Many novice traders intend to learn forex from scratch, even some of them are looking for forex classes or schools to become experts in online forex trading. It is undeniable, forex trading is an interesting instrument to do, apart from the potential to generate profits (profit) quickly, USA forex trading activities are also relatively easy to do.
Even so, not a few beginners find it difficult to get a return from forex trading. But don’t worry, basically how to trade forex online is not difficult and can be learned, as long as there is a willingness to learn. The following is a forex trading guide material for beginners in Indonesia 2022.
Forex Definition
What is forex? Forex is an abbreviation of foreign exchange which means the exchange of foreign currency or foreign exchange / foreign exchange. As is known, foreign exchange exchange will certainly involve currency transactions between countries. In forex trading, foreign currencies are paired together. For example, transactions in the Euro (EUR) against the American Dollar (USD) or EUS/USD. Then, what is the concept of online forex trading like?
Understanding Forex Trading
What is forex trading? In summary, trading means trading, while forex is foreign currency. Thus, the definition of forex trading is an activity of trading foreign currencies. Because there is a concept of trade, it is no longer just a currency exchange transaction in general, but has entered the business area. The purpose of forex trading is to make a profit (profit) from currency trading activities.
In its development, the term forex trading online emerged, or currency trading with an electronic system, not physically. In other words, anyone in any part of the world can trade currencies directly without having to meet face-to-face. All transactions are done online. When it comes to trading, it cannot be done without a place to make transactions, or what is called a market: in this case the forex market.
Know What is Forex Market
What is the forex market (forex market)? In general, the forex market is a place for foreign currency trading transactions that bring together buyers and sellers. The forex market is not like a market in general which is physical (building), but in the form of an integrated platform connected to the internet, such as an app that is operated online or an electronic system.
In addition, the forex market only trades currencies online (electronically) or also known as the over-the-counter (OTC) market. Thus, all people or traders in all corners of the world can make forex trading transactions with each other online without having to meet in person.
Furthermore, the forex market lasts for 24 hours on Monday – Friday. However, the forex trading system is carried out in 4 (four) sessions due to time differences in the world’s financial centers. Here are forex trading times.
- Australian market (headquartered in Sydney), forex trading takes place at 05.00 – 14.00 WIB.
- Asian market (headquartered in Tokyo), consisting of Japan, Hong Kong, and Singapore, forex trading takes
- place at 07.00 –00 WIB.
- European market (headquartered in London), consisting of the UK and Germany, forex trading takes place at
- 13.00 22.00 WIB.
- American market (headquartered in New York), forex trading takes place at 20.00 – 05.00 WIB.
The forex market is the most liquid market in the world in terms of the volume of trading transactions that even reach $ 5 trillion in a day. This is what makes the forex market very active with price movements that fluctuate throughout the day. Because the forex market is very liquid (has high liquidity), forex traders will find it easier to cash out or liquidate their assets.
Forex Market vs Money changer
Although it has been mentioned earlier, some beginners are still confused about the difference between the forex market and money changers. Both have similarities and differences. For equality, the forex market and money changer are both places where foreign currency exchange transactions occur, but with different motives. Transactions in the forex market are used as a business arena, while transactions at money changers prioritize the need to transact abroad.
While the differences between the forex market and money changers are as follows:
- First, transactions in the forex market are carried out fully online, while money changer transactions are carried out offline.
- Then, the currency traded in the forex market is limited, while money changers can exchange almost all types of currencies of countries in the world.
- In addition, transactions in the forex market have been determined by currency pairs, for example the Euro against the USD (EUR/USD), the Euro with the Pound sterling (EUR/GBP), and so on. While transactions at the money changer can be done for any currency pair.
General Terms in Forex Trading
Before presenting how online forex trading works, it’s a good idea to understand common terms in forex trading. This is an important part of the forex trading guide for beginners, so that you can more easily understand forex trading activities.
1. Open Position
The term open position in forex is an activity to buy or sell a currency pair. Other terms are open buy positions and open sell positions. When you predict the forex price will rise within a certain period of time, open a long position. On the other hand, if the forex price is predicted to fall, open a short position.
