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Foreign Exchange Investment

 Foreign Exchange Investment

Investment in Foreign Exchange is often referred to as Forex Business. What is Forex? Forex is an abbreviation of Foreign Exchange, in Indonesian it is often translated as foreign exchange or often abbreviated as forex. Examples of this forex are the US Dollar, Malaysian Ringgit, Japanese Yen, Chinese Yuan, British Pound Sterling, and the Euro for countries in the European Union. Exchange rates of currencies will always change at any time between one currency relative to another. Changes in exchange rates are influenced by the number of demand and supply factors. The more requests, the higher the exchange rate, the lower the demand, the lower the exchange rate. The exchange rate of this currency is also heavily influenced by the economic and political conditions of a country or region.
Traded currency
What exactly is traded on Forex? Of course money, namely the currency of various countries. You are of course confused, what exactly are you buying and selling because it is not physically visible. If you buy a currency, say the US dollar, you are actually buying shares of a country, or on a small scale, like buying shares of a company. The prevailing exchange rate of the US dollar is highly dependent on long-term economic conditions and the expectations of market participants for the currency of a particular country. The exchange rate that applies to a currency, always strengthens or weakens relative to other countries' currencies. Usually the currencies traded come from countries with a fairly advanced level of economy, which are often classified as major currencies.

Symbol	Country	Currency	Code
USD	Amerika Serikat	Dollar	Buck
EUR	Kawasan Uni Eropa	Euro	Fiber
JPY	Jepang	Yen	Yen
GBP	Inggris	Pound	Cable
CHF	Swiss	Franc	Swissy
CAD	Kanada	Dollar	Loonie
NZD	Selandia Baru	Dollar	Kiwi

Currency Pair Types
a. The main currency pairs (major currency pairs), which contain the US Dollar currency and come from 7 developed countries from the economic and industrial level. These major currency pairs are easier to trade because they are easier to analyze, especially for beginners.

b. Cross currency pairs, which do not contain US Dollar currency and originate from 7 developed countries from their economic and industrial levels.

c. Exotic currency pairs, namely currencies outside the list of developed industrial countries, such as Singapore, Hong Kong, South Africa, Bahrain, Russia and Indonesia. This exotic currency pair is very difficult to analyze, especially for beginners. This is due to the fact that the transaction volume is too small, so the price is too easy for speculators to manipulate.

Market Volume and Liquidity Level
Forex trading is not the same as stocks which are required to have a certain location such as the Jakarta Stock Exchange or the Jakarta Stock Exchange, New York Stock Exchange, London Stock Exchange and other stock exchanges. Forex transactions are unique, because they are not centralized in one place or must have a physical location. Forex transactions are often referred to as Over the Counter (O.T.C) or often also called the interbank market, where transactions are electronic, take place 24 hours a day and 5 days of the week. The perpetrators of these transactions are very diverse, ranging from individuals, companies, banks and speculators, all of whom are free to carry out buying and selling transactions with various volume levels and types of currencies. Many parties carry out transactions for the benefit of exchange rate differences, as much as 95% of transactions are speculation, only 5% are transactions based on needs such as in the industrial and tourism sectors.

Forms of Forex Transactions
Forex has many advantages compared to other investment instruments, there are many variations to make transactions.
a. Spot Market, are transactions that are carried out in a matter of seconds at a moment's notice, either in the form of buying or selling the desired currency pair. This type of spot transaction is the most commonly carried out by market players. This is the real form of forex transactions.
b. Futures, is a form of transaction to buy or sell a certain currency pair at a predetermined price, in the future. That's why it's called Futures.
c. Options, is a product derived from forex, giving the right to sell or buy an asset in the form of forex, commodity or stock at a certain price and a certain time. This option has an expiry nature.
d. Exchange Traded Funds, is the newest derivative product of forex, which is a combination of stocks and currencies. The downside is that it cannot be traded 24 hours a day.

