10 Ways Forex Trading for Beginners

10 Ways 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, this misunderstanding is what 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.

What is the largest financial transaction in the world?

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.

Learning forex trading for beginners is my goal in writing this article because many people get confused about this one instrument. Misguided, this misunderstanding is what 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.

What is the largest financial transaction in the world?

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.

The following is How to Learn Forex Trading in Indonesia for Beginners, starting with what Forex is, as follows:

What is Forex Trading

For many people, forex is that we go to a money changer, exchange money, take home dollars or euros, it is considered a forex transaction.

There are items to take home.

Forex trading is different, there is no goods or money you take home.

Let’s take a step back, what is the purpose of trading – buy at a low price and sell at a high price (buy low, sell high) or sell at a high price, buy at a low price (sell high, buy low).

Forex trading has the same goal.

The exchange rate of a currency pair changes all the time. You can see at the bank that the exchange rate of the rupiah against the USD can change very quickly.

Now the currency exchange rate becomes the object of forex trading. Buy when the exchange rate trend is strengthening and sell when the trend is the opposite.

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).

Learning forex trading for beginners is my goal in writing this article because many people get confused about this one instrument. Misguided, this misunderstanding is what 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.

What is the largest financial transaction in the world?

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.

The following is How to Learn Forex Trading in Indonesia for Beginners, starting with what Forex is, as follows:

What is Forex Trading

Learn Forex Trading

For many people, forex is that we go to a money changer, exchange money, take home dollars or euros, it is considered a forex transaction.

There are items to take home.

Forex trading is different, there is no goods or money you take home.

Let’s take a step back, what is the purpose of trading – buy at a low price and sell at a high price (buy low, sell high) or sell at a high price, buy at a low price (sell high, buy low).

Forex trading has the same goal.

The exchange rate of a currency pair changes all the time. You can see at the bank that the exchange rate of the rupiah against the USD can change very quickly.

Now the currency exchange rate becomes the object of forex trading. Buy when the exchange rate trend is strengthening and sell when the trend is the opposite.

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 or stock 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 currency exchange, like when making 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, local Indonesian brokers and international foreign brokers.

a. Indonesian Local Forex Broker

Brokers in Indonesia are regulated by CoFTRA, which is the futures market authority, which regulates currency or forex trading. According to regulations, forex brokers operating in Indonesia must have a license from CoFTRA.

Currently, more than 63 brokers already have permission from CoFTRA. See the list here.

b. Foreign International Forex Broker

Foreign forex brokers are problematic because according to CoFTRA provisions, unlicensed brokers cannot operate in Indonesia.

However, the reality in the field is that online transactions are the method that most people use in forex trading, which moves without national borders, where people in Indonesia can easily use the services of international-scale brokers who do not have CoFTRA permission.

In addition, does it mean that foreign forex brokers do not have regulations? is it definitely dangerous?

In fact, many international forex brokers are subject to the regulations of countries with advanced forex markets, such as the UK, Japan and Australia.

Even some international brokers have multiple licenses. Not only from one country but several countries.

If you are using an international broker, make sure that your broker has permission from the forex authority of a particular country. One of the authorities known to have strict and strict rules is FCA UK from England.

Check on the foreign broker’s website about the permits they have and cross check with the agency that issued the license to make sure.

For example FCA UK has a broker license checking service on their site.

 

  1. 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.

How to determine forex prices?

  1. Pair – Currency Pair

In forex, the benchmark price is the exchange rate of a currency pair. The term ‘pair’.

There must be a currency exchange rate pair that is the reference for trading.

There are 47 currency pairs from various countries around the world for forex trading.

I take the example of the most popular currency pair, Eur/USD.

In the EUR/USD pair, the base pair is Euro with a value always 1, while the quote pair, namely USD, changes according to price movements in the market.

At the end of June 2020, the positions of the buy and sell prices of EUR/USD were:

  • Buy : 1.1215
  • Sell : 1.1212

The ‘buy’ price shows the price to buy 1 Euro is 1.1215 USD, while the ‘Sell’ price shows the price to sell 1 Euro is 1.1212 USD.

Maybe with this currency pair you are still confused which currency we expect to strengthen if we buy and which we expect to weaken if we sell.

