What is the Foreign Exchange Market?
The foreign exchange market, also known as the forex (or even more simply, the FX market), is the largest financial market in the world. Every day, trillions of dollars of global currencies are traded in what are called “pairs”, i.e. the exchange of one currency for another, such as rupiah for dollars, euros for Japanese yen, etc. These transactions are carried out five days a week, 24 hours a day around the globe and determine the value of every currency on the planet second by second, based on supply and demand. So, if the pound is in demand, its value against, for example, the dollar will rise and vice versa.
Given its scale and breadth, forex trading is easily accessible by individual investors, who can open an account with a few hundred pounds and begin trading immediately. But it is easy to lose money, especially if you are a beginner. Trading successfully requires effort, discipline and a determination to learn as much as you can about the market before you start. You also need to understand the regulations governing the market, the costs of trading and which brokers to use. Most importantly, you should understand the risks and disadvantages before deciding whether forex trading is for you.
Why does the Forex Market Exist?
There are many reasons why people trade currencies. Indonesian companies may need to buy dollars to pay for American imports, or they may need euros to pay for the acquisition of a company based in Europe. Central banks, such as the Bank Indonesia (BI), can intervene in FX markets, buying and selling currency to manipulate its value for reasons of economic policy. Speculators also drive a very large part of the market, trading with the aim of generating a profit.
Large financial institutions, multinational corporations and hedge funds dominate the forex market, which reached a value of US$6.6 trillion per day in April 2019, according to the latest statistics. That size means it is a hugely liquid market, i.e. it is very easy to buy and sell currencies because there are so many buyers and sellers in the market for most currencies.
What Drives the Forex Market?
The rupiah is a free-floating currency. In other words, the value of the rupiah in the FX markets is determined by supply and demand. This is the case for the currencies of most advanced economies. By contrast, some currencies, such as the Chinese renminbi (RMB), have a fixed exchange rate. The Chinese authorities determine the value of the RMB against the dollar and keep the link until they decide to alter the exchange rate. Clearly, there is no potential for individual traders to profit from trading currencies with a fixed exchange rate.
The value of a floating currency such as the Indonesian rupiah, however, is constantly moving up and down against other currencies. Often these movements are relatively small, so the ringgit may begin the trading day at 15,000 rupiah to the dollar and end a little higher or lower, or even back at its opening level. But dramatic economic or political news can spark much greater volatility. For example, the rupiah fell by around 10% at the start of the Covid pandemic, back in February 2020. Traders, fearing a prolonged period of economic uncertainty, sold the ringgit as quickly as they could.
Economic developments are also a key influence. New data suggesting the Indonesian economy is growing slower than anticipated might spark concerns that BI could lower interest rates to stimulate growth. Lower interest rates reduce the appeal of holding a currency since you are getting less return on your money. That outlook consequently dampens demand for the rand and its value falls. Similarly, if Indonesia’s economic outlook brightens and traders anticipate BI will raise interest rates, they will buy the rupiah, increasing its value against other currencies.
That is why FX traders follow economic, financial and political news so closely, looking for any hint of information that could sway the value of currencies. They are hoping to react before other traders spot the development. Or they may take bets on a likely development, believing they have some insight that other traders lack. So, for example, in June 2016 on the day of the Brexit vote in the UK, before the results were announced, the British pound soared in value because many traders were convinced (incorrectly it turned out) that the British public had voted to remain in the EU.
Why is Forex Trading Popular?
Forex trading is the largest and most easily accessible market in the world. The costs involved are relatively low compared with other markets, there are lots of brokers to choose from in Indonesia, and it is relatively easy to understand the ways in which you can trade the market. There are many freely floating currencies and since they can all be traded against each other there are a huge number of currency pairs to trade in. A vast amount of information is available to would-be traders, ranging from how to get started to outlining potentially profitable trading strategies.
You can trade from your living room using a fairly basic computer if you download the appropriate trading software, and it is relatively easy to set up an account with a broker. Unlike other financial markets, you can also exploit the concept of “leverage”, where you make use of borrowed money to increase your potential profits (and your losses). To explain what this means, currency pairs are traded in specific amounts called lots. They tend to be in 100,000 units of a currency, so, for example, if you are trading in the pound sterling against the US dollar, you would buy or sell £100,000 at a time. Since most people don’t have £100,000 available to trade, the broker effectively offers to lend you money. So, they may allow you to trade in a lot of £100,000 by opening an account with £1,000 and lend you the remainder. The initial £1,000 is known as the margin and your leverage, in this case, would amount to 100 to one (100:1).
