How to Learn Indonesian Forex Trading for Beginners – Learning forex trading for beginners is my goal in writing this article because many people get confused about this one instrument. Misguided, it is this misunderstanding that makes many people deceived and lose big in forex, even though forex trading can actually bring big returns as long as you understand how to play.
Maybe you will say stocks because every day we read in newspapers and see on TV about the excitement of stock exchanges in various parts of the world. I also have the same understanding. The three largest exchanges in the world – NYSE, London, Tokyo – combined the total transaction amount is USD 300 Billion per day. Big, right? Forex trading records a transaction value of USD 6.6 Trillion per day, according to Bank International Settlement. Multiply the value of stock transactions around the world. I was surprised after knowing this data because so far I have rarely been exposed to forex trading news, I didn’t think that forex transactions were so big in the world. Unfortunately, forex has a bad stamp in Indonesia. It is considered a fraudulent investment, gambling, speculation and so on.
There is a saying “don’t know then don’t love”. I try to review the aspects of forex trading in Indonesia and after that you can decide for yourself whether forex is fake, gambling or speculation.
1. Forex Market
This market has a different character from the stock market, namely:
Over the Counter (OTC)
Unlike stocks where transactions occur centrally on the stock exchange between 3 parties (you, the broker and the Stock Exchange), in forex transactions are Over the Counter only between two parties (you and the broker).
In the stock market, BRI’s share price will be the same at all brokers, because the source is one, namely the Indonesia Stock Exchange. Stock transactions in Indonesia occur on one exchange. In forex because transactions do not occur on one exchange, but occur between you and the broker, as a result, foreign exchange rates can differ from one broker to another. In addition, the absence of an exchange party in forex makes the role of a broker very central. Because there is only you and the broker making transactions. It must be absolutely certain that the broker can be trusted and legit because there are no other parties involved in forex transactions.
No Exchange of Items
When you buy shares, you go home with the shares, which in this case are kept in custody, and these shares prove ownership of the company. So there’s stuff you have. Forex trading is different. You do not hold the goods, there is no exchange of currency, like when transactions at a money changer. When closing a position in forex, you only see the price difference, and pay (receive) the difference in price, depending on the profit or loss of your position.
2. Advantages & Benefits
It is impossible, the forex market becomes so large in transaction value, if it does not have an advantage. These include:
a. Highly Liquid Market
Many parties – countries, corporations, investors – make forex transactions every day which makes the market very liquid, which in the end is profitable for players because they can easily buy and sell.
b. Huge Profit Potential
Maybe this is too provocative, but if you want to make a quick profit, want to get rich quick, playing in the forex market is one of them. The reason;
Leverage, you can trade in large amounts with a minimum capital. Later I will explain more clearly about what it is and how Leverage works.
High volatility in the forex market makes the opportunity to make big profits. High Risk High Return.
c. Can Sell and Buy
In contrast to stocks, which can only buy and then sell, in the forex market you can buy and sell at the same time. You do not have to have goods to be able to sell in forex trading. By being able to buy and sell, you can follow the direction of the market. When the market goes up you sell, when the market goes down you sell.
That means the opportunity for profit becomes more wide open.
d. Minimum Capital
Due to leverage, the capital to be able to play forex is small and affordable, but has buying power for large investments. One example, at a forex broker I met, investors only needed $25 of capital to make $1000 worth of forex transactions.
The small amount of capital makes trading access open to many people. Plus the convenience offered by online trading facilities.
3. Legality of Forex Brokers
The Over-the-Counter (OTC) nature of forex trading makes the broker’s role very central because it is only you and the broker when making transactions, in contrast to stocks that have a Stock Exchange as the transaction center. The broker’s legality is one of the most important. The issue of legality is becoming increasingly crucial because now OJK and CoFTRA often close illegal forex brokers to protect customers from the threat of fraudulent investments.
How exactly is the legality of a forex broker? There are two types of brokers operating in Indonesia and each has its own legality, Indonesian local brokers and international foreign brokers.
