You had a very bad day trading.
Nothing went your way, and you failed to win a single trade.
Now, when things go south, what do you think about?
In more psychological terms: what is your mind’s habitual reaction to challenges?
Let’s talk about mindset today. One of the psychological theories in the self-development niche I keep coming back to is Carol Dweck’s Fixed vs. Growth Mindset.
In essence, when it comes to how you view your abilities, pursue goals, and handle failure, your mindset can typically fall into two categories: Fixed vs Growth Mindset
Fixed Mindset
Individuals with a fixed mindset believe that abilities, intelligence, and talents are innate traits that can’t change significantly.
Their sense of self-worth is fragile, so they feel the need to protect it. As a result, they see challenges as threats to their perceived competence.
“Believing that your qualities are carved in stone — the fixed mindset — creates an urgency to prove yourself over and over. If you have only a certain amount of intelligence, a certain personality, and a certain moral character — well, then you’d better prove that you have a healthy dose of them.”
– Carol Dweck, The New Psychology of Success
People with a fixed mindset:
See talent and intelligence as static.
Fear failure, as it confirms their limitations.
Avoid challenges to maintain their sense of competence.
Often interpret feedback or criticism as a personal attack.
Focus on tangible outcomes in learning, like tests, grades, and external validation.
Growth Mindset
In contrast, individuals with a growth mindset believe that abilities, intelligence, and talents can be developed through effort, learning, and persistence.
They view challenges as opportunities to grow and see failure as a stepping stone to improvement.
“The growth mindset is based on the belief that your basic qualities are things you can cultivate through your efforts. Although people may differ in every which way — in their initial talents and aptitudes, interests, or temperaments — everyone can change and grow through application and experience.”
– Carol Dweck, The New Psychology of Success
People with a growth mindset:
See talent and intelligence as dynamic traits that can be developed.
Embrace challenges as opportunities for growth.
View failure as a valuable learning experience.
Are open to feedback and use it to improve.
Focus on the process of learning and improvement rather than just outcomes.
Interestingly, these mental tendencies start forming very early in our lives.
In one of her experiments, Carol Dweck gave four-year-olds a task of completing a jigsaw puzzle. When they were finished, the kids were given a choice: they could either redo an easier puzzle or try a more difficult one.
It turned out that the mindset theory applies even to young children: those with a fixed mindset preferred to keep on doing an easier task to confirm their smartness and avoid the risk of failure. For growth oriented kids performing the same task all over again seemed boring. They opted for the harder puzzle, even at the risk of making mistakes. For them, learning was more important than being seen as smart kid.
What is your mental chatter about?
Keep in mind that what we’re talking about here are beliefs – the intuitive, often subconscious thoughts that drive your emotions and actions. Mindset dictates how you interact with and interpret the world.
People with a fixed mindset often instinctively interpret events as failures, seeing them as a reflection of their worth or the nature of others.
Their constant mental chatter is dominated by statements like:
“THIS means I’m a loser.”
“THIS means I’m better than others.”
“THIS means I’m a bad trader.”
“THIS means I'm a failure, I'll never get this right.''
On the other hand, the hallmark of a growth mindset is an open curiosity about the world and a willingness to explore all of its challenges, peaks, and valleys. It is defined by the fundamental belief that personality is shaped over time through experience.
People with a growth mindset do not feel a compulsive need to prove their worth. To them, it’s all a process, and success and failure are not seen as proof of superiority or inferiority to others.
Distilling it down to the basics, after a bad day at trading someone with a fixed mindset may think:
I haven’t won a single trade. I’m a failure.
…whereas someone with a growth mindset may think:
I failed to win a trade. I Wonder why...
What if I just don’t have the growth mindset?
Well, if you think that way, then your mindset is probably fixed…
…but don’t worry.
Like all psychological theories, this one is a simplification too. People don’t fall into rigid categories of fixed vs. growth mindsets but rather exist somewhere on a spectrum.
Your mindset can change (yep, growth person speaking), and the first step toward this is identifying your mental habits—your thoughts and reactions.
What can you do about it?
It’s time to get practical.
Let’s go back to your bad trading day.
Recreate this event in your mind. Try to recollect all the details. What were you feeling at that moment?
Experience all these emotions again. If it helps, write down your thoughts. Which of them can you attribute to fixed mindset, and which to the growth mindset?
Now, assume the perspective of a growth mindset. Could you treat this day as a lesson for growth?
Perhaps there were some things you could have done differently.
Or perhaps not. Maybe there’s nothing to learn from this experience, other than the fact that sometimes you’re just out of luck and there’s nothing you can do about it. And that’s a healthy and useful takeaway too.
If you think you have a problem with your mindset being too fixed, keep coming back to this exercise to cultivate a habit of looking at things from a perspective of growth.
And if you’re arrived at any interesting conclusions. - don’t forget to let me know in the comments!
Thanks for reading!
Alan
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About Alan
Alan Edward (aka The Divergent Trader) is an impactful speaker, author and high performance expert. A Full Time Trader by profession. Alan is the founder and CEO of Divergent Trader a private financial firm that educates, coaches and supports traders.
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