2. Floating Profit & Loss
Floating profit and floating loss are actually general terms used in trading or investment activities. In summary, floating profit is the current amount of profit (on open positions). While floating loss is the amount of ongoing losses. Because it is in an open position, the floating profit can be reversed into a floating loss, and vice versa.
3. Take Profit & Stop Loss
Take profit and stop loss are also common terms in trading and investing activities. In short, take profit is the activity of taking profit. While stop loss or also called cut loss is an activity to limit losses. When there is a floating profit of a certain amount, the trader will realize the profit by taking profit. Conversely, if there is a floating loss of a certain amount, the trader wants to limit the risk of loss by making a stop loss.
4. Balance
The term balance in forex is the amount of balance/capital/funds available in the forex trading account. So, if a trader deposits funds in a trading account of Rp. 1 million or the equivalent of $66.66 (exchange rate of Rp. 15,000), then that is the available balance.
5. Equity
The term equity in forex is the amount of balance + floating profit or floating loss. In other words, equity is the total balance in the trading account in an open position or when you open a position. For example, you have a balance of $67. Then, you open a long position. It turns out that there is a floating profit of $3. Thus, the total equity is $70. If you decide to close the position by taking profit, then the balance and equity will be worth the same, which is $70.
– If you are not doing an open position, then equity = balance.
– When an open position is open and there is a floating profit, then equity = balance + floating profit.
– If you are in an open position and there is a floating loss, then equity = balance + floating loss.
6. Lot
The term lot in forex is a unit of trading transaction units. The standard lot in forex is 1 lot or the equivalent of 100,000 units of the base currency (USD). However, you can also buy smaller lot sizes, such as 0.1 lot (10,000 units) and/or 0.01 lot (1,000).
– The standard lot is 1 lot = 100,000 units, or 100 thousand USD if using the US dollar currency.
– Mini lot is 0.1 lot or 10,000 units, or 10 thousand USD if using US dollar currency.
– Micro lot which is 0.01 lot or 1,000 units, or 1 thousand USD if using US dollar currency.
When opening a forex trading account at a broker, the trader will choose the type of trading account. However, trading transactions always use lots. Beginner traders are strongly advised to start with micro lots. In addition to being safer, playing forex with smaller lots also does not require a large balance of capital. Online forex trading activities with small lots also aim to maintain trading psychology.
7. Pip
In forex, pip or price interest point is a unit that serves to measure any changes in the exchange rate between two currency pairs. For example, 1 pip on the EUR/USD currency pair is 0.00001. If EUR/USD moves from 1.22280 to 1.22281, then there is an increase of 1 pip or 0.00001. A pip can also be called a point which refers to the last decimal value in the quoted price.
8. Spreads
The term spread in forex is a trader’s fee that becomes income for the broker. Spreads are generated from the difference between the ask and bid prices of a currency pair. The spread value varies greatly depending on the currency pair. For example, if the bid price for EUR/USD is 1.22280 and the ask price is 1.22283, the spread is 0.00003 or 3 pips. Traders usually prefer to trade currencies with smaller spreads.
9. Leverage
The term leverage in forex is a unit to summarize the transaction value, or also called leverage. Each broker will usually offer various leverage facilities. For example, leverage is 1:10, 1:100, 1:500, 1:1000, and so on. If the trader chooses 1:100 leverage and has a capital of $67, then that is equivalent to $67 x 100 = $6,700. Thus, traders can make transactions with a higher volume. With leverage, traders also have the potential to generate greater profits, but the risks they face are also equal. Therefore, it is important to be wise in using leverage.
10. Margin
The term margin in forex is the amount of funds (deposit money) required to maintain and/or open trading positions. There are two types of margin, namely used margin and free margin.
- Used margin is the nominal deposit that must be met to maintain a trading position.
- Free margin is the amount of deposit required to open a trading position.
This is where most novice traders get stuck. They assume that when forex prices continue to decline, it won’t be a problem. In fact, when the forex price declines to reach the margin limit, the system will automatically close the position. Usually, this happens when novice traders use excessive leverage, not worth the capital they have. This confirms that forex trading requires a mature strategy.
