Mindset Hacks: Adopt the Mindset of a Champion

sspencerBruce Bower, Trading Lesson, Trading PsychologyLeave a Comment

This is the final blog post in a 3 part series from Bruce Bower on Peak Performance. Part 1 was on consistency and Part 2 was on making better decisions.

When we did a survey of the top three topics that people wanted covered, I was surprised by the third place winner: “Mindset Hacks: Adopt the Mindset of a Champion”’. On the other hand, I was pleased. Possessing the right mindset is one of the best things that we can learn from peak performers in a variety of fields. They become champions precisely because they have the right mindset.

What exactly is the mindset of a peak performer or a champion? And how do we adopt that same mindset?

I think that this quote sums it all up:

“I’ve missed more than 9000 shots in my career. I’ve lost almost 300 games. 26 times, I’ve been trusted to take the game winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed”
 – Michael Jordan

I’d sum this up with the word: resilience. The peak performer looks at each “failure” as a stepping stone to eventual victory. If he tries something and it doesn’t work out, then he keeps working, pushing and practicing. There’s a saying that “you can’t win them all”. Maybe not, but if you keep working at it, then winning is much more likely.

In her famous book Mindset, Carol Dweck identified two kinds of mindsets about talent and personal development: the Fixed Mindset and the Growth Mindset. A fixed mindset takes the view that any success reflects innate talents, rather than any effort. If you do well in school, it’s because you’re naturally smart. If you’re a great athlete, then you’re just “talented”. The Growth Mindset asserts that success is the result of effort. If you did well in school, it’s because you studied. If you play a sport well, it’s because you practiced.

The difference is clear. With the Fixed Mindset, any failure can be devastating for one’s self-confidence. If you do badly on a test, it means that after years of thinking you were smart, you just hit your ceiling. This mindset makes substantial progress very difficult, because it takes the attitude that you either have it or you don’t. The Growth Mindset enables progress, because it views failure as temporary, as something that can be overcome with more effort or better preparation. Challenge and interest go hand in hand. It is the mindset of a champion. In fact, Mike Bellafiore of SMB calls a growth mindset the most important thing for a trader. Take failure or setbacks as feedback; use them to make a change for the better and to develop.

In the markets, a Growth Mindset is an absolute necessity. The markets are dynamic and always changing. Strategies that work at some point may stop working a year later. No matter how good you are, you will have positions that go against you. In this kind of climate, you need to be resilient and to accept temporary failures along the way. And then you need to keep working, learning, improving.

How do you go about cultivating a growth mindset? The first is to make sure that the markets are your passion. Interest and passion are the fuel that sustains the work. Without passion, then you won’t have enough of a “why” to persist in the markets.  If you’re not sure, then fixate on the specific elements of trading and investing that you like. Some people love the intellectual challenge of the markets. Others revel in the competition. Still more like the introspection. Whatever you can latch on to, try to dwell on that more.

The other way to shift to a growth mindset is to draw on a previous experience where you enjoyed doing something, and then it became more difficult. For instance, you liked playing basketball, and when the competition got harder and you had to practice much more just to keep a spot on the roster. Your interest propelled you through the challenge. Do the same with your trading and investing—persevere in the face of challenge.

What happens if you do meet with failure, like a big drawdown or not getting any traction with your strategy? You should remember that failure is neither final nor fatal. If you’re faced with failure in the markets, try to diagnose what exactly went wrong. In my work, I discuss a three-part rubric for trading and investing; Plan the Trade/Trade the Plan/Review&Tweak. Make sure to pinpoint where exactly you went wrong, and then fix. Did you not have a plan at all? Was it unrealistic? Did you have a solid plan but screw up the execution? Was your risk management weak? Drill down to the exact problem and start doing something different.

One of the corollaries to a growth mindset is that you pay more attention to inputs than outputs. That means working on things that you can control, seeing what the results are, and then tweaking. Often, you set goals. But these goals should be process goals and not P&L goals. These goals should be specific and inform what exactly you can do differently. For instance, you can target doing twice as much preparation every day. You could ditch any setup that lowers your overall win rate. You could resolve to hold onto your winners longer or tighten stops on your losing positions. These are all little tweaks that you can make to your process, all things that are in your control – and all of which would help you to get better. If Michael Jordan missed too many jump shots, he would tweak a couple things and practice more. The key is to take it one step at a time and stay process-oriented.

We can get better as traders and investors. In fact, the dynamic nature of the markets requires us to fight constantly to get better. We can meet the challenge if we adopt a growth mindset and take our journey one step at a time. Peak Performers in other fields are always finding ways to improve, work harder and get better- shouldn’t we?

No Relevant Positions


Leave a Reply