Brokers are an integral part of a trading life of a trader. Do you agree with us? I hope you will… if you are a forex trader.
So, it’s important to survive in the forex market to understand the brokers completely. Many of you curious to know about how they operate, how they make money, and how they pay traders?
All the above queries are solvable. Just stay with us and continue reading….
First, where do forex brokers get money to pay traders?
There are several methods through which a broker earns money and later pays it to you in different ways. These are spreads, commissions, trading platforms, payment processing fees, and some other additional services.
Despite all the above sources, there is a concept that we are not get paid by the broker. But actually, opposite traders pay us to become a buyer of our currency pairs.
To some extent it is true. Many brokers always try to manipulate you. So, it is important to have proper knowledge about them before trading.
Let’s learn more by reading this post carefully!
Where Do Brokers Get Money
The most asking question that every trader wants to know is how brokers get money to pay you? Do you know how you get paid after successful trading by a broker?
There are several ways through which a broker can make money and also pay our profit in trading. Main 5 ways of a broker’s income are listed below:
It is the largest source of income for the broker in the forex trading market. Basically, the spread is the difference between the Bid and Ask rates.
Whenever you trade on currency pairs, you will get the asking price.
Similarly, if you close your long positions and turn to short positions, you receive a bid price. This difference is actually your broker’s profit. This is how the broker usually makes money from the spread.
If you are trading with dealing desk brokers, you have to pay to fix spreads and they will pay you your winnings. But sometimes such brokers earn from your losses. They will prove scams but nothing with spread manipulation.
Many brokers will charge you a fixed commission or a fee per trade, besides spreads. Especially, this is adopted by ECN (Electronic Communication Network) brokers like ICMarkets.
Brokers who get a commission from a trader are known as non-dealing desk brokers. Working with them you can send your trade to the liquidity pool, where the broker works.
Broker get their commission fee on opening and closing orders. On the other hand, you as a trader get profit from the liquidity pool.
If you lose money, the dealing desk brokers get benefits. In this case, you can’t take any money from the broker.
● Trading Platforms
It is another major income source of a broker in forex. Many brokers offer you free in-house development and a platform for the third party. However, some of them may charge you for extra features.
If you are an expert or a professional trader, you can look at such platforms provided by a broker and check the elements, that will help you in daily trading.
Some brokers just provide you with their services and do not pay you anything. When you start selling, you will get profit from a buyer.
● Payment Processing Commission
Rarely, online brokers charge a commission from you. They often show it as a feature. However, there are some brokers who charge a processing fee from you. Payment processing commissions are deducted from your account when you deposit or withdraw money.
Such commissions are too small and have fix currency units, but enough for a broker’s expenses.
After getting the processing fee, a broker will stick to make you profit in trade and pay you your winnings without any dishonesty.
● Additional Services
Some faithful brokers offer you several additional services at a very low cost. So that you may get asses at large profitable trading instruments, such as trading signals, deep market info, and professional market research.
So, it is clear that brokers do not pay traders directly. But they help them to make money and provide their services at low charges.
How much commission do forex brokers charge?
Usually, a forex broker charges 1$ commission per 1000,000$ of a bought or sold currency pair. If a trader buys 10,000,000 EUR/USD, then the broker gets 10$ as a commission or a fee.
What is the main source of a forex broker to pay clients?
The source of the broker’s income is fee or commission. Through which they pay their clients as a profit. They also make money by keeping spreads.
Who pays for a mortgage broker?
Usually, mortgage broker fees paid by a lender when the loan has closed. Typically, it ranges from 0.5 to 2.75 per cent of the loan.
In the end, we may say that there are a number of ways that a broker adopts to make money and pay their clients.
From all the above discussion, we come to know that it is also a true fact that traders are not paid by the broker. Actually, when they trade opposite traders will pay them as a buyer of their currency pair.
As a trader, you must deal with the broker on a daily basis. Be active while paying transaction costs and connecting customers from time to time.
Basically, a broker earns money by a fee or commission get by the trader. Later, brokers pay you a profit after trading successfully. If you lose, you have no winning point and have to try again for profit.
Before trading, it is important to select the right type of broker. Otherwise, you may lose all money because there is a lot of scams in the form of brokers.
Hopefully, it is enough for you to understand the possible ways of making money that a broker adopts.