As traders our entire goal is to consistently turn a profit. While most of this will come down to your skill as a trader, there are some ways to increase your overall profit that have nothing to do with your skill as a trader. Forex broker rebates are hands down the easiest way to increase your overall profit. In the business of trading, small savings in spread can make a huge difference in the long run. For those who place trades on a daily basis the savings can be down right huge! The bottom line is if your trading live right now and your not receiving rebates then your literally throwing money out the window. Lets break down how important this savings can be as well as exactly how it works.
HOW DO FOREX BROKER REBATES WORK?
Every trade you place you are ‘paying a spread’ to the broker. On every currency pair this is the difference between the price you buy at and the price you sell at. Traders, especially those who trade short term make a huge deal about a brokers spread and for good reason! Spread can have a large impact on their overall profit or loss. Rebates essentially reduce the spread by forcing your broker to pay you back a portion of it on every trade you take. Why would the brokers do this?
Plain and simple brokers need clients. Because brokers need clients they use companies called Introducing Brokers (IB). Simply put the job of an IB is to find traders for brokers. When these IB’s refer a trader to a broker, the broker pays the IB a portion of the spread from each client they referred. In turn the IB then pays you and I the majority of what they received from the broker. The great part of this deal is that everyone wins. The broker receives a new client, the IB gets a portion of the spread for referring the client, and the client (you and I) get back a portion of the spread for every trade they take. Some brokers offer up to 1.6 pips back per trade. For every standard lot you trade that is $16! Lets break down the numbers a little further with a few examples.
1 Trade Per Day x 22 Trading Days Per Month x 12 Months = 264 Trades Per Year
264 Trades Per Year x $16 Per Trade = $4,224 in Rebates Per Year
3 Trades Per Day x 22 Trading Days Per Month x 12 Months = 792 Trade Per Year
792 Trades Per Year x $16 Per Trade = $12,672 In Rebates Per Year
Are you starting to see the power of rebates. Using the example above, for those who place 3 trades per day you could be break even overall with your trading and still make $12,672 that year! The above calculations are based off of 1 standard lot. If you trade less or more the rebate is adjusted accordingly.
Both Chad and I use the same forex rebate company and we do so for good reason. First and foremost they are good guys and we have both used them for years. Most importantly however they give the client back more money than any other rebate company out there, and this is why both us continue to stick with them. Signing up to receive trading rebates only takes about 5 minutes. From their you simply setup your account and your all set. If your trading live and not yet receive trading rebates you need to check this out. Below is a list of brokers that qualify.
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