As we mentioned, as well as increasing potential profits, leverage can dramatically increase risk. There are methods you can use to contain risk, but that is a topic for another article.
The Disadvantages of Forex Trading
Forex trading requires a considerable commitment. It takes time to learn how to trade profitably, and when you start to trade you may have to spend many hours per day on your computer screen following and researching what is happening in the market – and why – in preparation for your trading day. When that day is finished, you will need to analyse what happened and why your trading activities succeeded or failed, so that you can apply the lessons learnt to the next day’s trading. There could be days when you lose money and it is easy to become disheartened. There is certainly no guarantee of success. FX trading can be risky and you can lose money or you may find that it is simply not something you like or have the temperament for. You have to be patient, for example, waiting for opportunities to arise, and the market can experience bouts of extreme volatility that you may find highly stressful.
Is Forex Trading Legal in Indonesia?
Yes, Forex trading is legal in Indonesia and has been since 2013. Indonesian traders can trade with any Forex broker in the world.
Overview of Forex Trading in Indonesia
Over the last ten years, mobile phone use in Indonesia has exploded. 72% of Indonesians are now connected to the internet everywhere they go and whenever they want (up from 44% in 2017, a very rapid growth rate). At the same time, youth unemployment has increased during the Covid pandemic, analysts predict that 26% of all young people are currently jobless. Young, educated Indonesians looking for new ways to make money are at the forefront of a boom in Forex trading, made all the easier because:
- All Forex brokers now have mobile apps that allow traders to deposit and withdraw funds, check market news, and make trades from their phones.
- Many brokers in Indonesia have very low deposit requirements, some as low as 1 US dollar.
- Most brokers offer low-cost Islamic trading accounts, making trading a more appealing prospect for devout Muslims
Because it is easy to get started Forex trading, the number of Forex scams and bad brokers has also increased as criminals attempt to profit from the boom. Ponzi schemes and so-called “money games” are common.
A common recent scam involves trading “robots” – algorithms that can be installed on trading platforms to automate trading. Criminals are selling trading robots over the Telegram messaging service to beginner traders with the promise of huge profits.
Recent media scrutiny and publicity has led to a more educated and more wary public, but Forex scams are still frequent. Most Forex scams in Indonesia start on social media and are conducted by unlicensed individuals.
Considering the number of scams in Indonesia, the Forex trading environment in is not ideal. But it remains very popular and there are many trustworthy brokers to trade with.
Forex Trading Regulation in Indonesia
Indonesia has two regulatory authorities that oversee financial markets. These are the Otoritas Jasa Keuangan (OJK) and the Badan Pengawas Perdagangan Berjangka Komoditi (BAPPEBTI). Though there is some crossover between the two agencies – and they do work closely together – they have distinct roles in ensuring the healthy development of the Indonesian financial markets.
OJK is an independent authority under the Ministry of Finance and oversees banking, capital markets, and the non-bank financial services sector such as insurance, pension funds, financial institutions and fintech. BAPPEBTI, on the other hand, is part of the Ministry of Trade and regulates and supervises trading in commodities, foreign exchange, and derivatives – a much narrower remit than OJK.
Otoritas Jasa Keuangan (OJK)
Established in 2011 to replace BAPEPAM-LK, OJK regulates most traditional financial companies and protects consumers of financial services. OJK often posts warnings about unregulated Forex brokers operating in Indonesia and has the authority to prevent access to Indonesian websites which it deems are storefronts for companies that break the law.
Other than warning the public, OJK has very little to do with Forex brokers in Indonesia and leaves most of the regulatory work to BAPPEBTI.
Badan Pengawas Perdagangan Berjangka Komoditi (BAPPEBTI)
Unlike the OJK, BAPPEBTI has the sole supervisory mandate over CFD and Forex brokers in Indonesia. While the OJK can assist in the investigation and educate the public, BAPPEBTI is responsible for ensuring that Forex brokers in Indonesia follow the law.
For a broker based in Indonesia to operate legally, it must have a licence from BAPPEBTI. In addition to obtaining permission from BAPPEBTI, many brokers are also registered as members of the Jakarta Future Exchange (JFX) or the Indonesia Commodity & Derivatives Exchange (ICDX).
According to Indonesian law, Forex and CFD trading is futures trading and falls under the authority of BAPPEBTI. Law 32/1997 concerning commodity and futures trading, requires BAPPEBTI to:
- Issue business licenses for futures brokers their representatives.
- Issue rules and regulations.
- Conduct inspections of permit owners and parties suspected of committing violations.
- Supervise promotional activities to avoid misleading advertisements.
