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Traders who have been working in the Forex market for a long time are very familiar with the concept of rebate. When making trading operations, brokers concede or return part of the commission (spread) to traders who have opened a trading account with them.
In the context of competition in the foreign exchange market, rebate remuneration has recently been actively used to attract traders to participate in transactions. Rebate is beneficial in all respects, all participants in the investment market benefit from its use: traders partially compensate for their expenses, and brokers expand the network of traders involved in the transaction.
Any novice trader is interested in how much he can return in the form of a rebate, how significant the benefit will be in terms of rubles or dollars at the end of the week, month, year. Many factors influence the amount of this amount:
- the amount of the deposit;
- way of making a deal;
- the size of the spread (commission) charged by the broker;
- the nature of the swap (positive or negative);
- size of rebate rewards.
A rebate bonus is provided by a special service with which the broker cooperates. Obviously, you shouldn't refuse such a “gift”: by making an average of 6-10 transactions per day, a trader loses a significant amount on the spread, and it’s not bad to get at least some of the funds back in the form of a rebate! Below, using an example, we will have the opportunity to verify this.
Experienced traders know very well how much money flows from their pockets to the broker's account as a result of a transaction. It is not uncommon for a trader to receive as a result of a transaction less than a broker with a foreign currency account: spreads and commissions take 10-15, and sometimes even 30% of the total amount of the trading account.
Let's consider in detail the calculation scheme for brokerage services in the Forex market:
Let's say the trader's trading account is $ 20,000.
Trade volume - 1 lot.
The number of transactions in 1 day - 8 pcs.
The spread is 3 points, or $ 30 per trade.
The number of transactions per month - 176 (8 * 22 working days).
Trade volume - 176 lots (176 deals * 1 lot).
Let's calculate the total expenses of a trader for paying for brokerage services: 176 * 30 $ = 5,280 $, which is more than 26% of the trading account amount (5280: 20,000 * 100% = 26.4%).
It turns out that a trader lost more than a quarter of his own money in a month. This is how, little by little, a significant amount was formed. Is there a way to reduce your commission costs?
The broker gives part of his money earned from the transaction to an intermediary company that provides services to attract participants in the trading market - traders. Inevitably, the thought comes to mind about whether to look for such a partner yourself in order to reduce commission costs and return part of the money spent. Maybe there is an opportunity to become his client and get some of the commission back for it? Indeed, there is such a way! This can be done using the very rebate services that we mentioned at the beginning of the article.
Let's look at an example of how the rebate amount is calculated.
As shown in the previous example, our broker's spread is 3 pips, or $ 30. The rebate service returns 1.6 points from the trade turnover.
Let's calculate how much we can get back:
The number of closed deals per month - 176 pcs. (respectively - the same lot).
The refund from the Rebate service is 176 * 16 $ = 2816 $, which is slightly more than 14% of the trading account amount (2816: 20,000-100% = 14.08%).
Not a bad result: we returned $ 2816, or more than half of the amount paid for brokerage services.
The given calculations correspond to the rather conservative style of money management (money management), typical for newbie brokers. As you can see, even taking into account the adoption of not too high-risk decisions, the savings, taking into account the attraction of the rebate service, are quite impressive.
The size of the rebate reward varies in a significant range depending on the trading conditions offered by one or another participant in the foreign exchange market. The higher the risk of the transaction, the higher the percentage of rebate returns. The inexperienced trader should not chase the high percentages of rewards accrued by the rebate system. 5-10% at first is a perfectly acceptable option.
Subject to conservative trading, rebate payments will be relatively low, but the commission on transactions will also be lower. Over time, having gained experience in the Forex market, you will be able to choose the most optimal option for making a deal.
The main thing that a novice trader needs to learn is to use the benefits of rebate definitely profitable! Gradually you will find your "golden mean" and will be able to optimize the balance between the invested funds and the income received.
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5 simple steps to get rebates and cashback from your broker