HOW DO FOREX BROKERS MAKE MONEY THESE DAYS?
The question how do forex brokers make money is often neglected by people did forex trading. It is said this basic knowledge, which means knowing the flow of money’s destination, is a must for everyone want to do trading. Do not give your trust randomly to anyone because they might not concern about your account that much. This article will give my view on the method forex brokers earn money and their advantages in supporting liquidity. This could be the most important factor in forex trading.
Knowing how do Forex brokers make money will assist traders on selecting a good brokers. Profits which clients earned can be charged by brokers in most cases. Therefore, knowing well all provided selections will give you a hint of the money flows.
Money comes mainly from broker fees
Commission fee will be needed every trading time or the fee calculated by the spread between bid/ask prices can be the answer for how do forex brokers make money. They saves the spread or requires fee every round to earn money. A few brokers take both types of money.
However, this gradually disappears due to the need of cheaper prices. The true is just a very few numbers of Forex brokers will alert you that they charge you commission fee but they literally take more money in the spread instead.
The spread could be stable but could be also unsteady. The spread will be calculated on the number of orders between a changing spread liquidity pool. This number will be broaden if any official adjustment was given, for example, the Nonfarm Payroll Numbers coming out of the States.
Therefore, this shifting market could lead you to spend more in spread than expectation. Thanks to knowing exactly how much money you have to pay to support buying and selling, it is concerned as a benefit of a constant spread.
Other sources of earning money
In terms of clients services and learning activities, brokers will require you to pay additional fees for “bells and whistles”. They may give you clues, specific evaluation, even personal lessons and virtual study by websites for clients agree to spend more money or huge account. All in all, these stuff would not a problem in case you firmly know forex exchange method and how do brokers make money. A different answer for how do forex brokers make money is funding the “loan”.
This means you are already borrow an amount of money whenever you buy or short a currency with margin. It can be considered risky and difficult, however, I can say the interest, which is paid to Forex brokers in huge number of orders, do not have anything to do with you. People often say opposite but you will never be a true Interbank market due to the large number in orders needed to run in that place.
Literally, Forex brokers will team up with liquidity provider to divide these orders into small blocks where people can do trading backwards and forwards. A very small trading of only $500 will never have ability to affect a real Interbank market which concludes many big banks in the world. This will help you on how to profit from forex.