Indonesian traders flock into CFDs to purchase US stocks that they are unable to purchase directly. The Jakarta Stock Exchange does not have much to offer, and thus, the population turns to offshore brokers that provide immediate access to Apple, Tesla, and Amazon. What is not known is that they are not literally purchasing stocks. They are gambling on the price changes using contracts that expire into nothingness.
The best known ones among the Indonesians are eToro, Plus500 and dozens of obscure brokers that no one knows of outside Southeast Asia. These companies actively advertise on social media in Indonesia. On Facebook, there are groups of users gathering together with titles such as Trader Sukses Indonesia that include 50,000 users who post screenshots of profits that most likely never existed. The admins forward referral links to the brokers for which they receive commissions on each new account.
The online CFD trading platforms have made the opening of accounts ridiculously easy for Indonesians. Upload a KTP, deposit 100 USD using local methods, and within a short period of time a person in Surabaya is trading NASDAQ products at 50x leverage. No knowledge test, no risk warnings, immediate access to the weapons of financial destruction about which they themselves are ignorant.
Local payment methods compound everything. These brokers receive transfers from BCA, Mandiri and BNI. Some even accept GoPay and OVO. Indonesians believe that this implies the legality of the platforms. But why do local banks serve payments to fraudulent brokers? However, banks are mere processors of transactions. They do not verify with the broker whether money will ever be refunded.
The language barrier creates colossal issues. The majority of them support the Indonesian language, yet terms and conditions are in English. The key information regarding negative balance protection, margin requirements, and withdrawal limits is buried in 40-page documents which have never been read by Indonesian traders. In case of account wipeouts, traders find out that they entered into an agreement they were not even able to understand.
These platforms practically do not have regulation. Bappebti controls futures contracts of commodities in Indonesia, which is not applicable to offshore CFD brokers. These are companies based in Cyprus, the British Virgin Islands or Vanuatu. Indonesian traders turn to OJK when they lose their money. OJK explains to them that it cannot help and that they should have used regulated platforms. Regulated domestic platforms do not offer US stocks.
Expenses eat away at profitability from the start. Indonesian traders believe they are purchasing Apple stocks at market rate. Instead, they are paying market price plus a 3% markup spread. The stock has to rise 3% just to break even. Add the charges on short-term financing, withdrawal fees and exchange fees. Stock prices must rise by 10 percent to be of any real profit to the traders. There are few trades that deliver this.
The risk is doubled by currency exposure. Indonesians deposit money in rupiah, trade US stocks priced in dollars, and withdraw into rupiah. If the rupiah slumps 5 percent while positions are open, any profit disappears. Even winning trades can turn into losses after conversion. This is good for brokers since bewildered traders are unable to measure their real performance.
Things are aggravated by Indonesian influencers. Young men who call themselves professional traders have YouTube channels where they claim to have hundreds of thousands of subscribers. They display images of luxurious vehicles, high-end apartments in Jakarta, and boast about their financial freedom due to trading. Then they sell a course worth 5M rupiah on basic technical analysis that someone can learn for free online. Trading is not their source of income but rather the course sales and affiliate commissions.
Indonesian traders are often hit hardest with withdrawal problems. Withdrawals of 1,000 USD and below normally work on the first attempt. Try to withdraw 10,000 USD and all of a sudden everything goes wrong. The broker demands documents of income, tax returns, and notarized statements. Indonesian traders who work informal jobs cannot provide these documents. The money remains stuck on the platform as the brokers recommend that it should be used to trade toward higher profits.
The largest platforms market directly to Indonesian Muslims with advertisements promoting Islamic accounts as sharia-compliant. CFD trading is allegedly permissible because no interest is charged overnight. But researchers confirm that CFDs are pure speculation with no ownership of real assets. It is gambling by another name. It causes religious Indonesians to lose money while believing they are engaging in something allowed.
False confidence is created through demo accounts. When new traders start trading on demo accounts, they make regular gains after weeks of practice. The algorithm of the platform ensures that demo trades are successful often enough to build confidence. Switch to real money and the profits are gone. The market conditions appear different. Spreads are wider. Slippage occurs. The demo was more like a video game with no relation to real trading.
Indonesians often find out too late that they owe more than what they deposited. One trader in Bandung assumed that his maximum loss could not exceed his 5 million rupiah deposit. His leveraged positions deteriorated so severely in the 2022 tech stock crash that the broker demanded further funding to cover a negative balance. He even paid 15 million rupiah on top of his initial deposit. The broker threatened legal action until he complied.
Online CFD trading firms are aware of the lifespan of the average Indonesian trader. It lasts approximately 3 months between the first deposit and total loss. Their business model relies on revolving doors of customers. This is why the marketing budgets are so large. New victims are required to replace those who lost everything.
The smaller number of Indonesians who earn profits cannot sustain them for long. A trader may be lucky enough to short Meta during its collapse in 2022 and believe he is brilliant. After six months he has lost all his profits and initial capital trying to replicate that luck. The platforms maintain detailed records about this. They know that not many retail traders are profitable in the long run.
Savvy Indonesians seeking exposure to US stock markets prefer to purchase index funds through domestic brokers or save to open a real brokerage account with Interactive Brokers or Schwab. It requires more resources and time, but it provides them with real assets rather than gambling on platforms profiting from their losses.