Forex Trading Process and How it Works
Forex trading online is basically a transaction of two currencies in pairs (pairs), for example the Euro (EUR) and the American Dollar (USD) or EUR/USD for short. In other words, it consists of two sides: left (EUR) and right (USD). The left side is called the base currency and the right side is the quote currency. In the forex market, each currency that is traded has a designated partner.
Each currency paired with the USD is usually included in the major currency pairs (major currency pairs), namely the major currency pairs that are traded globally and are the most liquid. The following is a list of major currency pairs in forex trading activity:
- EUR/USD = Eurozone/United States
- GBP/USD = United Kingdom/United States
- USD/JPY = United States/Japan
- USD/CHF = United States/Switzerland
- USD/CAD = United States/Canada
- AUD/USD = Australia/United States
- NZD/USD = New Zealand/United States
In addition, there are also so-called minor currency pairs, namely currency pairs that are not paired with the USD, also known as cross-currency. The most frequently traded minor currency pairs usually involve the EUR, GBP or JPY. The following are examples of minor currency pairs in forex trading activity:
- EUR/CHF = Eurozone/Switzerland
- EUR/GBP = Eurozone/United Kingdom
- EUR/CAD = Euro Zone/Canada
- GBP/CHF = United Kingdom/Switzerland
- GBP/AUD = United Kingdom/Australia
- GBP/CAD = United Kingdom/Canada
- EUR/JPY = Eurozone/Japan
- GBP/JPY = United Kingdom/Japan
- CHF/JPY = Switzerland/Japan
- etc.
Furthermore, the process and workings of forex trading is a two-way transaction. For example: EUR/GBP, meaning that the trader is buying EUR and selling GBP at the same time.
The advantage of two-way transactions is that traders can make profits both when the price trend is up and the price is trending down. For example, a trader can open a buy first, then close it by doing an open sell. Conversely, traders can open sell first, then close with open buy.
When closing a trading position, the trader must cross the spread to make a profit. As explained earlier, the spread is a transaction fee or fee from the broker. For example, Mr. Andi trades forex by buying EUR/USD at 1.22280. In a buy position it is worth 1.22280, while in a sell position it is worth 1.22287. Buy price = purchase price of 1 Euro against USD. Sell price = selling price of 1 Euro against USD.
Mr. Andi saw that the EUR/USD price movement was experiencing an uptrend. Mr. Andi decided to take a long position with the amount of 1 lot at a price of 1.22280. In order to make a profit, Mr. Andi must sell EUR/USD at a price > 1.22287. This is due to the spread of 0.00007. And vice versa when Mr. Andi takes an open sell position.
Know What is a Forex Broker
Online forex trading activities cannot be done without a forex broker. In other words, a forex broker is a party that bridges market participants in trading activities. Forex is different from stocks because forex does not have a central exchange like stocks that have a stock exchange (in Indonesia it is supervised by the OJK).
The role of forex brokers or brokers is very important because they provide an online trading platform or app for market participants. Through this platform, traders can trade with each other in an electronic system. Because of its very vital role, it is important for Indonesian traders to choose the best and trusted forex brokers that are legal or regulated or have official licenses.
Indonesian forex brokers are regulated by the Commodity Futures Trading Regulatory Agency (CoFTRA). Meanwhile, the existence of foreign forex brokers is regulated by global or international authorities. The most popular international authorities include The Financial Conduct Authority (FCA), Cyprus Securities & Exchange Commission (CySEC), National Futures Association (NFA), and The Australian Securities and Investments Commission (ASIC). The legality of the broker is the first thing that must be checked by traders so that they are not trapped by fraudulent forex brokers. Here’s a list of the best forex brokers 2022:
- JustMarkets
Amarkets
OctaFX
eToro
Capital.com
Forex Trading App
Because forex trading is done online, a platform, software, or similar app is needed that supports currency trading transactions. Usually, each forex broker has its own forex trading app. It is important for traders to choose the best trading app so that trading activities are not disrupted. For example, make sure the order execution is not problematic or can be carried out (execution) precisely and accurately. Then, the user friendly view of the app.
Traders can also consider other facilities. For example, the copytrading facility functions to automatically copy the positions of professional traders (usually the best professional traders with high ratings) so that novice traders have the opportunity to make profits. However, the copytrade facility can create dependence on others. Then, another facility that is quite important, namely a demo account, serves as a training ground for novice traders before using a real account.
