Forex Rebates is a service for the return of a part of the spread or a commission from each transaction made. Rebates can be paid directly by the brokers themselves, as well as by specialized companies that receive payments from the broker for attracted customers and, in turn, share part of these payments with customers. Rebates are a good addition to any trading system, as they allow you to slightly reduce costs, and therefore, to raise the average profit of transactions. But can the rebates become a basic element of earnings? In this article, we show how, with the help of arbitrage strategies, it is possible to build effective trading systems that earn exclusively on rebates.
First of all, what's the point in the rebates for the broker? First, in this way, it increases the flow of customers, attracting them through numerous rebate services, supposedly by more favorable terms of trade. And secondly, it stimulates customers to make more deals and trade large volumes, which inevitably leads to the fact that the average customer starts to lose money quickly, which eventually goes to the broker. After all, according to well-known statistics, more than 90% of traders lose their money on forex, which means that the more customers make transactions, the faster their funds will flow from their pockets into the broker's pocket. In general, for a broker, the introduction of rebates is another cunning marketing move that allows them to quickly withdraw surplus cash from trusting clients.
But how can this be done by an arbitrage trader?
First of all, with the help of rebates, it is possible to effectively mask the arbitrage trading on Forex. As you know, life of the average arbitrage account is usually bright, but short-lived: traders, especially beginners, tend to get as much profit as possible while the broker does not notice an abnormal growth in their account and does not actively oppose it. At the same time, brokers use their tricks and methods of fighting arbitrage trade: requotes, delays, etc. After this, the continuation of trade loses its meaning and it is time to withdraw money. This way of trading, which can be characterized as an "all-in" method, is an all-around good one for sure, except for one thing - one would have to open a new account for trading with the same broker - sometimes it may not be very convenient for the trader. In addition, after several such explicit arbitration "raids", brokers step up their defense, worsening the terms of trade for all accounts. After that, arbitration becomes impossible even on new accounts. Therefore, experienced traders, who have been involved in arbitration for more than one year, have long developed their tricks, which allow them to earn a long time without attracting the attention of brokers. And one of these techniques is the use of rebates.
The essence of this method is to organize the trade in such a way that all income comes from the rebates, while the balance of the main account would fluctuate around the initial values. There may be several ways to do this, but the simplest one is to choose the level of the spread deviation for the opening of transactions (the price difference between the traded instrument and the advanced source) in such a way that the average profit of the trades is zero. Usually this is achieved when the deviation level is slightly larger than the spread of the traded instrument, but the optimum value should be selected based on experiments. With such small opening levels, the arbitrage system will generate quite a lot of transactions, which guarantees a good rebate payment, while the yield of the trading account will be around zero.
Another option, when the use of rebates can be crucial - is the situation where no way to adjust the arbitrage strategy to a stable profit. Most often, such situations are characterized by the fact that for large deviations of the traded instrument from the advanced source, the broker does not make transactions, constantly returning requotes, while for small deviations deals are opened, but the values of these deviations are not enough to repulse the spread of the instrument and make a profit. In this case, before putting a cross on this broker, it is worth trying to look for the possibility of connecting rebates. And if there is such a possibility, then you will get a stable mechanism of profit generation from a futile system.
Note that the latter option is not limited to using only arbitration. You can use any other stable trading system, the yield of which should at least beat the spread. To be more precise, the amount of the average transaction winnings of such a system plus the rebate payment per transaction must exceed the spread of the trading instrument (plus the commission, if any). In this case, the mathematical expectation of the profitability of such a complex system will be positive, and therefore, it can be used for earnings.
However, we recommend that you use arbitrage to earn money on rebates, explain why. The fact is that this way of earning involves carrying out a fairly large number of transactions with large lots - only in this case, payments on rebates will be noticeable. But in order to make a lot of transactions with a large volume, it is necessary that the trading system has a low risk. Otherwise, you can easily drive the deposit into a hard drawdown, from which, with the help of only the rebates, it will be very difficult to get out. Arbitration systems are characterized by extremely low risk and high stability. Those. the results of their transactions are almost independent of external factors, except that the broker will begin to interfere with the trade or, for example, change the speed of the Internet. Unlike arbitrage, classical trading systems based on the use of past time series values and various indicators of technical analysis are generally not stable in nature. The results of transactions of such systems often change over time depending on market conditions (market trend, news, etc.). So, they a priori will have a high risk. This is why the arbitrage trading systems are best suited for earning on rebates.