This article is perhaps the only article online that will really tell you the truth behind this mysteries question of how do binary options brokers make money.
The reason why it is so hard to find a real answer, is due to the fact that most companies involved in the binary options industry are simply interested in keeping this topic as secret while selling innocent binary option traders fake stories about how really money is being made.
There are a few typical answers you might get when asking your broker this direct question about how do they make money. One of the common answers will be telling you a story about how they are making their money off of the traders trading volume, meaning that on the more people are trading the more commission the broker make from the trading volume.
Other brokers will tell you they are making their money from the profits that the traders make. For example, when you are profiting, the payout is usually around 80%, so the common broker explanation for this will be that it is not 100% because he is the taking the remaining 20% as commission.
This story does not make any sense for too many reasons, but some binary brokers still use this story when their traders ask them how they make money.
There are possibly many more made up stories binary option brokers might tell you when you ask them this question, but the only real answer to how binary options brokers make money is very simple!
And the ANSWER is this, when a trader loses money, the Binary Broker simply keeps it, yes believe it or not but that’s the reall truth everyone trying to hide!
This is the main reason for why do binary options brokers do not have to charge a commission or a fee per trade. So every time you are losing they are simply grabbing your losses straight to their bank accounts.
So what should you do you are asking yourself, how can you avoid this nightmare!? Well, the only possible way to somehow trade binary and profit, is to trade with solid size brokers, meaning the really big regulated binary options brokers.
The reason is that with big veteran binary brokers, even if you as an individual are making profits they will be able to sustain their losses thanks to the fact they have a large amount of traders who are losing, so as long as the ratio of the overall trades is in their favor, you as an individual can get away with your profits.
How to avoid trading with scam binary option brokers
So now that you realized that in fact there is a huge conflict between you and your broker, there are still a few ways to make binary options beneficial for you.
The first and most important thing you should avoid doing, is to open an account with an unregulated binary option broker. An unregulated binary broker can simply do whatever he wants with your money and you wont be able to appeal to the authorities in case something goes wrong.
Secondly, you should be paying attention to is the bonus. In most cases we simply advice you not taking the offered bonus. The bonus money usually 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 10 to 50 times that amount of the bonus. So in other words, it might be impossible for you to take out your initial investment.
Another important thing you should do, is to stay away from brokers that offer to help you make money. They will try to convince you to give them permission to trade on your behalf, after you said yes; you can basically kiss your money goodbye as in most cases they will lose it in no time
Lastly, you should always start with a small investment and the reason is because you do want to test out the withdrawal procedure. Unfortunately, withdrawing your investment with many binary brokers still remained almost impossible. Binary option brokers are not a bank and you cannot automatically withdraw your money.
In the event, make sure you verify your binary option account before investing big amounts as otherwise the brokers tend to make the verification process very difficult by asking for a ton of verification paperwork.
For conclusion, Now that you know how do binary options brokers make money you are already in a better position compared to where you were before reading this article, and although the binary option industry has still a long way to go before becoming fully legitimate, you can still make money while trading binary options, simply by making your homework and avoiding beginners mistakes.
Contact us if you have any more questions or comments regarding binary options trading.
–> For part 2 of this article Click here