- Facilitate the settlement of disputes related to futures trading.
While BAPPEBTI is responsible for all brokers with an office in Indonesia, it has no authority over brokers based outside of the country.
Advantages of Trading with a Regulated Broker
As most Indonesian Forex traders work with brokers based overseas, it is important for Indonesian traders to make sure that they are not trading with an unregulated broker. Brokers regulated by ASIC in Australia, CySEC in Europe, MAS in Singapore or the FCA in the UK are much more secure than brokers with no regulation at all.
ASIC, CySEC, MAS and the FCA all require brokers to keep their operational funds segregated from traders’ funds. Most brokers regulated by these bodies will also offer negative balance protection, so traders never end up owing their broker money. You can also be sure that brokers regulated by these authorities are frequently audited and will not cheat their clients or manipulate market data.
While some brokers regulated by ASIC, CySEC, MAS and the FCA will restrict leverage to 30:1, many have gained licences with offshore regulators in the Virgin Islands, Mauritius or Seychelles that allow them to provide leverage of 500:1 or higher for Indonesia traders.
Forex Scams and Bad Brokers in Indonesia and How to Avoid Them
As part of our work at FXScouts, we ask traders who have been scammed or defrauded by Forex brokers – or people claiming to be Forex “experts” – to let us know about their experience (you can find the details here).
Forex Scams and Money Games
According to our latest research, we found that Facebook and Instagram were the sources of more than 50% of “money games”. We also found that many victims paid the people who scammed them in Bitcoin or other cryptocurrencies and that almost half of the complaints people made were against individual scammers, not brokers.
Both social media and cryptocurrency are great tools for criminals who want to disguise themselves. People can use whatever name they want on social media, and cryptocurrency is almost untraceable. Once someone pays a scammer they met on social media with cryptocurrency, it’s impossible to get their money back.
Other telltale signs of a Forex scam are promises of guaranteed returns and the use of complex jargon. Forex trading is high-risk speculation and even professional traders cannot guarantee returns. And while there is Forex-specific jargon, trading can be explained in simple terms.
Bad Brokers
Avoiding individual scammers is relatively easy compared to avoiding bad brokers. So, what can Indonesian traders do to avoid bad brokers? There are a few tell-tale signs that a broker is not treating its clients fairly:
- Unpublished spreads: The spread is the broker’s fee for connecting traders to the Forex market. If a broker doesn’t want to say how much this fee is, it’s probably charging too much.
- High deposit and withdrawal fees: Deposits should always be free of charge and withdrawals should be low-cost. Be wary of high fees or unexplained charges
- Delayed withdrawals: Withdrawals should take a few days at the most. If a broker ignores withdrawal requests or delays for more than a week it is cheating its customers.
- Missing Deposits: Bad brokers will sometimes claim to have not received a deposit after it has been made. Always request proof of payment when depositing.
- Unresponsive Customer Service: In many cases, the customer service team at bad brokers will ignore complaints or requests for assistance – especially when dealing with any of the problems listed above.
- Paywalled/Limited Demo Accounts: Demo accounts are the best educational tool beginner Forex traders have. Brokers that require new traders to open a live account before they can open a demo account, or close demo accounts after a short time, are trying to force beginners to start trading before they are ready.
How to Compare Forex Brokers in Indonesia
Though Forex brokers might appear to be similar, they are quite different once you dig a little deeper, and account conditions will vary for Indonesian residents. These are some of the most common questions traders will have when comparing Forex brokers.
Forex Brokers for Beginners:
Forex Broker Fees and Trading Costs:
Other Trading Options:
Forex Broker Regulation
Forex Broker Customer Support:
Forex Trading Platforms:
Do I Need a Broker to Trade Forex?
Yes, you will need a broker to trade Forex. Connecting traders to the Forex market is an expensive and technically complex business. It’s important to choose a regulated Forex broker with low costs and a history of treating its clients fairly.
What is an Islamic Trading Account?
In Islam, interest (or Riba) is haram and outlawed. Interest is a common part of normal Forex trading, but many Forex brokers offer special Islamic trading accounts with no interest charged on overnight trading positions. These trading accounts usually have higher fees or commissions to make up for the lost interest charges.
Which is the Best Broker in Indonesia?
The best broker in Indonesia is FXTM. FXTM is regulated by the FCA in the UK and fees are low, with a 50 USD minimum deposit and tight spreads. Islamic trading is available on all accounts and the FXTM website is fully translated into Malay. FXTM clients can trade Forex, commodities, metals, stocks, and indices and have a choice of trading platforms and useful trading tools. Finally, the FXTM Invest copy-trading system is one of the best-designed in the world; it’s relatively cheap, easy for beginners to understand and has a great number of successful traders to copy.
