Knowing how your broker earns money is essential to planning your moves. A smart trader would keep an eye on the earning methods of the broker. Of course, your aim should be to earn money for yourself. However, when you know the ways your broker earns its profit, you can align your trading moves accordingly.
But, knowing how it earns money before choosing any binary broker is essential. So, let us find out how Deriv earns money and then decide why this broker is good for you.
How does Deriv make money?
Deriv earns money through the following options:
| Options order matching: | Depending on the asset and leverage |
| Spreads: | Additional spreads from 0.5 pips via Forex trading |
| Financing fee (Swaps): | Depending on the asset an leverage |
| Inactivity fees: | Inactivity fee from $ 25 |
| Deposit: | No additional charges |
| Withdrawal: | No additional charges |
| Commissions: | No |
Deriv is a broker that has been in the industry since 1999, offering the best services to its clients. However, it is natural for any trader to grow curious about how the broker earns money. A trader has the open opportunity to earn while placing the bets. They can choose the assets of their choice and predict the rise or fall in their prices. However, when it is about the broker’s earnings, they have to do it separately.
The usual source of a broker like Deriv’s income is through fees and commissions. Many brokers depend solely on the commissions and fees they charge. Every time a trader executes a trade and wins it, the broker’s charge applies. It can also be in various other forms such as withdrawal, swapping, etc.
Moreover, knowing whether your broker earns through illegal means or not is also important. What if you are a part of a scam? That can lead you to trouble. Moreover, if your broker hides its earning process, that is not a trustworthy broker. How can you trust a broker that does not even reveal how it earns money?
The brokers can charge various amounts depending on the account and asset types. However, the most commonly incurring ones are spreads, trading fees, withdrawal fees, etc. Besides, there can be many additional fees, such as deposit fees, inactivity fees, etc. Deriv also follows the usual ways to earn.
(Risk warning: Trading involves risks)
1. Order matching (options)
When you trade Binary Options on the Deriv platform, the broker matches the orders between traders. For example, 2 traders get a return of 98% for their trades. One trader loses and the other one wins the contract. As a result, Deriv earns 2% of return for these 2 trades. As far as we know, we experienced a difference between 2% and 5% of Deriv´s revenue per binary trade.
As you see in this example, Deriv can adjust the return to the current market conditions and the trader’s trading volume. It can be that the yield is different between long and short trades. This is the result of order matching on their dealing desk.
2. Spreads:
A spread represents nothing but the difference between two prices. It is basically the difference between the bidding and asking prices. These are usually measured in percentages in points. That is why many brokers denote spreads in pips.
The spread at Deriv starts at 0.5 pips EUR/USD. However, you cannot view the full list of spreads unless you open an account, either demo or the real trading account. Deriv makes money by adding an additional spread to all markets.
3. Swap fees
Swap fees occur when you keep on holding the same position in a trade. It arises when you keep it beyond the set time limit. If any trader holds a position more than the set duration with Deriv, she might have to bear the swap fees. However, it is not a mandatory fee and occurs purely depending on your conduct. There is also a free swap calculator available on the Deriv website.
4. Inactivity fees
Deriv earns mostly through the spreads. It will not ask you to pay while withdrawing or depositing. However, you may have to pay an inactivity fee if you stop using the account. We cannot call the inactivity fee a way to earn money. That is because it occurs conditionally when you keep your account dormant for more than 12 months straight Deriv charges a fee of $25. It applies only if you have not placed even a single trade during that entire period.
Conclusion – Deriv makes no secret of how it earns its money
Earning money is a common need for both traders and brokers. However, not all brokers have a clean way of earning. Some even get involved in cross-betting and marking up. Some brokers may charge additional fees every time a trade wins a trade, whereas others may keep withdrawal and deposit fees. Deriv is a broker who keeps all its fees at the lowest possible range. Moreover, it does not earn through your deposits and withdrawals, making it a reliable broker.
(Risk warning: Trading involves risks)
