Forex Broker Rebates Advantages And Disadvantages

Forex brokers rebates offers are without question one of the most divisive aspects of this style of trading. While some traders appreciate the undoubted potential value that they may add to their investments, others take the view that they encourage many people to trust to luck rather than judgement. These opinions are just the tip of the iceberg when it comes to Forex rebate schemes. Either way one looks at there’s certainly no shortage of brokers offering this kind of service, and the market is a very competitive one. However should you be considering taking on a broker offering a rebate, be sure to shop around as the products on offer vary enormously in terms of bonuses and rebates on offer.

How Does Forex Broker Rebates Work?

For those new to trading rebate accounts we’ll quickly explain the basics first. The most important principle to understand is that the broker offers a standard rebate – often referred to as ‘commission sharing’ – upon every trade made via their service. Forex rebates are designed simply to reward traders for using their service and as a form of loyalty bonus.

At first this may sound an unusual concept – after all why should a broker share a proportion of the trade without needing to do so? Simply this is because it’s well demonstrable that many Forex Brokers who offer a rebate incentive earn considerably more trade than they may otherwise have expected. But it’s important that clients don’t think of this as ‘free money’ as very often these brokers offer poor overall terms compared to a typical service.

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Those without a personal relationship with their account manager will find that there are still plenty of options available. The rebates themselves vary enormously and ought to be paired with a specific trading style. For example someone who make plenty of trades a month (600 for example) could earn an excellent return if they have a good week (especially with a 0.7 or dozen dollar typical rate). However with rebate trading they will also have to pay additional levy on their trades in the first place, so bad months could turn very sour indeed.

Forex Trading rebates are best suited to investors who approach trading with a ‘scalping’ strategy, looking for many low value secure wins. It’s not ideal for those who make few trades as often the basic conditions on offer don’t match that of standard Forex brokering services.

Advantages Of Forex Brokers Rebates

The good news with rebate offers is that serious investors who have already been with a broker for a long while can often negotiate a rebate ‘on the house’. Loyalty is a big deal in online trading, and it’s essential to never underestimate the importance of your custom to the broker. Even just a quick discussion with your account manager may open up a special offer that can offer very generous returns. This is usually the best way of securing a good value rebate. As mentioned above many brokers that offer a rebate upon initial signup can be pretty low quality.

Earn A Rebate On Every Trade

By far and away the reason why this kind of Forex trading has been so popular is because it’s basically free money. Much like people collect loyalty points for the amount they spend or invest with other services, this is essentially the same principle – just applied to binary trading.

Many Offer Very Attractive Promotions

Again this advantage is all about how they reward users for their loyalty and steady use of their services. The vast majority of services offer sometime highly lucrative sign up bonuses. For those investing serious capital this can amount to a considerable starting boost to their trading payroll. Even better for those intending on trading in the long term, most will also offer regular rewards based either upon length of time the account has been open or, more commonly how much has been invested overall.

Slightly Improves The Trader’s Prospects

Let’s face it everyone knows that Forex trading demands a degree of luck as well as skill. Even the most competent traders will have the occasional bad run, so broker rebates allow for at least a small part of protection/compensation. Even the unluckiest trader will be left with something by the close of trading. In a way this also serves to explain why these rebates are so popular with new investors.

Disadvantages Of Forex Broker Rebates

As mentioned during the introduction there are plenty arguments that can be made against the effectiveness of using broker rebate services. It should be clear by now that on paper they do unquestionably look like appealing prospects at first glance. But when looking a little deeper it is clear that they certainly aren’t going to be universally suitable for all.

Lack Of Professional Liability

This is a major factor and one that mustn’t be underestimated in regards to risk. As the brokers used by rebate services are professional they are expected to hold indemnity insurance. That may sound like a positive, but the fact is that it protects them – not the investor – should they make a bad trade on their clients behalf. For this reason there’s little reason to prevent them encouraging traders to make many losing trades, as ultimately they will still profit and be legally covered.

Encourages Risky Trading Practices

While there’s no doubt that in the right hands these rebates can add appreciable benefits, they do have a tendency of encouraging plenty of investors to take a deal that they may otherwise have passed up on. Obviously the broker doesn’t care – it’s not their role to advise people not to trade, however there’s no doubt that the bonus rebate will entice aspects of risky and speculative trading.

Lack Of Regulation

Rebate service providers do not need to be regulated in order to operate – they fall outside the bounds of standard supervisory bodies. There are scams out there and people do get ripped off by them. People who are sensible, do their research and and opt for an established rebate service will find that they are in pretty secure hands. If rebates are suitable for you, don’t be put off by a few crooks.

Conclusion

It’s plainly clear that while rebate services may not always be suitable for all, they can in some cases provide notable advantages. Plenty of people leap into Forex trading without formulating a strategy or even understanding the absolute basic of how the market fluctuates. In regards to determining whether or not a rebate service is good for you, it should be pretty clear already before even investing a single penny in the market.