Forex rebate sites have been popping up on the World Wide Web like mushrooms over the past few years as retail forex trading has gained popularity. Want to learn more about them? You’ll find the answers to the most frequently asked questions about forex rebate sites below!
1. What is a rebate?
A rebate is a small deduction from an amount to be paid OR a return of a part of an amount given in a payment. It’s kinda like the cashback reward programs that credit card companies offer to their customers who pay diligently.
2. What do forex rebate sites do?
Forex rebate sites essentially work as middlemen for brokers. By offering rebates and other marketing efforts, they draw in potential traders to get them to open live accounts with forex brokers. In return, the brokers give these companies a share of the spread of every trade taken by the trader, a small portion of which is given back to the trader.
3. What don’t forex rebate sites do?
Forex rebate sites are marketing machines – they don’t actually provide clients with currency quotes, so you cannot hold them responsible for trade execution. All trade transaction issues rest solely with the broker.
4. Why do traders sign up with rebate sites?
Because rebate sites give a certain portion of every trade back (either in cash or in their trading accounts) at the end of the month, traders in effect end up paying less on their spreads. This can be a small boost to a trader’s profits (or reduce their losses) by decreasing their transaction costs.
Another reason why some choose to go through these forex rebate companies is because they don’t have enough capital to get the best spreads directly from brokers. Most brokers only offer their best (thinnest) spreads to their clients who trade in very large volumes.
5. Who is it best suited for?
Since the money you get in return depends on the number and size of the trades you take (regardless of whether these were winning trades or not), those who are most active and trade the biggest positions stand to benefit the most.
6. What are the dangers of forex rebates?
The danger lies in getting blinded by these rebates. Some may open a live account based on the attractiveness of the rebates alone, not considering the size of the broker’s spread. If you’re not paying attention, even with the rebate, you may still end up paying higher total transaction costs than other non-rebate options out there.
Also, it’s always best to do a background check to make sure you’re not getting scammed. Before you sign up with a forex rebate site, do your research on the company and find user feedback, just to confirm you’re not walking into a scammer’s trap!