Tips on Starting Forex Trading When the USD Exchange is Expensive
The rupiah exchange rate against the USD is still falling. Now, the exchange rate of USD / IDR has been in the area of 14,000. That means 1 USD for around Rp. 14,000.00. Well, if you currently want to have some money – for example – USD 500, then you should at least provide around Rp. 7,000,000.00 (seven million rupiah). You can do that at the money changer or bank (and when you do that you actually do forex trading).
The Rupiah is currently weakening against the USD, as are almost all other currencies in the world. But we cannot eliminate the possibility that the rupiah will strengthen again against the USD. If everything goes according to the government’s plan, the strengthening of the rupiah could come back quite sharply.
Rupiah weakening and strengthening
We see an example of an incident in 2008. In mid-November 2008 the rupiah was depressed to around 13,000. But in the next seven weeks it gradually recovered to the range of 10,700. You can see that there is a gain of 2,300 points since reaching the weakest level of 2008 until the beginning of 2009.
Imagine that you already bought USD at a price of 13,000 in the amount of USD 500 like the example above. When the rupiah strengthens to the range of 10,700, your value of USD 500 is IDR 5,350,000.00. By value, you have lost Rp 1,650,000.00.
Open a Trading Account
Well, let’s say now you are ready to jump into the world of forex trading. You have learned and simulated. Then you register at one of the brokers that applies a floating rate for the exchange rate of USD / IDR (alias is the same as the current exchange rate). You decide to start with capital worth – for example – USD 500. With the current exchange rate (14,000), the capital of USD 500 means Rp. 7,000,000.00 (seven million rupiah).
The question that arises then is: what if if the rupiah strengthened?
Of course this will not be a problem if you open an account using USD, not rupiah. That is, you have already had a dollar (USD) in the form of “physical” in the amount of USD 500 before opening an account.
But if you have never previously had USD in physical form then you have to exchange your rupiah into USD; in other words: buy USD at a fairly high price. You must provide seven million rupiah.
That’s where the problem is.
Say if USD / IDR falls to 12,000. When that happens, your USD 500 is no longer seven million rupiahs but has been reduced to 6,000,000 rupiah.1,000,000 rupiah or around 15%. Without trading, your capital has shrunk by 1 million rupiah.
Should you wait until the USD becomes cheap again?
Actually there is no need. The solution is very simple.
You just have to open a trading account with a forex broker that sets a fixed rate. That is, the set rate is set at a certain number.
FOREXimf has this facility. The fixed rate is IDR 10,000 (ten thousand rupiahs) or IDR 12,000,000.00 (twelve thousand rupiahs). Most traders choose the first fixed rate , which is ten thousand rupiah.
So, if you want to open a trading account ( real account ) with initial capital, for example worth USD 500, then you just need to provide funds of five million rupiah. Compare that if you open an account at the current exchange rate. There is a difference of two million rupiah.Much cheaper.
What is the Profit / Rug Calculation?
By using a fixed rate , you no longer need to be bothered by the rise and fall of the dollar exchange rate against the rupiah. The point is USD 1 is set at ten thousand rupiah. So, when you later withdraw, the keeper is ten thousand rupiah.
Say you managed to get a profit of USD 100, then if you withdraw the profit will be multiplied by ten thousand rupiah, which is to become one million rupiah. (Of course to be able to make a profit you have to make a transaction.
If you withdraw all of your funds amounting to USD 500, then you will still get five million rupiah.