Rebate or Cash Back On The Forex Market To Consider

Lets talk about The Background. How is it possible that some forex broker giving rebates to their clients? Should there be any lack of confidence because the broker giving out rebates? There shouldn't be any miss judges about broker giving rebates/cash back to their client, especially from a specific ECN broker. ECN brokers gain revenues primarily from their client through their price spread.

You as a forex trader should know that there is always spread between pairs, when you trade the market (either shorting or longing) the broker gets their profit, say for eurusd the spread is 2pips, so when you open a position for the pair, it generate profits for the broker, and the profit should be arround 2pips, if you put 1 full lot($100,000), then the broker should gain ~$20 from the trade it self, whether the trade goes profit or goes losses.

Now this should be worth of considering, there are some Introducing Broker(IB) commission scheme out there, the broker will give 0.3 pips up untill 0.7 pips per trade closed by a client refered by the IB. Based from this commision scheme, there are some IB giving back their commission to the clients refered by them (the IB), and this is what we should call Forex Rebates/Forex Cash Back. Some IB give 0.3 pips cash back, and some could give 0.7 pips Rebates

Okay now we know the background of the Forex Rebates, how should we calculate the generated rebates/cash back when we do sign up an account under some IB Links? To simplify things out, let's do some simple example calculation, assuming you'll get a 0.7 pips rebates/cash back :

1. Every trade worth 0.7 pips
2. Assuming we are using an auto trading program so called "Expert Advisors"
3. We are trading 0.5 Lot ($50,000)
4. Each day the EA(Expert Advisors) could trades arround 20 times a day on a single pair
5. We are trading the EURUSD pair so that the value of 1 pips of 0.5 lot EURUSD is $5
6. The rebates/cash back we gain for a period of 1 month (20 trading days) should be :20 trades * 0.7pips * $5 * 20 trading days = $1,400.00

No matter the clients trade was on profit or was on loss, the client already banked $1,400 out from the cash back he/she made. If we should consider profits annually, it should be 12 months x $1,400 = $16,800

There should be a broaden way of view about the forex rebates offered by some IB, and as a forex trader we know that we do trade the forex market pairs, and each pairs caries their own spread rate. If we didn't sign up through any IB that is offering cash back/rebates, then all of the spread profit will go to the broker. As an added advantage, every forex trader should consider cash back/rebates to their trading activity.