, suggesting various methods to commit to it, such as rewarding oneself or having an accountability partner. The underlying message is the value of commitment, discipline, and routine in enhancing trading effectiveness.

00:35:00

In this part of the video, the speakers discuss the importance of routines in establishing habits, noting that it takes about two hours to start a habit. They delve into traders’ self-perception versus their true potential, using an exercise with three concentric circles to illustrate the concepts of persona, fear, and true self. They emphasize that traders, like any individuals, are beings of energy and light, and maintaining a positive mindset in trading can be challenging. The speakers reflect on being in tune with the market akin to being in a state of flow in sports, acknowledging that such moments are fleeting and often end as soon as one becomes aware of them. The conversation includes an anecdote about trading psychologists providing useful suggestions and highlights the difficulty in staying consistently aligned with the market’s energy.

00:40:00

In this segment, the discussion focuses on building self-trust, specifically through developing positive self-talk and recognizing intuition. The speaker stresses the importance of differentiating between intuition and fear or hope-based impulses, which comes with experience, particularly for traders. For novice traders, relying on intuition without sufficient experience can be misleading due to hindsight bias. Experienced traders, on the other hand, often work on distinguishing pure emotion from genuine intuition, which tends to be quieter and more subtle, unlike the intense urges of fear-driven impulses.

00:45:00

In this part of the video, the discussion focuses on personal goals and strategies for trading. The speaker highlights their intention to maintain a financial cushion in their trading account to better manage market fluctuations and build resilience. They plan to avoid excessively large position sizes to keep this cushion intact. Another point discussed is finding a balance between having too much money, which can lead to risky behavior, and having too little, which can cause fear and over-leverage. The conversation also touches on the importance of understanding oneself as a trader, learning from experiences, and staying humble to navigate the unpredictable nature of the market effectively.

00:50:00

In this segment, the speaker reflects on a past habit of sharing daily trading profits with his family, which created negative dynamics and pressure to constantly perform. This realization led to a significant change where he stopped discussing daily earnings, leading to better psychological outcomes. The conversation touches on the importance of humility in trading, as traders who brag about their successes often face bigger drawdowns. The segment concludes with mutual gratitude, best wishes for the holiday season, and a reminder to stay humble.