How Do Binary Options Brokers Make Money?

Make money

If you came to binary options from FOREX, then you probably know that FOREX brokers make money on commissions (percentage from their customers’ income). Binary options brokers, as you know, don’t have commissions. So many of the traders have a legit question – how do binary options brokers make money?

I am sorry to break it to you, but there is no conspiracy theory behind binary options business and the making-money-scheme is very simple.

As you have probably noticed, your max profit on binary options trading is around 85%. Whereas if you finish your trade out-of-money, in most cases you lose 100% of investment in this specific deal. Thus binary options brokers have around 15% difference from in-the-money and out-of-the-money trades.

Let’s have an example: I invested $100 in an option and my prognosis was wrong – broker has just made $100. At the same time you invested in an option $100 and finished in-the money, meaning you get your $100 investment back +$85 profit. This $85 broker takes from the $100 he just earned from my deal and keeps the $15 difference. Not bad, ha? Now imagine how many deals are made every hour…

Binary Options Brokers – Myth #1

Binary options myth 1I heard comments from some of the traders who have just started trading binary options that in their opinion, broker should be interested in having as many losing customers as possible in order to make more money.

It is a MYTH. On the contrary, binary options brokers are interested in having as many clients as possible to have the healthy turnover of the deals and for that they have to keep the customers happy. If everyone is losing, the broker will get a nice short-term profit, but in the long term the business will be dead.

That is why brokers organize educational webinars, issue daily financial news and provide you with personal consultants. At the end of the day, binary options trading is not piece of cake and you need some help to start making money.

Binary Options Brokers – Myth #2

Binary options myth 2How the broker will survive if more traders make money than lose? The fact that most traders earn from binary options is a myth as well. As I have just said, it is not a piece of cake and you need to learn one or two things before you start earning.

On the other hand, it is a fact that brokers position binary options as a financial tool that doesn’t need any knowledge or skill to start profiting and this IS a trap – you do need to learn how to trade and you do need to have a strategy.

From my experience only 35-40% of traders make money on binary options. There is no reason why you shouldn’t be in this list if you have a good trading strategy and a viable money management approach.

Remember, all is in your hands!

1 Comment + Add Comment

  • Thanks for the explanation!! Now it really makes sense as till now i was wondering how binary brokers make money. It was not so clear to me, but you explained it nicely. Thanks again!

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