It is no secret, but it is often misunderstood, How a Binary Options Broker Makes Money.
The simple answer is, when a trader loses money, the broker keeps it. And this is the reason binary options brokers do not have to charge a commission or a fee per trade.
There are two types of brokers, Honest and Dishonest.
How Honest Brokers Make Money
An honest broker, which is usually licensed and regulated makes their money based on trading volume. A report was put out last year with data from binary options trader in Japan showing that 85% of traders lose their money! That means that it is very profitable to be a binary options broker.
There is still that 15% of traders, who manage to take money out of the broker.
Another trick that brokers use to make money is by offering traders a bonus. The “bonus money” which is a sales gimmick that many traders no longer fall for works like this. A trader opens an account with a licensed broker. The brokers salesman offer the trader a bonus to “help them start trading”. The trader doesn’t realize that the bonus money comes with certain conditions. Traders should read each brokers terms & conditions page for specific details. The biggest problem with bonus money is that there is a trading volume requirement of anywhere from 15 – 50 times that amount of the bonus.There is the regulated binary options exchange at Nadex.com and they charge a commission, and use market makers to provide liquidity.
How Scam Brokers Make Money
The ways that scam binary options brokers make money are a few ways.
In order to provide a facade that they are legitimate, they offer to help you make money. The will get your permission to trade on your behalf, and manipulate the software so that your trades are winners.
The broker will give you an automatic bonus, thereby locking up your deposited funds so that you cannot withdraw it. They will place unauthorized charges on your credit card. The broker will become your best friend to build up your trust and get you to deposit $10,000.
Everything will seem fine and good with the broker until you ask to withdraw your money, and then the problems start.
Withdrawing money from an unlicensed and shady broker is almost impossible. Since they are not a bank, you cannot automatically withdraw your money. All withdrawals are processed manually by a clerk.
In the event that you did not receive a bonus, and you are eligible to withdraw your cash, they make the process difficult. They start asking for a ton of verification paperwork. The salesman gets on the phone and starts pitching you to deposit more money for an unbelievable trading opportunity.
What Should You Do?
You should choose from one of the Top Rated Brokers.