Forex Transaction Operators
Participants in the forex market are very diverse, in general they can be referred to as market makers. In general, participants in the forex market can be categorized as:

a. Commercial banks and Central banks, are commercial banks which are the main actors of Forex trading. Examples of these banks are Bank of America, Barclays, Societe Generale, Citigroup, Deutche bank, UBS, HSBC and Goldman Sachs. Transactions are carried out in the form of buying and selling with consumers from the business world, smaller banks, sending money around the world and through speculative transactions in the forex market. A country's central bank is the largest operator in the currency market. They enter the market not for the purpose of speculating. The central bank has an important role to watch over the market, control the smooth supply of currency, regulate interest rates with the aim that the country's economy can be stable through a series of economic policies taken by the government. Central banks also often anticipate market fluctuations using intervention measures. The aim of the intervention is to control currency stability, protect currency values at a certain price level, slow down price volatility and reverse market direction.

b. The Business World, are Multinational Companies such as Google, Microsoft, Apple, Samsung, Toyota are the main actors in the forex market. They transact for the purposes of paying for products, operational costs and the salaries of their employees from various countries around the world.

c. A broker or broker is an institution that functions as an intermediary between retail traders or the general public and the Bank. Brokers benefit from the spread, which is the fee charged when transacting with the difference between the selling and buying values.

d. Hedge Fund, is an institution that carries out short-term investment activities or speculation with the expectation of profit, through funds raised from capital owners. Examples of Hedge Fund actors are George Soros, Warren Buffett.

e. Retail Traders / the general public, are individuals who carry out forex trading transactions with commercial banks or other market players who use the services of their respective brokers.

Considerations for choosing a good broker

Considerations for choosing a good broker

Following are some considerations to consider:

a. Legality of Brokers:

This means that not all brokers available on the internet have proper operating licenses, because in the internet world there are many frauds, ranging from the lure of fake gifts, fake job vacancies, fake goods, fake Multi Level Marketing businesses or money games, fake/fraudulent gambling. , identity and password theft to the point of fake commodity and Forex brokers which are usually used as a means of money laundering or simply pure fraud. A legal broker will have guaranteed regulation. Correct and credible regulations for a brokerage company with an international market, namely: NFA, CFTC, FCA UK, MFSA, MiFID, ASIC.

 b. Support for strategy trading :

Not all brokers support existing trading techniques such as the prohibition of hedging, scalping, having to be FIFO or not supporting the use of Expert Advisors. Legal brokers & who support all trading strategies usually operate in European Union countries such as FXDD Malta, Gain Capital Forex.com UK, FXCM UK and OANDA. Brokers operating from the USA prohibit hedging techniques and use FIFO rules, for example like MB Trading & Interactive Brokers (IB).

 c. Broker credibility can be seen from the country where the broker is registered:

Not all brokers have satisfactory credibility, this credibility concerns the level of culture & discipline of a country. Credible brokers usually come from developed countries, such as the European Union Region, the Australian Continent & the North American Region. The characteristics of a broker with a high level of credibility, must be regulated in one of the regulators, such as NFA, CFTC, FCA UK, MFSA, MiFID, ASIC. Meanwhile, brokers from developing countries, which are included in this category are the Russian Federation, British Virgin Islands (BVI), Marshall Islands, Mauritius, Seychelles, Panama, Bahamas, Cyprus, Belize, Costa Rica, Gibraltar, Cayman Islands, and Saint Vincent and the Grenadines .

