Like an ATM! Think again...

I remember coming across a statement made in one of the various books on forex where it was compared to an ATM machine,"It's like you need some money and you go to your Automated Teller Machine, slot in your card, press the right buttons and voila! you can withdraw with a maximum pip limit of the range of pair you are requesting for!" WRONG!
After sitting my butt down and gyrating between trading a demo and live account for about 2 years, here's what i have to say about that statement.

This comparison is not absolutely true based on the following reasons.

1. You only need to be told how to use an ATM once and after that you can operate it on your own without supervision and it would work for you all the time (as long as you have an average IQ and you still have money in the bank!). However, forex is a weird kind of ATM that some have even been trying to get to work for years and have failed!

2. Imagine you slotting your card in the machine and instead of seizing your card for inputting maybe the wrong digits, it deducts money from your account! Well welcome to forex, that is exactly what the market does when you mess with it thinking you know where it is going.

3. You only need to operate the ATM for about less than a minute to get money from it but when it comes to forex, you would discover people sitting for hours in front of the computer to squeeze out as low as 20 pips (for scalpers) for 100x the time you would need to do that with an ATM!

I could come up with more reasons why this analogy is not the best to explain the market but since this is a forum i think we should all have our own share of the fun.

What dissimilarities do you see when you try to compare making money fro forex to withdrawing money from the ATM (or the cash machine as it is called in Europe)? You might be surprised what comes to mind.

[quote=ajantala;2773444]

2. Imagine you slotting your card in the machine and instead of seizing your card for inputting maybe the wrong digits, it deducts money from your account! Well welcome to forex, that is exactly what the market does when you mess with it thinking you know where it is going.

[quote]

Any ATM I use deducts money from my account when I use it correctly. With forex you can add money to your account with money you dont have, which you can't do with an ATM. So the whole analogy is wrong.

[quote=markmm;2773638][quote=ajantala;2773444]

2. Imagine you slotting your card in the machine and instead of seizing your card for inputting maybe the wrong digits, it deducts money from your account! Well welcome to forex, that is exactly what the market does when you mess with it thinking you know where it is going.


Yeah, i get what you mean but i think we should look at it this way:

Your account is non-existent, the account we are referring to here is a global one which everyone (trading forex) has access to. When you make a successful trade in the market, the profit is removed from that global account and is added to your non-existent account subject to withdrawal by you.

When you make a losing trade, the money is deducted from your non-existent account and transferred back to that global account.

I think more appropriately, you can compare it to transferring money from one big pool of account to a smaller one but with every wrong input, the market takes away your stop loss further reducing the amount you already have in the smaller account.

Just tinkering with the idea a bit but you are right, the whole analogy doesn't quite add up perfectly for an ATM.

Sounds fun. Here's a go on how using an ATM is like trading forex:

If your investment fits into one instant of time, stacked as so much price above that instant, there's your 'card' and 'slot'. An ATM card is essentially worth nothing, or the same, when you put it in and remove it; so is your investment.
If you prejudge where your fingers go to hit the ATM keys for a deposit or withdrawal and how much, close your eyes and punch some keys until get a result, you may get a random sense from your 'deposit' (loss) or 'withdrawal' (profit). This, of course, is like having a trading plan that trades on the somewhat-random chart.
Being the highest-margin trading market, forex can be instant, just like a faceless machine that spits out money on your order. Both have a sense of gambling to them, if your prejudging and its followthru are poor.
One could track how one behaves using an ATM and forex. Like going over your trades and overall PL, you could chart your own spending vs. saving habits and see if your ATM-use approach allows a deficit or surplus in your overall budget.
Finally, ATM fees, charged just for using the machine, can be pretty high, like forex ones. Since I began reading forex factory, I've learned to deal better with forex's nature (tho not an ATM's, ha-ha).

Sometimes you get robbed after withdrawing money from an ATM.