4. How Forex Trading Works
The principle of trading in forex is buy low sell high and sell high buy kow. Traders take advantage of the difference between the buy and sell prices. When you predict that the price will increase, then place a buy position, otherwise place a sell position if the price is expected to weaken.
In the explanation of PIP, you can see that to be able to do 1 standard lot it takes $100,000 to be able to trade the EUR / USD pair. A very large number! Need Rp 1.4 M. Of course, you can still play with smaller lot sizes, namely Mini Lot and Micro Lot, for $10,000 and $1,000 respectively. But even that is still a large investment for retail, and the consequence of playing Micro and Mini Lot is that the potential profit is much smaller than the standard lot. If the standard lot increases by 100 pips, assuming a long position of EUR/US$, it will generate a profit of $1000 while the mini profit is $100 and the micro $10.
So, in conclusion it takes a large investment value in forex because of the large minimum requirements to be able to trade effectively. But don’t worry, there is Leverage that helps traders.
Also Read : Basic Terms of Online Slot Machine Gambling
6. Risk and Return
You can see that the possibility of profit in forex is enormous. You trade with $1,000 of capital. Without Leverage, a 1% price move results in a $10 (1*1,000) profit (loss). Now with leverage, for example 1:100, your buying power becomes $100,000 (100 x 1,000 capital) then a 1% change can result in a profit of $1,000 (1% of 100,000). Your profit is 100% with only 1% change in the market.
Great, isn’t it! However, if there is a return, there is a risk. That’s the law. The same 1% change in a different direction, can result in a loss of $1,000 (1% of 100,000) or equal to the amount of your capital. So, with just a 1% change in the forex market, your capital can run out, run out, in no time. Forex trading offers a very dynamic risk-return.
7. Risk Management
With the risk and return of forex trading that is very dynamic, you need risk management. Of course, you don’t want to lose money in an instant, do you? Some things you can do to manage forex trading risks
a. Investment Diversification
Rule #1 You must diversify your investments. Don’t put your eggs in one basket. You use money that is ready to be lost, or the term ‘cold’ money. Because of the high risk of forex trading, you must always be prepared for the consequences of losing money. Don’t spend money that you need in the near future. Very dangerous. All investments have risk. You have to be prepared for the risks.
b. Stop Loss and Take Profit
You need to place a Stop Loss, which means that your position will be automatically closed if the loss has reached a certain amount that you have previously determined. In this way, your losses can be controlled. For example, you apply that the maximum daily loss is 1% of the capital. Then you recalculate how many PIPs must occur so that losses do not exceed these limits and after knowing the PIP you can set a price for Stop Loss. Of course, with Stop Loss, the profit potential becomes smaller. However, this is your way of mitigating the risk of a potential loss that is too large. There are also those who make a target loss, which is to make transactions per day for the value that you are ready to lose.
For example, you are ready to lose 1% of the capital, then make transactions only worth 1% of the capital. For example, $1,000 capital is only used for $ 10 and then the rest with leverage. Then you are ready to lose that $10 for 1 currency pair. Contrary to Stop Loss, in Take Profit, you have determined that if the position is profitable, you ask the platform to automatically close the position. The goal is to be disciplined in realizing profit.
Without Take Profit, you can be tempted to not realize the profit even though you have reached the target because you expect even higher profits. As a result, profits that are already in sight can be lost instantly when the market changes very quickly. Both Stop Loss and Take Profit help you to have discipline in running your trades. With discipline, you can manage the high risk of forex trading so that the fluctuations do not harm you.
8. Fee Fee
Investors need to calculate the costs in forex trading carefully because instead of making a profit, the costs may actually eat away at the return.
9. Multi Asset Broker
Diversification is an important part of how to invest in forex trading, given the high risk. Don’t put all your money in one instrument. To be able to run verified effectively, you can use a multi-asset broker, which is a broker that offers a variety of financial instruments on one platform.
You can put money in various instruments and manage risk and monitor portfolio more easily in one platform. One example of a multi-asset broker offering investment in instruments: