Many new traders are afraid to make a losing trade, but like it or not, losing is a part of trading.
If you learn to employ a strict system of money management, together with a trading method that in general gives you more wins than losses and bigger profits than losses on those wins then you will be able to smile at your losses, because you will know that over time, you will still be profitable.
The reality of trading is of course a mixture of both wins and losses with success being dictated by the ratio of those wins and losses, and it is a complicated ratio. I often see it defined as "you must aim for a win to loss ratio of at least 2:1". Well that's nice work if you can get it. The markets rarely allow us the luxury of employing anything as straight forward as that.
The real ratio in most cases is to be able - in general - to make more wins than losses and for those wins to be greater in value then the losses.
Yes it would be nice to only enter those trades that will definitely give us at least a 2:1 winning ratio but I have yet to hear of any trader that can consistently do this. The market just does not operate in that certain way. Because of this, a vital part of any trading method must include money management.
By employing a well developed strategy of money management, it helps to even out the wins and losses thereby allowing you to easily accept the losses that will most certainly be coming your way.
If each time that you trade, your very survival depends upon a win, then you will not like the prospect of a losing trade, but rest assured that sooner or later - and likely sooner - you will get one whether you like it or not.
Many new traders look for, or try to develop, strategies that rarely if ever lose. This is a fruitless exercise. One of the things that has to be accepted by traders is that no matter how successful the method that you follow, there will still be losing trades.
As an example, you may have a system that has a win to loss ratio of 4:1 (which would be extremely unusual). In our example, from 100 trades there will be 80 winning trades and 20 losing trades.
You wins and losses are a percentage and this percentace is somewhat random in order. If you were unfortunate, you could find that the next 20 trades that you execute all lose. When trading too large a portion of your account it is only too easy to lose all of your money on a "losing streak" so that you never get to the "winning Streak".
It is unusual to have long runs of losses with a good trading system, but it can happen and yet still maintain the same win to loss ratio. If you learn to employ a strict system of money management, together with a trading method that in general gives you more wins than losses and bigger profits than losses on those wins then you will be able to smile at your losses, because you will know that over time, you will still be profitable.
Being able to smile at your losses in the same way that you are able to smile at your profitable trades is an essential emotional qualility, and it is one that can only be developed by employing strict money management.
Social Distortion Winners And Losers
If you presently earn a living as a taxidermist stuffing dead animals, you are 40 points closer to getting the opportunity to work down under.
Better still, if you treat live animals as a qualified veterinarian, you get 60.
If you are eligible still to go on a Club 18 to 30 holiday, you can bag another 30.
But cross the 40 threshold and you only get 15. Nudge past 44 and you are completely ineligible for a skilled work visa.
Language skills
Fluency in one of Australia's community languages wins you another five. A capital investment in Australia or work experience here yields the same number.
To enter this cricket-obsessed country as a skilled migrant, the ultimate aim is to score over a century. The current pass mark is 120 for independent applicants and 110 for family sponsors.
Then, if you pass the necessary health and criminal checks, the way is clear to start living the Australian dream.
Transparent, fair, rigorous and designed to suit the needs of the economy. No wonder the UK government has decided to craft its own system, which will become operational next year, on the Australian model.
UK immigration minister Liam Byrne even went as far as to unveil the timetable after a photo opportunity at Sydney Airport, half a planet away from Westminster.
"Migration has to support Britain's national interest," he said.
"A new Australian-style points system will be simpler, cheaper, and easier to enforce. Crucially it will give us the best way of letting in only those people who have something to offer Britain."
But the points system does have drawbacks.
Just ask Lee Alexander, a British IT specialist working in Sydney, who just falls short of the number of points required.
Lee and his family love living here. His firm, which is presently sponsoring him, thinks he does a terrific job. He has specialist computing skills ideally suited to the needs of the Australian economy. But his curriculum vitae is bereft of one salient entry - a degree.
"It's a strange position," says Lee. "I have the necessary skills Australia is looking for. But I'm not a graduate, so I'm about five to 10 points short of the required number to work here full time."
In some instances, the points system arguably makes it too hard to get in and sets criteria that are too rigid.
Hairdresser shortage
As Lee's case illustrates, it often places too high an emphasis on paper-based qualifications rather than on-the-job experience.
Oddly, the country's hair salons highlight another problem with the points system.
Presently, Australia faces a chronic shortage of hairdressers, prompting the corniest of headlines: "Hairdressers groomed to cut shortage" and "Industry tearing its hair out". It has also forced some salons to close down through lack of trained staff.
Each six months, the points system is adjusted to meet these kind of skills shortages - hairdressing now makes the migration occupations in demand list, the severe skills shortage list.
But there is often a time lag and it is hard to synchronise the needs of a fast-changing economy with the kind of migrants the system delivers.
"The system needs constant recalibration," says Christopher Brown of the Tourism and Transport Forum, a lobby group representing industries which themselves suffer chronic skills shortages.
"Is it hairdressers this week, pastry chefs next week, or engineers the week after? How quickly can the points system adapt? You have to be very nimble and fleet of foot."
'Geographical isolation'
And is it a good economic move to exclude the non-skilled? The experience of the Australian hotel and construction industries suggests not.
"Points systems are good at attracting the upper-end skilled workers," says Christopher Brown.
"But the difficulty for an economy like ours is how to do we get the bulk of people to work in the lower end of the tourism industry or the labouring end of the construction industry."
Admittedly, the problem is worse in Australia than elsewhere, partly because of its geographic remoteness.
"Everyone in the world has access to a cheap labour force," says Christopher Brown.
"Western Europe has Eastern Europe; North America has South America; the Gulf has the Subcontinent. The problem is where does our source of low-cost labour come from to sustain and grow our economy?"
----Nick Bryant, bbc.co.uk
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Martin Bottomley has sinced written about articles on various topics from Forex Guide, Forex Trading Forex and Forex Guide. Martin Bottomley is a full time professional forex trader, acknowledged author, forex tutor and co-developer of forex trading software including The Amazing Stealth Forex Trading system.You will find more information at:. Martin Bottomley's top article generates over 3600 views. to your Favourites.
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