Forex Brokers

Nov 23, 2009

General

Forex brokers

How do Forex brokers like forex.com, fxcm.com, etc. make their profits?

How do Forex brokers like forex.com, fxcm.com, etc. make their profits?
I know about the spread between bid and offer rates, but is there something else they do, eg. some accounting trickery or smart management of assets and liabilities, that makes their owners rich?
I look forward to receiving competent answers. Thank you very much!

I have literally spoken to a Forex.com representative and it was explained to me:

A Pip, is a fraction of a cent (It is 1/100 of a cent). Most Forex Trading is based on very minor changes in the exchange rate - in other words, a difference in Pips. The exchange rate changes every second.

The Forex company makes their money by collecting the difference between how much you buy it for and how much you sell it back for.

For example, if the exchange rate for Euro/USDollar was 1/1.34571, that would mean that a Euro would cost $1.34571. However they might sell it to you for a few Pips higher at a price like $1.34591. They collect that difference by charging you slightly more than it really cost.

It works the same way backwards. When you sell it back to them (i.e. they buy it from you), you get slightly less than the price it’s worth. They may only give you $1.34551 per Euro.

In both scenarios, they collect 2 pips ($0.0002). But you have too consider you’re trading huge amounts of the currency, which amounts to a lot more.

It’s not a scam. It’s actually brilliant on their part because the difference is hardly noticeable to the investor, but it can add up for them. And they don’t have to charge obnoxious commission. And it practically pays for itself because you can very easily make up the difference.

But the specific answer to your question is: Not really. They simply gather the money in the spread. Although, since they do offer fixed AND variable pip rates, they have the opportunity to widen the margin for the variable rate and collect more if needed.

Other than that, the owners generate wealth simply by having users.

Introducing Forex Broker - Forex Bonus Programs Of Brokers And Introducing Brokers

Introducing Forex Broker

Years ago, the minimum investment for speculators in the Forex Market ran to as high as $10 million, a figure that restricted Foreign Exchange Trading to banks, investment firms, Forex trading firms, and wealthy individual traders. Because of the internet and retail Forex brokers, a trader who has only $200 or less can now participate in foreign exchange spot trading through a home computer.

The increasing number of participants in Currency Trading with limited capital presented an opportunity for brokers to present them with Forex bonus programs that boost the traders’ incomes and attract more traders to pick the brokers’ services.

There are various ways that brokers present their bonus systems. Some brokers reward their new members simply for joining them by increasing the members’ initial deposits while treating their old clients with a similar deal. For example, a trader who opens an account with a broker who offers a joining bonus of 30% can earn an extra $300 for an initial deposit of $1000. Introducing Forex Broker

Some brokers reward high-earning traders by showering them with prizes in proportion to their profits. Under this scheme, a trader will be motivated to earn more as his Forex bonus proportionately increases with his Forex trading income.

Like Forex brokers, introducing brokers, who match traders with Forex Dealing firms that pay them for their referral service, are also generous to their clients. These introducing brokers pay traders for every transaction that they make.

Choosing a bonus program can be as confusing and tricky as picking the right Forex broker. While most rewards are tempting, the wise trader research and evaluate before settling with an incentive system. Introducing Forex Broker

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