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Forex Trading In Indonesia 2021

Published by Usman Ahmed, MBA (Researcher)

Reviewed by Bowen Khong, ACCA

What Is Forex Trading?

The exchange of currencies in a decentralized forex market to earn profits from price fluctuations is called forex trading. The forex market is one of the most liquid markets in the world. According to the Triennial Central Bank Survey, the forex market carries out an average trading volume of more than 6.6 Trillion U.S. Dollars every day. As far as forex trading in Indonesia is concerned, it has become increasingly popular over the last decade. With nearly 9.5% of the total population living under the line of poverty, people in Indonesia seek a bailout of financial independence through forex trading. 

How Does it Work?

Forex trading involves three entities, including traders, brokers, and liquidity providers (market participants). Traders buy and sell currencies in the market using trading platforms provided by brokers. The fluctuation in the prices of currencies allows traders to make profits. 

Traders can trade currencies in pairs. i-e, GBP/USD, IDR/USD, USD/JPY, etc. Each pair consists of two currencies, the base currency, and the quote currency. First currency in a pair is the base currency, while the second is called the quote currency. 

While entering a trade, you sell or buy base currency against the quote currency. The increase or decrease in the market value of one currency against the other brings profit or loss.  Let’s consider a simple example to understand how profits are earned in forex trading.

Suppose you wish to enter a buy trade for 10 USD, and your broker quotes you the current market rate to buy $1 as USD/IDR – 14,035 IDR. That means you can buy 10 USD for 1,40,035 IDR. 

Now there are two possible situations, i-e, the USD may strengthen against the IDR, or it may  slide down. 

Situation 01:

If you anticipate USD appreciating against the IDR in a few days, buying the U.S. Dollars today at spot price, holding them for a few days, and then converting them back to IDR will bring you some profit. 

Situation 02:

If you think USD will decline against the IDR, then selling the U.S. Dollar on spot price and after a few days buying them back at low price can bring you some profits.

Please be informed that real trading also involves spread cost that clients need to pay to brokers or liquidity providers as compensation for their services. 

Pros And Cons of Forex Trading 

Besides being highly liquid, the forex market is also very volatile. Therefore, traders should always consider both positive and negative aspects of forex trading. Listed below are the main pros and cons of forex trading;

Pros

  • Leverage – Leverage is by far the most significant element of forex trading. Despite having limited capital, traders can buy assets with bigger volume. Usually, a leverage of up to 1:30 is available with most regulated brokers. However, some brokers allow clients to have maximum market exposure by offering them high leverage of up to 1:1000 or even more.
  • Decentralized Market – The forex market may also be known as an over-the-counter market. There is no central authority controlling it. The decentralized nature of the forex market helps traders to stay safe from sudden surprises as compared to equity markets, where a company’s sudden dividend announcement can change the prices significantly.
  • Low Cost – Forex trading involves low cost as compared to other markets. Except for spread charges and a nominal commission charged by brokers for overnight positions, you don’t have to incur various overhead expenses, as may be the case with other businesses.
  • Tax Relief – Capital gains from forex trading are free from taxes. In most countries, profits generated through spread betting are tax-free. However, traders might have to bear tax on CFDs trading. 
  • Accessibility – The forex market is easily accessible. Traders can open a live trading account with a broker and start trading right away. The market has four major trading sessions, including Sydney, Tokyo, London, and NewYork. Each trading session opens before the closing of the following session. Therefore, traders can trade round the clock, five days a week.
  • Liquidity – Known for its increased liquidity, the forex market moves fast. Traders can have ample opportunities to sell off their positions multiple times and generate good returns in different financial instruments.  
  • Price Manipulations –  The forex market is free from price manipulations as compared to stock, commodity, or bond markets. Usually, insider information that can create volatility in the forex prices stays with government authorities. Owing to increased public scrutiny and rigorous audits, government institutions, and central banks remain transparent. 

Cons

  • Key Players Dominance – Major participants, including banks, hedging funds, and corporate clients, dominate the forex market. Key players have more access to the latest information and advanced technology that ultimately provides them an edge over low scale traders. 
  • Regulatory limitations – Since the forex market is a decentralized market with no central regulatory oversight, it can sometimes make traders concerned about their fund’s security. Although many countries have in-house regulatory institutions to regulate brokers to avoid financial abuse, Still traders should remain cautious while signing up with a broker.
  • Less residual value – Forex trading has less residual value than other markets, such as bonds and stocks as you can receive interest or dividends as opposed to forex trading where the prime source of profit is the price appreciation or depreciation.

