I have been trading for some years, but never really understood how this works.
Can anyone here help me out?
So, let's say there is a broker, and he has 10 clients. All of those 10 clients deposit 100$. For every trade the broker gets a commission of 1$.
And they are successful. The traders all make 10 trades winning 10$ for each trade. So after a month or so, they effectively doubled their accounts. 10 traders now have 200$ in their accounts. Great.
The Broker on the other hand has made money from these trades through commissions. 10 traders have made 10 trades, giving 1$ each. So the broker has made 100$ from the trades.
Now the 10 clients want to withdraw their money. They deposited 1000$ and now want to withdraw that PLUS the winnings. So 2000$ in total.
Now my question: How does the broker pay the clients here? Where do the additional 1000$ actually come from? Does someone know?
Can anyone here help me out?
So, let's say there is a broker, and he has 10 clients. All of those 10 clients deposit 100$. For every trade the broker gets a commission of 1$.
And they are successful. The traders all make 10 trades winning 10$ for each trade. So after a month or so, they effectively doubled their accounts. 10 traders now have 200$ in their accounts. Great.
The Broker on the other hand has made money from these trades through commissions. 10 traders have made 10 trades, giving 1$ each. So the broker has made 100$ from the trades.
Now the 10 clients want to withdraw their money. They deposited 1000$ and now want to withdraw that PLUS the winnings. So 2000$ in total.
Now my question: How does the broker pay the clients here? Where do the additional 1000$ actually come from? Does someone know?