How do Binary Brokers Profit from a Trade?
By Angela Sanders Friday, January 24, 2014, 07:28 AM EST
It is a well known fact that brokers play a significant role in the binary option trading market. They will do everything they can to help you in a trade and make sure that you are able to get the best returns. But at the same time they also profit from a trade.
In this article, we will find out how the brokers earn their share of profit from any trade and what continues to keep them ticking in the binary option market so that they can survive the competition. So, read on for more information.
One of the primary ways in which the binary brokers earn money is from the money that the traders invest in a trade and if they happen to lose the same. Since binary trading means that there can be only 2 outcomes, either you lose the trade and your money or you win the trade and earn profits. In other words, it is basically a “All or Nothing’ situation. Let us say a couple of traders predict that the strike price will be touched while few others predict that the strike price will not be touched. For the traders that win the trade will surely earn the money (profit) while the traders that lose the trade, their invested cash will go straight into the pockets of the binary brokers. Most of the brokers operate in this fashion. In order to understand better how a particular broker deals with his clients, you can visit http://www.best-binaryoptionsbroker.com/ to know names of the top ranking brokers in the market and visit their official website.
There are many brokers that will prefer to earn their profits as commission per trade. As such, the commission amount they will earn will entirely depend on the volume of trade. According to many traders, this is comparatively a better way of making money by brokers than the above model.
3.Closing trade before expiration time
There are many trading platforms that allow traders to exit a trade much before the expiration time. However, as a trader, you will have to incur some loss. And the amount you lose in the trade by exiting the trade well before the expiration time becomes profit for the binary option trading brokers.
4.Indirect way of earning money
You will come across many trading platforms that will allow you to use their demo accounts on one condition and that is only if you sign up with them after using the demo account. And in the event you lose the trade, the amount you invest in the live trade and if you happen to lose the same, the cash you have invested will become the broker’s profit.
So, prior to selecting a broker, it is important that you understand that the broker will earn his profit only in the legal manner. So, the first method is the most common and is also legal. Not all brokers are dubious and try to extract money in the wrong way. To be on the safe side in the binary market, it is best to deal with authentic trading platforms that have good reputation and have earned good feedback and reviews from clients.