Prop Training Section 8 - Mindset

Growth Mindset vs. Fixed Mindset 

Trader A underperforms for a month and meets with the Head Trader of the firm. The Head Trader asks why Trader A thinks he is not doing as well as he can. Trader A claims his underperformance relates to where he is sitting, his filters program being buggy, and the girl he is dating. The Head Trader offers some adjustments which Trader A finds upsetting since he does not believe he should need help. Trader A finishes with: "I guess I am just not that good of a trader."

Trader B underperforms for the month and meets with the Head Trader of the firm. The Head Trader asks why Trader B thinks he is not doing as well as he can. Trader B explains he is underperforming because he is in the wrong stocks. Trader B explains his plan to be in better stocks. The Head Trader offers some adjustments which excite Trader B since he is always interested in getting better. Trader B finishes with: "This will help me find better stocks and do much better next month."

Are you Trader A or Trader B? Do you have a fixed mindset or a growth mindset?

The Growth Mindset

Yesterday, behind closed doors, I spoke with one of our traders about a better next month. I bet this off-the-charts motivated trader $250 that he would make over 20k next month if he made two solution-based adjustments to his trading. I added a caveat that if he made 30k plus he owed me lunch.

Later that evening he unveiled his growth mindset in an email shared below. Notice how he views his past month as a place he is at now but will not be at the end of next month. (BTW, I am thinking a burger at Bobby Van's when he has to pay off his lost bet.)

I have to be honest with myself, and Lets be honest, I really make money on only a few setups. And thats really all I have to do. It's going to be a battle for me in the beginning, but I have to be okay with missing plays, and this is a test of my discipline now. And that's what good trading comes down to. Discipline. And I haven't been showing much if it as of late.

Play to strengths, not weaknesses. Eliminate everything else but my strengths.

Strengths:
1. My number one strength, is MOMENTUM: High volume, fast moving stocks, on fresh news, earnings, etc. After catching morning drive, get out, and wait for consolidation to get back in.
2. Breakout plays: Stock breaks out of a technical or intraday level support/resistance level/premkt level/etc. On HIGH VOLUME: Stock retraces to the breakout price, I always buy or sell here. Good trade.
3. Midday, fresh news: News driven stock: that moves on HIGH VOLUME.
4. Consolidation plays. A stock is consolidating/in a range, at a certain price, for minimum 15-20 mins. Buying or selling at the top or bottom of the range and getting in at these prices, and these prices only. Easy to identify risk here.
5. Playing the trend! Can never go wrong with this. Look to get long /short at consolidations following the trends. In the long run, playing the trend will pay off, then fading.
6. Reading the tape is a strength of mine, and use it to my advantage.
7. Trading one or two stocks on open. I know if I only focus on one or two I will do well in those stocks. When I try to catch everything, I MISS EVERYTHING.

Wait patiently for only these setups. These are the only plays I need to do and do more of and eliminate everything else.

Weaknesses: Eliminate these plays entirely for now from my play book.
1. Buying pullbacks just based on price. What I think would be good buys. NO NO NO NO DO NOT DO THIS.
2. Fighting the trend, DO NOT FIGHT TRENDS.
3. Picking tops or bottoms, VERY LOW PERCENTAGE TRADE... ELIMINATE THIS. This goes back to what I think would be good buys/sells based on price. NO! Stop this.
4. Trading low volume stocks.
5. Trading somethings that not in play.
6. Over thinking: just keep things simple, and let the market/stock tell me a story .
7. Multiple Positions in stocks on the open. NO, I CAN'T DO THIS ANYMORE .
8. Buying baskets of stocks. Just focus on one, buying baskets don't work as well anymore.

The Fixed vs. The Growth Mindset: The Consequences

With a growth mindset a trader believes through effort that they can be much better than they are today. With a fixed mindset the trader believes they can only go so far as their innate talent will allow. In Part I we posed two hypothetical traders, Trader A with a fixed mindset, and Trader B with a growth mindset and asked our readers to consider who they were. In Part II we showed an example of a growth mindset trader working on their game. Today we will explore the consequences to the trader of a fixed mindset and offer one very important conclusion.

Fixed Mindset

1. When things get tough you will become easily discouraged. You may lack an important characteristic of the successful trader: resilience. I have never met a trader who did not struggle before they became good. I have never met a trader who did not struggle after they became good.

2. You will more quickly trade on tilt since being good now is so important to you. Trading on tilt ruins trading months and careers.

3. You more quickly will be offended by critical feedback from senior traders and mentors. In Matthew Syed's book Bounce we learn that very few have reached a high level of achievement in a performance field without elite coaching.

4. You will be less likely to review your trading since you believe you either have it or do not.Dr. Steenbarger and Charles Kirk have written relentlessly about the importance of keeping a detailed trading journal. Performance research has concluded the act of writing down your corrections improves your performance.

5. You are more likely to cheat or lie since underperformance would be devastating to your self worth (think Enron).

6. You are less likely to take good ideas from your trading peers.

7. You will make excuses for poor performance instead of seeking solutions.

8. You view a losing trade as evidence of a lack of talent instead of an opportunity to learn.

9. You cut down other weaker traders to build your self esteem.

10. Your performance will suffer since studies show definitively that those with a growth mindset outperform those with a fixed mindset.