With many brokers in the financial world, it is normal to ask questions about their validity. We covered this in the article checking if Olymp Trade is a scam and the conclusion was that you can trust Olymp Trade. But another question you probably wanted to ask is how do brokers make money? Well, there are several ways, like for example fees and commissions.
You need to read carefully rules on the broker’s site in order to avoid unpleasant surprises. Sometimes they try to hide real fees so you sign up, trade, and then have to pay unexpected commissions.
Fees and commissions at Olymp Trade
There is a service commission, known also as a subscription fee, but it will be only taken if you did not make any operation on your real trading account during 180 days. By operation, Olymp Trade means opening transactions or depositing/withdrawing money. The service commission is $10 or its equivalent in the account currency and is taken monthly until the movement on the account appears. The best way to avoid this fee is to make trading or non-trading operations regularly.
There is also a transaction commission at Olymp Trade when you are trading on Forex markets. Every time you open a position you will clearly see the amount of commission that will be taken from your account.
Another fee, you can encounter at Olymp Trade is a rollover commission. A certain amount of money will be taken from your account if you decide to keep your position open through the night. If you do not want to pay this fee you need to remember to close your trades before the end of the trading day.
You may wonder about the fees for depositing or withdrawing money. Good news is Olymp Trade does not charge extra for depositing nor withdrawing funds.
Making money on options trading
Digital options trading has recently become very popular in the financial world. Contrary to CFDs trading there are no commissions added to each transaction. How does a broker make money then?
To illustrate the concept I will use the example of the EURUSD currency pair. The exchange rate, that is how many dollars one euro costs, is under constant change. Traders’ task is to speculate about the future price.
Now, let’s say there are 200 clients using the platform. 100 predict the price will increase. The other half expects the price to fall. They open transactions for one hour and each trader invest $100. The total amount of money contributed to the market is 20,000. The return for the EURUSD currency pair on the Olymp Trade platform is 82%.
An hour passed by. The final price of the EURUSD pair is higher than at the beginning of the trading. 100 traders who opened up positions win. They get a return of 82% so there is $182 back on their accounts. The other 100 clients who entered sell trades lose and receive $0. The total payout will be $18,200. That leaves $1,800 for the brokers to take as their commission.
This was only an example to show you how brokers make money on options trading. In reality, there is no such a perfect balance between those who sell and those who buy. But on the other hand, there are many more trades opened every hour. Moreover, there are many more currency pairs to choose from and more hours in a day. Altogether, this will give huge numbers which mean a lot of money for brokers to earn.
Trading is a business so there has to be money going in and out. My advice is to protect your account against losses before you start thinking about making a profit. Practice on a free demo account first and learn how the platform works.
Wish you enjoyable trading!
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