 d. Fund Withdrawal Fees and Fund Deposits:
Each broker has a different fee for withdrawing funds. For example the FXDD broker
free of charge for withdrawing funds 1 time a month because for the 2nd withdrawal of funds you will be charged. The Gain Capital broker has a fee of 25 USD, while FXCM charges a fee of 40 USD for each withdrawal. In addition to the withdrawal fee, there is also a wire transfer fee, which ranges from around 25 USD to a broker's offshore account, for example Bank of America or Barclays in the UK. the funds will arrive in the trading account around 1-3 working days. If you want free withdrawal and Deposit Fund fees (if any, at least below 1% of the total Withdrawal/Deposit), you can open a trading account at a broker from the Russian Federation, British Virgin Islands (BVI), Mauritius, Seychelles, Panama , Bahamas, Cyprus, Belize, Costa Rica, Gibraltar, Cayman Islands and Saint Vincent and the Grenadines. Withdrawal and deposit media can use a 3rd party account (the term local deposit versus wire transfer). So you can deposit or withdraw funds directly via BCA, Mandiri, BNI ATMs in a matter of minutes. Or sometimes through payment media such as FASAPAY or buying a deposit or prepaid voucher from the broker where you are trading, usually with a nominal value of at least 5 - 10 US dollars. Actually, administratively, this method violates Bank Indonesia regulations, because it collects public funds in Indonesia without permission.

e. Technical support
To make it easier to deal with problems that will occur in the future, you should register through an Introducing Broker (IB) from your favorite broker. Not every broker from abroad has an IB.
 

f. Fund Guarantee Risk
If we trade with the amount of funds invested exceeding 1000 USD, you should choose a more credible broker, which is regulated in one of the regulators, such as NFA, CFTC, FCA UK, MFSA, MiFID and ASIC, which guarantees the safety of trader assets, oversees and protect investors from fraudulent activities in commodities and futures trading. On the other hand, if you are still in the learning stage with funds of less than 1000 USD, you can choose any broker (even if the regulations are not clear) without any problems. Especially for brokers whose regulations have not been registered with the NFA, CFTC, FCA UK, MFSA, MiFID or ASIC, it is recommended to choose a broker with a long standing age, for example broker ALPARI (1998), Master Forex (2006) and Exness ( 2008) each of which came from the Russian Federation. At this broker, you can withdraw and deposit funds via an ATM (the term local deposit versus wire transfer), or through an exchanger such as FASAPAY.

 

g. Spreads
The spread is the difference between the buy and sell prices. This spread is a service that we have to pay to the broker. Forget about the spread, no matter how small the spread, the broker will kickback alias against the order price some time after the order is executed, unless you are trading at a broker with the largest retail forex turnover in the world, namely Interactive Brokers. These big brokers are in the same class as liquidators or foreign exchange banks such as Barclays Capital, JP Morgan. Orders from other brokers based on MT4 are often thrown here. There is no kickback at this Broker. There are brokers with small spreads such as FXCM and Gain Capital, but when withdrawing they are charged a fee of 40 USD and 25 USD respectively, there are those with rather large spreads such as FXDD, but when withdrawing once a month, they are given a free fee facility, choose a broker Either way, there are advantages and disadvantages.

h. Additional facilities for forex technical analysis.
Several brokers work with Autochartist to provide additional services for their clients. One of the tools offered is Autochartist. These tools can be used to analyze price movements of various types of forex pairs, commodities and indices. The forex brokers that support the Autochartist Facility are ALPARI, ActivTrades, Admiral Markets, A Markets, ALBMenkul, AIQ, CFD1000, EC Markets, Finam, Finansonline, Finexo, Forex Club, Gain Capital Forex.com, Forex4U, Forex Yard, FxPro, GFT (UK & Australia), GKFX, GO Markets, GO4X, IG Markets (UK), IG Index, iNET Securities, Instaforex, IS Yatirim, Markets.com, MaxiForex, Monex Investindo Futures, MTrading, NETTRADER, OANDA, RoboForex, SmartCapital, Swissquote, ThinkForex, Think Or Swim, TMS, Tradefair, Vantage FX UK, VTB24, xForex and finally xTrade.

