How the Broker made money between buyer and seller

Beginner Questions
1

Ok i learning how the broker is making the money by adding pips between each other.
Example loss between 1.0812 and 1.0810 = 2 PIPS , so 2 PIPS is added to right (Buyer) and 2 PIPS is reduce at left (Seller)

So i have came across the example made by them.

Buy @ 1.0596
Sell @ 1.0594

2 PIPS

So 2 PIPS is added/reduce on right and left respectively,
And he said the broker makes $20? And i am wondering how is it $20?

Because…

1 standard lot = $10 per pip
0.10 mini lot = $1 per pip
0.01 micro lot = $0.10 per pip

I thought the broker will make only $2?
Seriously which lot size did he use? and why he use standard lot size?

2

I must say you should avoid standard lot until you are not good in practice on demo. You can trade in small lots like 0.5 or 0.3 it is enough lot size , standard or big lot involves much risk use more money from your capital. In loss you face big suffering on each pip. Brokers earn their money through spread , swap and other commissions.

3

But Why is it $20? instead of $2?

4

1 standard lot is $100.000 and makes $10 per pip if spread is 2pips then 2pipsx$10 = $20
Don’t trade 1lot Trade 0.01 lots first

5

I still don’t get it, you can choose the lot size then calculate right?

1 standard lot = $10 per pip
0.10 mini lot = $1 per pip
0.01 micro lot = $0.10 per pip

So it’s my personnel preference which lot to choose and calculate?

6

Thats not 2 pips its 2 points! 10 points is 1pip

so 2pips is from 1.0812 to 1.0832

7

yes but you should calculate before you put the trade on

8

Thank you. very much

9

you got it now?

3 things to consider

1 The spread
2 commission if you pay commission
3 Swap rate if you pay / recieve the swap

10

Can explain all the points from 1 to 3? PLS? In simple way i can understand

11

OK sure

1 The spread is the difference between the Bid price and the Ask price

Margin2.PNG1267×685 37.7 KB

The cream line and the grey line is the spread 1.7 pips
the broker gets this so if you open 1lot brker gets $17
if you open 0.10 lot they get $1.70
or 0.01lot = $0.17

  1. if you use an ECN account the spread is lower but you pay commission depending on lot size

  2. Swaps if you hold your trade open over night you either get Interest or pay interest on wednesdays it x3

But you can get swap free account and commission free account

12

The Broker gets the money when i buy the trade right? Buying in terms of bid? Am i right?

13

the broker gets the money if you buy or if you sell it don’t matter wich way when you open your trade you will be $17 down straight away or $1.70 which ever lot size you traded

14

Ok thank you very much

15

No worries

Are you Daytrading or holding trades for longer?

16

I am still learning forex. After learning maybe start with demo then go live.

1 Like
17

How much are you going to deposit on real account?

Use that exact amount on demo

18

I need to try out on demo account first. But i am still learning and taking things slowly. Because i am learning by myself. So i need guidance haha :slight_smile:

19

Well now your not by yourself you have all the people in babypips forum to ask.

Download the demo Play around with it But don’t forget if your starting demo with 100000 is that realy how much you would deposit in real life.?

I started Demo with $1000 and 1:500 leverage which is what i am going to do in real life

20

Ok i get what you meant. Btw can you keep deposit money into the same account as and when you like? Or is it like 1 time deposit?