Forex rebate websites are essentially marketing machines used by brokers to bring in more customers. Traders get a small amount from their spreads back in cash, so they’re reducing their overheads with every trade. There are disadvantages and advantages to signing up with a rebate website, rather than going directly to your broker.
Platforms like iForex offer many benefits, but at the same time they aren’t for everyone. In this article, we’re going to discuss Forex rebates and the pros and cons of using them. Use this information to come to your own decision on whether to use them.
What is a Forex Rebate Website?
A Forex rebate website is a site that acts on behalf of the broker. They’ll offer lucrative promotions to get people to sign up with them. They pay a portion of the fees they take directly to the broker, and the broker allows them to have a portion of the fees for commission. The rebate website will also give part of their commission to the trader as an incentive.
They aren’t registered brokers, so they can’t be held responsible for any information they give out. You can’t hold them to the same standards as the brokers themselves, although most well-known rebate websites do aim to hit the same high standards as brokers.
Pro: Money Back
The main benefit you’ll get for signing up with Forex rebate programme is you’ll get some of your spread fee back on every trade. If you’re the sort of trader that employs a scalping strategy, you’ll have the most to gain.
The more wagers you make and the more you trade the more money you get in return. The occasional trader won’t be able to get the same lucrative benefits from opting for one of these platforms.
Con: No Professional Liability
If you decided to work with a Forex account management company, you would be able to sue them if they gave out wholly incorrect information. They’re professionals and must have professional liability insurance to function. Rebate websites aren’t professional brokers or managers. They’re simply platforms. As a result, it means you don’t have the same protections.
They could say practically anything and you wouldn’t have any legal right to sue them or take action.
Pro: Lucrative Promotions
Any rebate website is looking to promote online trading in as many different ways as they can. Their only goal is to get you to join up with a specific broker, whom they’re working for. Since the industry is so competitive, it means there are always lucrative promotions available.
Practically all rebate platforms have some sort of sign-up bonus. This could put hundreds of pounds into your account over time. You wouldn’t see this sort of promotion if you signed up with a broker directly.
Con: The Psychological Impact
You’d be surprised how much of an impact a rebate can have on the psychology of your trading activities. There are no benefits to trading more with a conventional broker. It’s another factor you don’t have to take into account.
One thing you need to know about Forex rebates is the inevitable encouragement you’ll receive to trade more. Since you’re rewarded for more trades, you might feel tempted to make some extra minor trades. It doesn’t take much for you to quickly lose control and place unnecessary trades.
For some traders, it’s better for them if this temptation simply doesn’t exist in the first place.
Pro: Overcoming Luck
Luck is the factor in Forex trading we can’t do anything about. There are always situations where the only thing separating victory from defeat is some bad luck. Rebates can help you to offset the losses you suffer from bad luck.
You’re getting a portion of your money back from the spread, so over time this will essentially provide you with free bets.
During a long losing streak, this can help to save your bank roll. The true extent of this benefit will become apparent as you trade more often.
Con: The Potential for a Scam
With anything like a rebate, there’s always the potential for a scam. Unlike brokers, no rebate programme needs to register with a central authority. Brokers need to have the appropriate certifications to enter the foreign exchange trading market. You know if something goes wrong you have someone to blame.
Rebate platforms can disappear in an instant. Anyone can create a mock rebate platform if they need to.
This shouldn’t completely put you off the idea of an FX rebate, though. As long as you complete your research, there’s no reason why you should fall victim to a scam. Do your research and find out about the company behind it. Search for some independent customer reviews to find out more about it.
Pro: Training Wheels
In the beginning, most traders are naturally wary about their chances of success. They’re worried about losing large amounts of money. Although beginners will lose money to start with, a rebate can take away some of the sting of a major loss and keep them on board.
This is where rebates actually have a psychological advantage. By providing a rebate, it takes away the stress of a loss and stops the trader from entering an emotional decline. The arch enemy for any new trader is entering emotional trading. Making decisions based on emotions over logic will ultimately end in failure.
So is Joining a Forex Rebate Platform Worth it?
You’ve heard the balanced argument for and against Forex rebates. In conclusion, rebates do have their advantages for some traders. The main disadvantage is the choice and the lack of security. You’ll never have the same peace of mind as you would whilst working with a broker directly.
If you’re just getting started, a well-known rebate programme with a history for offering good customer service is ideal.
Weigh up the pros and cons and look at your personal situation before making a final decision. It isn’t for everyone, but when used in the right way a rebate can become an extremely potent part of your trading strategy.
Lance Richardson is a Finance graduate from UPenn. For years he worked as a banker handling various aspects of Forex trading and one day realized he knew enough to venture out on his own. Presently, he works as a financial consultant and also ghost writes articles on anything related to forex and forex trading.