Have you ever thought about how to trade forex more profitably? And we don’t mean improving your knowledge or gaining experience (though these are crucial). We’re talking about a rebate or spread compensation that every trader can obtain, regardless of experience or transaction results.
Cashback forex is entirely free, but it does not mean that it will be in your real favour. Of course, there are certain risks attached to it. This article will discuss rebates, how they work, the benefits of rebates for all scheme participants, and much more. Let’s see if cashbacks in the form of trading rebates are worth it.
A rebate (also known as a spread payback or forex rebate) is a discount obtained by returning a portion of the commission and spread to the trader. A broker is a forex market intermediary that facilitates a trader’s directive to buy or sell an asset on the forex market. They charge the trader a commission on the spread in exchange for doing so.
Whether the transaction was successful, the broker will frequently return a portion of the spread to the trader’s account directly or through a rebate service.
The rebate might be fixed (in US dollars and tied to trade volume) or relative (expressed as a turnover percentage). Rebates can be credited to the trader’s account daily, weekly, or monthly.
Generally, three parties are involved in the rebate system: a broker, a rebate service, and a trader.
It operates as follows:
Forex rebate schemes are similar in nature to credit card rewards programmes. Take, for example, a Visa credit card. When you use your Visa credit card to make a purchase, the vendor is charged a fee ranging from 1.5% to 3%, which they pay to Visa to process the transaction.
Many consumers are enrolled in a credit card rewards programme and receive approximately 1% cashback on each credit card purchase paid to them by your credit card provider out of the fees charged to the vendor.
Is it free money? Both yes and no. It is money that the consumer would not have received if they had not signed up for the rewards programme, but it is paid out to you from the fees charged to the vendor, who will, of course, include such fees in the cost of their products.
The provider typically has a contractual relationship with multiple forex brokers, earning a commission on each trade placed by a trader referred by the provider to the forex broker. The provider then pays the client a cash rebate from the forex broker’s commission.
One of the most frequently asked questions is, “Why would a broker share a part of their profits with a trader?”
A rebate is a marketing tool for a broker that allows you to:
Furthermore, if brokers cut the spread for a trader, the trader will tend to reduce the broker’s commission “as a matter of course.” The rebate might also function as a little consolation award for a trader who loses a trade.
Outsourcing is another reason why brokers used to work with rebate services. For reasons, the broker is unable to contact the clients who have been captured in different parts of the world (due to the absence of representative offices or a language problem, etc.). As a result, the broker is willing to share their commission with a better-positioned rebate service.
Payment methods may differ across providers. In general, a cashback website, for example, works with thousands of traders worldwide and offers its services in many languages, covering a wide range of options.
Monthly Cashback: Payments are automatically credited and distributed by the 10th or 12th of the month after the month’s rebates are earned.
Spread or commission reduction: The trader benefits from lower commissions and spreads. This is an exciting alternative offered by several of the top brokers.
Paid direct to brokerage account: Cashback rebate is generally credited directly to the trader’s brokerage account 1-7 days after the trade is completed.
Generally, monthly payments for the monthly cashback (rebate) option can be paid via a bank wire transfer, Paypal, Skrill, Sticpay, Entropay, China Unionpay, or Neteller. Specific payment methods, such as bank wire transfers, incur fees.
Traders frequently create a custom minimum payment amount to accumulate rebates and withdraw their extra cash less frequently than monthly, therefore paying less in fees.
Of course, if you follow all of the basic rules and don’t allow cashback to affect your forex trading, a forex rebate is a highly recommended cost-saving method. Here are some of the advantages of using forex rebates.
Forex cashback might harm your trading behaviour, which you should be aware of before using forex rebates.
Here are some common pitfalls to be aware of:Best forex pair to trade - Do you have a favourite? — 2023
You should continually strive to develop your trader skills even if you receive cashback. Always follow up to date on the latest trading trends and techniques. Forget that learning forex is a never-ending road in which you must continually evolve.
Maintain sound financial management. Forex trading is all about managing money properly. To avoid losing all of your money in an alarming series of trades, you must be highly conscious of money management.
Last but not least, do not trade to receive forex cashback. Always consider the best time to enter and exit the market, and never let forex rebates influence your decision.
Forex rebate sites generally work as intermediaries for brokers. They entice new traders to open live accounts with forex brokers by giving rebates and other marketing initiatives. In exchange, the brokers provide these businesses with a piece of the spread from each trade the trader takes, a portion of which is returned to the trader.
Forex rebate sites have mushroomed on the world wide web recently as retail forex trading has grown in popularity. The benefit of making money in either case (win or loss) doesn’t give you a license to play freely in the market. You may still face an overall loss even if you benefit from forex cashback rebates. This is not a trading strategy!
So, always be careful, well-equipped with trading knowledge, and be specific in your calculation while dealing with such reward schemes.
A rebate is a modest deduction from the amount to be paid or a return of a part of the payment received. It’s similar to credit card issuers’ cashback reward schemes for loyal consumers.