 

BROKER REGULATORS

 Introduction to Broker Regulations

regulatory body that aims to protect security and honesty in the implementation of buying and selling transaction activities. Each country has its own regulatory body. The following is a list of regulators in each country, including:

a. CFTC, Commodity Futures Trading Commission (CFTC)

The CFTC is an independent institution in America that was founded in 1974 with the aim of protecting market participants and the general public from fraud, manipulation, infringing practices, and systemic risks associated with its derivative products, as well as other products that are regulated from commodity futures trading. Brokers with CFTC regulations above are mostly used by professional traders with thousands to millions of dollars in funds because they are known for the safety of their funds.

 

b. NFA, National Futures Association (NFA)

NFA is an independent organization for the financial derivatives industry in America, including futures trading exchanges, retail foreign currency (forex) and derivative products from OTC (swaps). For more than 30 years, the NFA has grown, developed and enforced the rules, provided programs and offered services that functioned to maintain market integrity, protect investors and help NFA members meet their regulatory responsibilities.

  

 

c. FCA (Financial Conduct Authority)

The FCA is the UK's financial regulatory body, but operates independently of the UK government. FCA is funded by charging fees to members of the financial services industry. FCA regulates financial companies that provide services to consumers and maintains the integrity of UK financial markets. The FCA focuses on regulating the activities of retail and wholesale financial services companies, much like its predecessor the FSA. FCA is formed as a limited company with a guarantee.

 

 

d. ASIC, Australian Securities & Investments Commission (ASIC)

ASIC is an independent Australian government agency, which acts as a corporate regulator in 

Australia. ASIC's role is to enforce and regulate company and financial services laws to 

protect consumers, investors and creditors in Australia. ASIC was founded on 1 July 1998 after

being recommended by Kiri Wallis. The powers and scope of ASIC are defined in accordance with

the Australian Securities and Investments Commission Act 2001.

 
e. CoFTRA, Commodity Futures Trading Supervisory Agency (Bappebti)
CoFTRA is an echelon I unit at the Indonesian Ministry of Trade, which is tasked with carrying
out guidance, regulation and supervision of futures trading activities as well as physical
markets and financial services in Indonesia.
 
f. CySEC (Cyprus Securities and Exchange Commission)CySEC is the financial regulatory agency of
Cyprus. As a member state of the European Union, CySEC's financial regulations and how it
operates must comply with and comply with the provisions of European financial law, namely
MiFID. A large number of overseas retail forex brokers as well as many binary options use
CySEC regulations to offer their products. 
 
 g. Offshore Regulation,Offshore regulation is a broker regulatory agency that is located in a
remote country and is tax-free. There are a lot of brokers belonging to the Offshore category.
Have an operating license with a less credible legal umbrella, usually located in Russia, Saint
Vincent and the Grenadines, Mauritius, British Virgin Island (BVI), Seychelles, Cayman Island,
New Zealand (New Zealand), Panama, Philippines, Egypt, Ireland, Costa Rica, Mexico, Columbia,
and Nigeria. The following is the name of the offshore regulatory agency and the country of
origin:
     a) IFSC (Belize).
     b) CRFIN, KROUFRR (Russia). 
     c) Securities and Exchange Commission (Nigeria). 
     d) Capital Market Authority (Egypt)
     e) Superintendentia General de Valores (Costa Rica)
     f) Comisión Nacional de Valores (Panama)
     g) BVI Financial Services Commission (FSC of BVI)
     h) Financial Services Commission of Mauritius (FSC Mauritius)
     i) Superintendencia Financiera (Colombia).This offshore regulatory company has 
        the potential to carry out money laundering activities with irresponsible parties. 
        If you invest in a broker with offshore regulations, it is recommended that you only 
        have funds under 1000 USD. The advantage of trading at an offshore broker is that it
        allows customers to deposit funds locally using an ATM or e-banking machine through
        a third party account, which belongs to the management of an Introducing Broker.
        There are almost no administration fees deducted, either for depositing or withdrawing
        funds. Offshore brokers are in great demand by beginners because of the ease of
        verifying real accounts, depositing and withdrawing funds.