Which is the Best Broker for Beginners?
IG Markets is also the best broker for beginners in Indonesia. IG Markets has some of the lowest fees in the industry, with spreads starting at 0.6 pips on the EUR/USD. IG Markets’ has no required minimum deposit for bank transfers and traders can access 17,000+ CFDs, including Forex, indices, commodities and shares. Beginners will also appreciate IG Markets’ world-class educational and market analysis section.
If you are looking for a reliable broker for beginners, some other good options are:
Scroll for more details
Which Broker has the Best Demo Trading Account?
Capital.com is the best broker for demo trading in Indonesia. Capital.com’s demo account never expires and is available on both MT4 and Capital.com’s own web-based trading platform (also available on iOS and Android). Capital.com’s platform offers in-depth financial analysis with over 75 technical indicators, multiple trading chart types, and extensive drawing tools. It also allows traders to toggle in and out of up to six tabs while keeping an eye on all charts and instruments. All 4000+ of Capital.com’s CFDs are available through its demo account.
Some other well-regulated brokers with great demo accounts are:
Scroll for more details Are Forex brokers in Indonesia reliable?
Yes, most Forex brokers in Indonesia are reliable and trustworthy. The most reliable brokers in Indonesia are regulated by the FCA, CySEC or ASIC and have a history of treating Indonesian traders fairly. If you are unsure about the reliability of your Forex broker, you can check our list of brokers to avoid.
How do I Choose a Forex Broker?
When choosing a Forex broker there are three things to consider:
- Regulation: Make sure you choose a broker regulated by one of the major regulators like CySEC (Europe), ASIC (Australia) or the FCA (UK). Regulated brokers have better security and will treat their traders fairly
- Cost: Look for a broker with a low minimum deposit and low fees. Broker fees will include the spread, commission and deposit and withdrawal fees.
- Education: If you’re a beginner you will want a broker with good educational content. All of the brokers on our Best Brokers for Beginners page have high-quality education for beginners.
How do Forex Brokers Make Money?
Some brokers (called market makers) only make money from the spread – the difference between the buying and selling price of the currency pair. These brokers will be the counterparty to any trade, so they make money when clients lose trades.
Other brokers (called ECNs) have tight spreads but make money from commissions, which are charged every time a trade is opened or closed. This type of broker makes money whether a client wins or loses.
Which Broker has the Lowest Fees?
Tickmill is the broker with the lowest fees, with the total trading cost on its Pro Account equalling 0.4 pips on the EUR/USD, this includes a 0 pip minimum spread and a round turn commission of 4 USD per 100,000 traded.
Other brokers with low trading costs are:
Scroll for more details Broker fees are split into the trading costs, which is the total of the spread and commission, and non-trading fees such as deposit and withdrawal fees.
The spread is the difference between the buy and sell price of a Forex pair and is measured in pips, the smaller or “tighter” the spread the less money you spend when you make a trade. Commission is charged by some brokers every time a trade is opened or closed.
How do I make a Deposit with a Broker?
Making a deposit with a broker is a simple process. Once you have signed up and opened a live account you will be given a few options. Most brokers in Indonesia will accept local bank transfers, credit cards, online payment solutions like Go-Pay and PayPal, and eWallets like Neteller and Skrill. Bank transfers usually take 1-2 days to process and may have a fee attached but all other deposit methods are usually instant and free.
How do I make a Withdrawal from a Broker?
To make a withdrawal from a broker you must have enough money in your trading account after deducting the margin needed to keep any trades open. Once you know how much you can withdraw, you can make a withdrawal request via your account dashboard. To prevent money laundering, most brokers in Indonesia will only let you withdraw the same amount as your initial deposit back to your credit card or eWallet. Anything more than this will have to be withdrawn to a bank account in your name.
Which Broker has the Lowest Minimum Deposit?
OANDA is the broker with the lowest minimum deposit in Indonesia and there is no minimum deposit requirement on its Standard Account. Spreads start at 1.0 pips (EUR/USD) on its commission-free, beginner-friendly account, which is average compared to other brokers, but suitable for beginner traders who don’t want to risk large amounts of capital.
Other brokers in Indonesia with low minimum deposits are:
Scroll for more details With most brokers, larger deposits usually unlock lower trading costs and other perks. What level of minimum deposit you are comfortable with depends on your financial situation.
How do I Calculate Trading Costs?
