Red_Uku:
My question may seem naive, but I can’t find for sure the answer. Everywhere how binary options work is explained from the point of view of the trader. How can such a system work if the broker is not also making money ?
From my understandings : at no moment any money implied with this transaction is related to the market. I believe it is called an over the counter (OTC) transaction. So, from this angle, that’s very like gambling with a casino, where the broker is the bank and the trader is the player.
[B]If it is the case, the trader is playing/trading against the broker. Unlike in trading forex, where the broker make profit with the spread, whether the trader is making gain or loss.[/B]
[B]So, like a casino, if the broker wants to make profit out of these binary options transactions, his overall clients losses has to be higher than his overall clients profits.[/B]
If my understanding is correct, I find hard to see how binary options can be the next big thing : like in a casino, [B]the trader’s interest is against his broker’s interest.[/B] So if traders are getting better, the broker will have to lower the potential gains or too good traders may even get tossed out :59: !
I know markets works on the same principle that someone’s profit is made of others losses, but the broker is just a proxy, not interfering with his client interest.
[B]Am I correct on the mechanism of how binary options transaction work ?
Most binary option broker are a scam. They need traders to make a deposit and lose trades in order to make money. For example you place a $100 trade and the payout is 75% which means you will earn $75. Another trader places a $100 trade and records a loss. On those two trades the broker made $25. Stay away from those brokers. There is only a handful of quality binary option brokers in the market.
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