Zero Spread Binary Options Brokers and Have Spreads Brokers

Zero Spread Binary Options Brokers and Have Spreads Brokers?

The principle behind binary trading is simple. You need to identify the best investment opportunities, to buy the respective pairs, whether we are talking about currencies or stocks, and to win some money. While from the point of view of the client, this is not so complicated, have you ever wondered how the website wins? Besides the withdrawal commissions, the majority of binary trading websites applies a difference between the buying and selling price, which is their commission. Those are called the Binary Options Spreads, and you can consider it as a commission of the website applied to any transaction.

What are the Binary Options PIPs?

As there are many types of investors in the binary trading world, there are many sums involved. Some people prefer to invest 30 dollars in a transaction, while others like to use the leverage option to trade value of 100 000$ or even more. This is why it is not recommended to measure the evolution of Binary Options Spreads in dollars. For this, the Binary Options PIPs were invented, which are in fact a percentage of the value of stocks.

How are the Zero Spread Binary Options Brokers Calculated?

Let’s suppose you want to buy a currency pair EUR/USD at a value of 1.3500. This means that you will pay 1.35$ for each Euro that you want to buy. If the value of your pair is modified at a course of 1.3502, even if we are talking about a variation of 0.002%, it might be significant for a person that invests 1 million dollars in such an operation. The difference is called spread, and it has a value of 2 PIPs

Now that you understand what are the Binary Options PIPs, you should find a broker that offers you the possibility to trade with zero spread. This means that you will be able to buy and sell your pairs without being concerned by the commission of the company. while this is a lucrative and rewarding opportunity for people that trade often, as they will be interested of initiating a large number of operations without being charged, in the case of long term investments, it is recommended to find a company that does not have so higher commissions, even if they charge you some PIPs on any spread.

Why sometimes the companies with low spreads are better than the ones with zero spreads

As said before, zero spread is a great opportunity for the experienced traders that initiate tens of transactions every day. In this case, every PIP is important, and this is why it is important for the traders not to worry about spreads. For example, if the binary options platform takes 1 PIP from every transaction, you will need a difference of at least 2 PIPs to sell for a profit. With a binary options platform that has zero spreads commissions, you will be able to win even for a variation of 1 PIP.

On the other hand, the withdrawal and administration commissions of the companies offering zero spreads are higher. In other words, you will not pay a commission for transactions, but you will pay more money when you want to cash in your profits. This is why this system is recommended only for people that are involved in short term transactions. For other traders, the commission of one PIP per transaction would not be so burdening, especially if they initiate one or two transactions a week.

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