When trading Forex, the total trading cost is the spread on the currency pair you are trading plus any commission your broker may charge. If you keep a trade open overnight you will also be charged a rollover (or “swap”) fee, which will be deducted automatically from your account. Major pairs, such as the EUR/USD or USD/JPY have tighter spreads and are cheaper to trade.
Which Broker has the Highest Leverage?
FBS offers the highest leverage of any Forex broker in Indonesia. On three of their five accounts, leverage of 1:3000 is available.
Leverage is money borrowed from your Forex broker to increase the size of a Forex trade. Leverage is essential in Forex trading because the movements of the market are too small to make a decent profit unless you place thousands of dollars on each trade. Leverage can be used to make large profits with a little of your own money, but you can also quickly lose more than your original investment.
Which Broker Has the Most CFDs?
MultiBank is the broker with the most CFDs to trade. Regulated by 10 different authorities, MultiBank offers trading on over 20,000 instruments, including Forex, indices, share CFDs, commodities and cryptocurrencies. Multibank’s Standard Account has a minimum deposit of 50 USD and Islamic accounts are available for all Indonesian traders.
Other brokers with a wide range of instruments to trade are:
Scroll for more details Which Broker has the Most Currency Pairs?
Capital.com is the Broker with the most currency pairs, with 137 currency crosses to trade. One of our highest rated brokers, Capital.com is one of the lowest-cost brokers in the world and also has a large portfolio of cryptocurrency CFDs to trade.
Other Forex brokers with a larger than usual selection of currency pairs to trade are:
Scroll for more details Which Broker is the Best for Professional Traders?
Pepperstone is the best broker for professional traders. An ECN broker with extensive liquidity streams, Pepperstone supports all three major trading platforms (MT4, MT5 and cTrader) and has some of the tightest spreads in the industry (0.09 pips EUR/USD spread on its Razor Account).
Commissions are low and there are no minimum deposit requirements. Commissions can be further reduced by becoming a member of Pepperstone’s Active Trader Program. The Active Trader Program has a number of other advantages for high-volume traders, including a free VPS service and priority customer support.
What are Managed Forex Accounts?
Some brokers will operate a managed account for you, but this is rare. There are independent money managers who can manage your account while they are trading for themselves. It is vital that you understand the minimum deposit requirements and additional risks involved when trading CFDs.
If you have any questions after reading through this guide, please get in touch with us in the comments at the bottom of the page.
How do I Know if a Forex Broker is Regulated?
All regulated brokers are required to display their licence number and the authority they received it from on their website. These licence numbers can be easily verified on the regulatory authority’s website. Some scam brokers will use similar names to legitimate businesses, so make sure the name of the licence holder on the regulator’s website matches the broker’s details.
How Can I Report Scam brokers?
If you believe you have been scammed by your broker, the first thing to do is warn others and tell your story. You can contact BAPPEPTI’s complaints department here and ask them to investigate. We also have a report a scam broker form which we use to gather information so that we get the word out. If you have been scammed, please complete the form.
Which Broker has the Best Customer Support in Indonesia?
FP Markets is the broker with the best customer service. FP Markets’ customer support team has won 22 awards since the company was founded in Australia in 2005. Available 24/7 (0800 – 1600 on weekends) via live chat, email, telephone and call-back service in over 12 languages, FP Markets’ customer support is knowledgable, responsive and can assist traders with all aspects of CFD trading, from setting up accounts to navigating its platforms, plus any other technical queries.
Forex Risk Disclaimer
Trading Forex and CFDs is not suitable for all investors as it carries a high degree of risk to your capital: 75-90% of retail investors lose money trading these products.
Forex and CFD transactions involve high risk due to the following factors: Over-leveraging, unpredictable market volatility, slippage arising from a lack of liquidity, inadequate trading knowledge or experience, and a lack of regulatory protection for clients.
Traders should not deposit any money that is not disposable. Regardless of how much research you have done, or how confident you are in your trade, there is always a substantial risk of loss. (Learn more from the FCA or from ASIC)
Our Rating & Review Methodology
Our State of the Market Report and directory of CFD Brokers to Avoid are the results of extensive research on over 180 Forex brokers. The explicit goal of these resources is to help traders find the best Forex brokers – and steer them away from the worst ones – with the benefit of accurate and up-to-date information.
With over 200 data points on each broker and over 3000 hours of research and review writing, we believe we have succeeded in our goal.
In a world where trading conditions and customer support can vary based on where you live, our broker reviews focus on the local trader and give you information about these brokers from your perspective.
All research has been conducted by our in-house team of researchers and writers, gathering information from various company representatives, websites and sifting through the fine print. Learn more about how we rank brokers.