The benchmark is the base currency, which is the first position of the pair, against the opposing currency.

So, when buying Eur/USD, we expect the base currency Eur to increase in value, otherwise when selling we expect the Eur to weaken.

On the other hand, if you think that the USD will strengthen against the EUR, then the position you take is to sell the EUR/USD.

  1. Open Buy and Open Sell

In an Open Buy position, you expect the value of the Euro to strengthen against the USD.

In the example above, you bought at 1.1215 then Eur/USD strengthened to 1.1216 (it took more USD to buy 1 Euro). If the EUR/USD exchange rate strengthens, you realize the profit by closing the position and making a Close Buy.

In an Open Sell position, you expect the value of the Euro to weaken against the USD or the USD to strengthen.

With the example above, let’s say you bought at 1.1215 and the Eur/USD exchange rate weakened to 1.1211, which means it takes less USD to buy 1 Euro. If the EUR/USD exchange rate weakens, you realize a profit by closing the position and making a Close Sell.

  1. Forex Important Reference PIPs

Price movement in forex is called PIP. This is an important reference that forex traders must understand and an important component to calculate how much profit and loss from forex trading.

PIP refers to 4 decimal places behind the comma in the exchange rate. So if the price of Eur/USD buys 1.1215, then the PIP is 1215.

If the value of Eur/USD drops to 1.1214 (from 1.1215) it means it has moved 1 pip, while if it drops to 1.1115 it means it is down 100 pips.

The difference of 4 digits behind the comma to determine how many PIP.

To determine the profit or loss from forex trading, the PIP value depends on the type of lot size we take, which is divided as follows:

Profit 1 lot x $10 (value per PIP) x 100 (change in price in PIP) = $1,000.

To be clear, you buy 1 standard lot at 1.1215 which means buy 100,000 Euros to get US $ 112,150. Then, the Eur strengthened to 1.1315 so that the value of the US $ you have now is US $ 113,150 where the difference of $ 1000 becomes your profit.

It is important to note that to play in the standard lot your minimum trade value must be $100,000 because this is the value of 1 lot in the standard lot.

Meanwhile, Mini Lot and Micro Lot require smaller minimums of $10 thousand and $1 thousand, but changes in PIP in these two types of lot sizes provide lower profits and losses, namely $1 and 1 cent.

So, the calculation of profit and loss in forex depends on the changes in the PIP and the selected Lot Size.

  1. Leverage

In the explanation about 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 standard lots.

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.

Debt

This is an important feature that distinguishes forex from other investments, such as stocks, is the use of leverage.

What is Leverage? Simple word debt.

Say you have USD 1,000 and want to trade 1 standard lot that costs $100,000 then the remaining $99,000 ($100,000 – $1,000) you owe the broker. You take Leverage.

Brokers are happy to pass debts to you. Don’t worry about not getting a loan.

How much is the leverage

Brokers provide leverage options that you can take. The following is an example of leverage options assuming a capital of $25:

  1. 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 different directions, 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.

  1. 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

  1. 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.

  1. 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.

c. Demo Account

Practice makes perfect!

You need practice, because it takes time to hone your trading skills.

One of them is to use a demo account provided by the broker. With this account, you don’t have to lose money to try but can experience the real conditions of forex trading.

Of course, learning to use a demo account does not guarantee that your forex trading will be successful. But at least you practice first to know how to risk and return in forex.

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.

a. Spreads

‘Spread’, is the difference between the purchase price and the selling price. For example in Eur/USD, the buy price is at 1.1215 while the selling price is at 1.1212 a difference of 3 PIP, which is actually a cost for investors.

When you buy you should be able to get at a lower price at 1.1212 while when you sell you can get a higher price. at 1.1215 if there is no spread.

But because there is a spread, the broker takes the profit.

We are looking for a money changer, usually looking for the one with the smallest difference between buying and selling prices.

Ideally you are looking for a forex broker whose spread is the smallest.

Conclusion

Forex trading is a financial instrument with the largest market in the world, offering attractive risk and return for those who want big profits and are willing to accept the risks.

Forex is a means of investment like any other investment. Gambling or speculation, is very dependent on the knowledge and readiness to manage forex in transactions and investments.

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