Having gone through some truly harmful scenarios when it comes to the difference here I felt led to share my opinion and as well my experiences with this.
Many years ago I was part of what I would now consider a hyper-faith group of people. Their whole mindset was that faith and healing are a right, and if you have even the tiniest bit of faith you can manifest whatever you want or need.
In my case for example I had a severe spinal issue. It was excruciating. During this time, the group of people I was involved with insisted that it was a matter of my faith. When the healing results did not occur in my spine, it became more and more toxic. I was told that I was the problem, and my thinking was not allowing me to heal.
Furthermore, I was grilled, counseled, and badgered as to what I might have done to have this occur. I was asked to dig up my childhood traumas, and look to see where I had not "forgiven" someone. When this pseudo-psychological torture did not yield a healing I was shunned. My friends turned on me, and the entire group. This culminated with an MRI that showed a severely herniated disk that had ruptured into the spinal canal, which is extremely dangerous. I was sent for immediate surgery, and as I'm being wheeled in there was this group of people pointing at me, slandering me saying, "You did this to yourself. God has turned His back on you. You are an unbelieving witch, a true Jezebel."
What we had in this scenario was not positive thinking, it was magical thinking, and it was toxic. It is one thing to encourage someone, and to hold their hand, lift them up, and help them to see the good. It's quite another to abuse them spiritually, emotionally, and psychologically in the name of magical thinking.
So let's define what magical thinking is.
1) Magical thinking is the idea that someone's thoughts, actions, words, or whatever else will somehow alter the course of events in the physical realm. This idea that we are mini-Gods with a skeleton key can be very dangerous. There are people that have literally died of curable diseases for example because they insisted to the point of death that their thoughts had dominion over their bodies. Unfortunately death had other ideas.
2) Magical thinking is putting rational thought on hold. The belief or intense desire to change the circumstances creates an alternate reality in the person's mind
3) There is an illusion of control. The idea is if someone can control their thoughts they can also control their Universe. It gives as well a sense not just of power, but of entitlement, a sort of name it, claim it mentality that often loses perspective.
4) The biggest fallacy is that people will blame themselves when whatever they want to magically manifest does not appear. I have personally seen this lead to psychotic breaks, self-harm, and severe depression.
So what is positive thinking then?
1) Positive thinking, or an optimistic attitude. It means we are focusing on the good in situations. While this can have a big impact on your physical and mental health it doesn’t mean you ignore reality or make light of problems.
2) Positive thinking has no issues looking at the hurdles, and the disappointments life brings us. It is not a process of denial, but rather a process of hope, and of chosing faith when fear seems to be the biggest issue.
3) Positive thinking often starts with self-talk or unspoken thoughts that run through someone's mind. Some self-talk is based on logic and reason.
4) Solid breath work, calm, and creating space is also helpful to positive thinking.
In light of these definitions we can say that magical thinking shuns reality. It is a process of deep denial. It gives an illusion of control but in essence can in effect create a mental, spiritual and emotional break from reality. Positive thinking on the other hand is a good attitude. It is not denial, it faces issues directly, but in a way that promotes physical and spiritual health.