In addition, traders can also consider apps from forex brokers that can connect with Metatrader 4 or Metatrader 5 apps. Why is that? Please note, Metatrader is the most (common) used platform in the world for trading forex and contracts for difference (CFD). The features displayed are very complete and have proven to be the main choice in trading. The Metatrader app also supports PC (Windows & Mac) and mobile (Android & iOS). Thus, traders have many alternatives: they can use apps from brokers and/or Metatrader.
How to Start Trading Forex
There are several steps that must be taken by beginners as part of the guide and how to trade forex online, which are as follows:
- The first step, choose the best forex broker. For consideration, you can check here.
- The second step, register with the selected broker. In general, how to register forex can be done online. The average registration stages are the same, starting from downloading the forex trading app, after that filling out the form provided (username, email, and password), then verifying email, completing personal data, to uploading documents (if needed).
- The third step, make a deposit (deposit). After registering, then the trading account is active (verified), the next step is to make an initial deposit. Every forex broker will set a minimum deposit of funds. Well, novice traders may consider choosing a forex broker that doesn’t imply a large initial deposit.
- Last step, trading time! For beginners, it is better for traders to start with a demo account as a “trial” to gain trading experience for the first time. Even though the demo account is free, it doesn’t mean that traders can trade arbitrarily. Use the demo account wisely as a place to learn. Beginner traders are free to tinker with trading strategies when running a demo account so that they can get the best forex trading strategies. If the trader feels ready, immediately start with a real account.
How to Trade Forex
As already explained, forex trading is done through apps, both those provided by forex brokers and trading apps in general, namely Metatrader. On this occasion, we will provide a guide on how to buy and sell forex using Metatrader. Examples of forex trading transactions here using a demo account. To be clear, here are the ways and forex trading guides for beginners:
The first step, please download the Metatrader app. We use Metatrader 5 which can be downloaded via Playstore or AppStore.
- The second step, please open the Quote menu which displays a wide selection of currency pairs, as shown below.
- The third step, please open a position by clicking on the desired forex currency pair, for example EUR / USD.
- The fourth step, various options appear. To open a position, please click “New Order”.
- The fifth step, the execution display appears. Traders can choose to open short positions or open long positions.
Then, select the number of lots. For example, we open a 1 lot position for a buy option assuming the EUR/USD price is experiencing an uptrend.
- The sixth step, a notification appears when you have finished an open position. As you can see, the information shows that we opened a long position of 1 lot for the EUR/USD currency pair at the price of 1.21561.
- The seventh step, open the “Trade” menu to see if there is a floating loss or floating profit. It turned out that there was a floating profit of $ 10. We decided to take profit by closing the position, as can be seen in the image below.
- The last step, the system will direct you to the close position menu. It turned out that within a few seconds, the floating profit decreased to $5. We don’t mind and still close the position by clicking the “Close with Profit $5” option.
How to trade forex for one open position is completed with the achievement of making a profit of $ 5 in seconds. Remember, you can’t always make a profit in seconds or minutes. There could be a large floating loss. Therefore, it is better for traders to have a trading strategy. For example, define a trading timeframe, follow the price trend (trend following) as we did that the EUR/USD price chart shows an uptrend. It is also important to open positions with the ideal number of lots, according to the trading capital.
For novice traders who are serious about wanting to succeed from online forex trading in Indonesia, our tips are to learn about trading strategies. Don’t worry, we have provided the material that you can read for free in this article: Safe & Profitable Forex Trading Strategies for beginners.
Success belongs to those who are prepared
There is no instant success. Success is all about preparation and process. Anyone who prepares seriously and proceeds well in forex trading, then they have a great chance to succeed, even get rich from forex. “Time will mature.” Maybe Indonesian novice traders experience more losses at the beginning, but don’t use that as an excuse to give up.
It is part of the process of learning and seeking experience. By practicing consistently, the best results will come. Trade online with pleasure and carefree. Finally, forex trading is about the long-term game, aka how a trader is able to survive in volatile, volatile, or volatile financial markets. Of course, this requires money management and a trading plan, which is part of a forex trading strategy.
