Do paying profit traders mean losing traders?
Brokers are just intermediaries.
@ Koi:
- Does the profit of a trader get paid by losing traders?
Answer: No. The profit of a trader is paid by the market.
For illustration, last week you bought US Dollars at a money changer or bank for Rp. 13,200 per 1 USD (or bought USD/IDR at a price of 13200), and now 1 USD is valued at Rp. 13,300, then you sell your US Dollars at the current price (or sell USD/IDR at a price of 13300) then your profit is Rp. 100.
The one who pays for your profit is not the money changer or bank, but the market itself. The money changer and bank only provide buying or selling services with a profit from the difference between the selling and buying prices.
That is basic knowledge in trading. Read more at this collection of articles.
- The broker is just an intermediary..
Answer: As illustrated above, the function of a forex broker is exactly the same as a money changer and bank, namely providing buying or selling services with a profit from the difference between the selling (ask) and buying (bid) prices, which is called a spread.
So the correct function of a broker is indeed only as an intermediary between traders and the market. But an incorrect broker will create its own market between fellow traders who are its customers, or commonly called a “market maker” or “dealer broker”.
Read also: Choosing the Right Forex Broker
Now, if you trade at a dealer broker, your profit will be paid from the losses of other traders, and the dealer broker will try to make many traders lose because the more traders who lose, the more profit they reap.
The characteristics of a dealer broker include not being regulated by a credible international regulatory body such as CFTC, NFA, FCA, FSA, FINMA, MIFID, ASIC and FMA. A credible regulatory body is one that has been tested and recognized worldwide, and imposes strict sanctions on brokers if they violate the agreed-upon provisions.
So be careful in choosing a broker.
In the illustration that reached a sale of 13300, it was still continuing.. because the buyer at the price of 13300 also wanted a profit.
Where else will he get it from later? While the market price fluctuates.... he will inevitably have to sell at a loss.
@ Aziz:
If someone buys at 13300 and wants to profit, they obviously have to sell when the market price is above 13300.
- Where will they get it from then?
Still from the market, not from a money changer or bank.
- While the market price fluctuates....
The price in the market is always moving up and down, it's never static.
- ….. they will inevitably sell at a loss
That depends on the trader. If their analysis shows the price will continue to fall, they will sell now rather than suffer a large loss. But if the analysis shows the price can still rise, it will of course be held.
To Seno,
OlympTrade brokers are binary option brokers. When looking at the overall performance of binary option brokers, it can be said that binary option brokers fall into the category of Dealing Desk (market makers).
Because trading binary options cannot be fully considered trading. And the majority of binary option brokers do not have a clear liquidity provider. In other words, binary option brokers do not actually connect their clients/traders to the stock, forex, or commodity markets.
Therefore, most binary option brokers have their own market (although based on live quotes like forex trading). And binary option brokers only facilitate speculators or other option traders to bet or predict the direction of future price movements.
If a trader can predict correctly and accurately, the broker will pay profits from other traders who have suffered losses due to incorrect predictions. This is why most binary option brokers currently available are of the Dealing Desk (market maker) type.
Hopefully this helps.
@ Joko jianto:
For the security of your trading and funds, we recommend choosing a broker that is already regulated by a credible international regulatory body, namely: CFTC, NFA, FCA, FSA, FINMA, MiFID, ASIC and FMA.
A credible regulatory body is one that has been tested and is internationally recognized, and imposes strict sanctions on brokers if they are found to have violated agreed-upon terms. The regulatory body is also responsible for the security of client funds.