How Binary Option Brokers Make Money - Binary Options Exchange!
Posted: Sep 11, 2016
How binary option brokers make money is one of the hottest topics in the binary options world. Many binary options traders fear that the only way for their brokers to make money is by ripping them off. Luckily, this is far from true. In this article, what is really going on and why this knowledge can make you rich. For this purpose, we will answer these questions:
- How do binary options brokers make money?• Why is there a big misconception about how binary options brokers make money?• How can this knowledge help you to become rich?How do binary options brokers make money?
Binary options are a unique investment. With classical assets such as stocks, you pay a broker to get access to the stock market, the currency market, and so on. This system detaches your broker from your success. Regardless of whether or not you make money with an investment, your broker gets the fee for buying and selling this asset. Consequently, some argue that your broker wants you to be successful because they want to keep a customer.
With binary options, things are different. There is no central binary options market to which your broker will provide you with access. Instead, your broker itself creates the binary options it then offers to you. Every deal is between you and your broker only, and the money you make is the money your broker loses and vice versa.
This system has caused some people to argue that your broker would be interested in you losing your money. Fortunately, this is a misconception.
While it is true that your broker makes money when its customers lose money, this statement is only true on the whole. Your broker wants to make money by the end of the month after hundreds of thousands of traders made millions of trades. Viewed from this perspective, your broker is completely indifferent to whether a single customer makes money or loses money. Your broker makes money when some traders lose a little more money than other traders win. That’s all there is to it.
The way a binary options broker makes money is exactly the same as the way a stock broker makes money. On the stock exchange, too, some traders make money, and some lose money. As wealth swaps from one person to the other, the stock broker takes a cut by applying a fee. Binary options brokers do the exact same thing, but they apply their fees by offering slightly lower payouts for winning trades than you lose money on losing trades.
All in all, trading stocks and binary options offer almost the exact same structure of costs. For some people to make money, other people have to lose it, and the intermediary, the broker, gets a cut.
There is nothing inherently negative about the way binary options are traded, and there is no reason why you could not turn a profit with them. On the contrary, for your broker to offer a sustainable business, some brokers have to get rich. All you have to do to become one of them is to understand what distinguishes the traders that make money from those that lose it. We will explain this connection in the next part of this article.
How this knowledge can help you to become rich
Understanding how brokers make money is the key to making money with binary options.
Many new traders intuitively believe that they have to beat the bank to make money and that they have to use clever, risky, and inventive new strategies to get an edge over their broker. When you understand that you are not trading against the bank, however, the basic question of how to make money with binary options changes, which will also lead you to new ideas on how to answer it.
The truth is that with binary options, wealth will switch from some people to other – just like with any financial transaction. Therefore, you do not have to beat the bank; you have to beat the other traders out there.
You can accomplish this goal without trading extravagant strategies. All you need to do is identify one scenario in which you know that you can make money and constantly reinvest in this scenario. The key to binary options success is consistency and reliance on proven strategies, not chasing big secrets and doing extravagant new ideas. In many ways, not losing money will automatically lead to making money.
Once you understand this connection, you understand how binary options brokers make money and how you can use this system to become rich.
Signe J. Petersen is an experienced trader of stocks, currencies, commodities and many more. In the wake of rising popularity of binary options trading.