How To Start Trading Forex in Indonesia

The prerequisites of forex trading in Indonesia are the same as in the rest of the world. A supported electronic device such a PC, laptop, or mobile phone with a stable internet connection, and a live trading account with a broker, is all you need to start forex trading in Indonesia. 

Read: Best Forex Brokers in Indonesia

Forex brokers in Indonesia comply with strict AML/ATF guidelines to ensure the eradication of financial fraud and money laundering practices. The broker will therefore ask you to verify your identity and residential address before starting your forex journey. You can use the following documents to verify your identity;

  1. National ID card/Passport/Driving license
  2. Bank Statement or Utility Bill 

Please note that your broker might also ask you to provide additional documents as and when required. Once done with account verification, you can deposit funds in your account. Usually, brokers offer multiple payment methods, including debit cards, credit cards, bank wire, and e-payments, etc.  

Forex Trading Communities, Forums, and Discussion Groups in Indonesia

Online forex trading communities, forums, and discussion groups can be an effective way to enhance your trading exposure. Social connections with like-minded people not only nurtures your trading skills but also inspires you to take on more challenging tasks. Let me enlist a few popular indonesian forex communities below;

#1 Trading Forex Indonesia Community

Founded in 2017, the Trading Forex Indonesia Community is a popular Facebook page. The community consists of more than 79.0K registered members. Since multiple posts are added to the page every hour, it is a highly active community for forex traders based in Indonesia. The group focuses on forex and stock trading discussions. 

#2 Secure Trade Community

The Secure Trade Community is an online consultancy company, educating investors on how to benefit from opportunities in the forex industry. Its main office is in Jakarta, Indonesia. With a mission to make clients financially independent, the company offers forex education through multiple channels, including online consultancy, e-learning, and seminars. 

#3 Dasarforex.com

Dasarforex.com is another online community created for Indonesian traders. The members of the community focus on opportunities and constraints in forex trading. The forum has multiple open posts and discussion threads to join. 

Forex Influencers to Follow in Indonesia

#1 Anak Agung Gede Mahendra 

Mahendra is a professional trader having expertise in forex and stock trading. He is one of the most influential forex traders based in Indonesia. Besides sharing educational videos on forex trading, he also conducts online webinars. Mahendra has a huge fan following on both Instagram and youtube channels.

#2 Ryan Filbert

Ryan Filbert is another famous investment specialist and forex trader from Indonesia. Filbert specializes in price action strategies. He has written more than 17 books on the investment niche. He also holds an award for being one of the most popular capital market influencers. You can follow him for his valuable trading ideas here. 

#3 Muhammad Ibnuh

Based in Indonesia, Muhammad Ibnus is a forex, stock, and cryptocurrency expert. He is educating forex and stock trading for the past six years. Traders can watch his videos covering different topics on investment in forex and crypto markets on his youtube channel.  

FAQ 

Is forex trading legal in Indonesia? 

Yes, forex trading is legal in Indonesia. However, shariah rulings (religious guidelines for Muslims) might impact the decision of muslim community on whether or not to be involved in forex trading. 

What is the best time to trade forex in Indonesia?  

Generally, the best time to trade forex is when the forex market has the highest volatility. Usually, it is the time when two forex trading sessions run in parallel. Listed below are the overlap timings for different trading sessions as per the Indonesian time zone. 

  1. US/London Overlap: 8:00 PM to 12:00 PM
  2. Sydney/Tokyo Overlap: 02:00 PM to 4:00 PM
  3. London/Tokyo Overlap: 03:00 PM to 4:00 PM

Is Forex Trading taxable in Indonesia? 

Yes, forex trading is taxable in Indonesia. Forex trading profits exceeding the taxable income threshold are assessable under the ordinary income tax rate. 

Can you make money by trading Forex in Indonesia? 

Forex trading is equally popular in Indonesia as in the rest of the world. If done with proper devotion and consistency, then you can make steady returns with forex trading.

Usman Ahmed, MBA (Researcher)
Usman Ahmed, MBA (Researcher)
Usman Ahmed is a currency trader and financial market analyst with more than 7 years of active trading experience. Besides holding a Masters degree in Business Administration, he has worked for some of the most renewed companies in the forex industry including FXCM, IQOption, MetaQuotes, Alpari, FXStreet, DailyFX and several others. Usman possesses strong technical analytical skills and is famous for his very own, informative and entertaining, writing style. He believes in naked chart trading analysis that is commonly known as price action trading. He follows global financial news and macro-economic events very closely.
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