Hi guys, i recently join a traders community in my country and have gained so much knowledge from the lovely people i met. We also discuss on how brokers make money. Is it true that broker make profit with our loss? Would appreciate if you guys can give me your thoughts on this. Thanks!
It’s not a straight line relationship. From the brokers point of view it’s more to do with risk. Trade losses pay for trade winnings. If the broker is doing their job well, one balances the other, and this allows them to offer competitive spreads and attract more trades and it is from spreads that they make most money.
If brokers just made money only from losing traders they would quickly run out of clients.
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This subject is covered in The School of Pipsology:
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Because the broker is not the counterparty, they do not suffer any financial losses when their clients succeed. The counterparty to your deal loses when you trade on the exchange and make money.
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They make money whether you win or lose.
you lose = broker win (deposit + comissions)
you win = broker win (comissions)
Brokers make money not from only your losses but also your profits. The pips in-between your ask and bid price belongs to them, it is called spread. The spread is where they make their money even if your trades end in Red🟥 or Blue🟦 they make money. Thanks for your question.