How are profits made in Forex?
Many traders want to know the sources of forex brokers’ revenue.
They also want to know how Forex brokers make profits.
We can clarify this further by understanding the basic principles of the economics of trading brokers.
By traders understanding these principles, they will understand the difference between real and false brokerage firms.
Besides, they will differentiate between honest companies and false companies that do not abide by any laws.
And so you can know the sources of revenue through which Forex brokers can enter.
Spread is the main source of Forex revenue.
In the Forex market, the “Spread” feature is the main revenue source for most brokers.
The spread indicates the difference between the purchase and sale prices, and through this, the broker gets the price difference.
Then it adds a premium to the spread rates offered to its clients.
Through this method, the company can obtain the return in the form of spread that the trader pays when buying or selling.
Leverage comes on small deals that have slight profit rates.
Also, these ratios do not represent a good source of income for brokers in the currency market.
This is why the majority of Forex brokers offer high levels of leverage.
In the currency market, leverage is one of the most beneficial things for doubling the trading volume, which creates an increase in profit and loss opportunities.
Large volumes are also an opportunity to double the broker’s revenue from the spread because it uses a leverage of 1: 100.
When the broker’s revenue multiples occur,
the spread is the same.
What are the fees in the Forex market?
Brokerage firms pay fees to traders, such as fees for placing trades.
And the opposite is true if the interest rates applied to the currency purchased price are lower than those accompanying the currency sold; the brokerage firm takes fees from the trader.
You have to note that the fees that the broker takes are more than they pay even on the same currency pairs.
For example, if one of the traders bought one lot of the euro-dollar pair, another trader sold the same pair with the same trading volume.
We will find the first trader to pay swap fees not equal to the second trader’s swap fees.
This is because the broker takes part in this and that under different names.