Forex cashback is unlike any other bonus program that one might be familiar with since it involves the element of trading.
In the modern era, where the idea of a generous bonus is the norm, it may come as a surprise that a relatively large group of traders consciously choose a good Forex cashback rebate over any substantial bonus.
There are plenty of reasons why a Forex rebate program attracts many seasoned traders. This extensive guide will help you learn all about FX rebates and how you can take advantage of trading the markets with a cashback Forex broker.
No. | Broker | Bonus | Min. Deposit | Trading | More Info |
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1 | XM | 15% Deposit Bonus up to $500 |
Min. Deposit: $5 |
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2 | AVATrade | 30% Deposit Bonus up to $10,000 |
Min. Deposit: $200 |
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3 | XTB | 50% XTB Deposit Bonus | Min. Deposit: No Minimum Deposit Requirements |
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4 | Pepperstone | Min. Deposit: $200 |
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5 | Eightcap | Min. Deposit: $100 |
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6 | Primebit | $80 | Min. Deposit: |
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7 | Bubinga | Up to 100% to $1500 first deposit |
Min. Deposit: $5 |
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8 | FXTM | 30% Deposit Bonus up to $300 |
Min. Deposit: $50 |
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9 | Alpari | 30% Deposit Bonus up to $100 |
Min. Deposit: $0 for Nano Account & $20 for Standard MT4 Account |
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10 | FBS | 100% Deposit Bonus up to $10,000 |
Min. Deposit: No Minimum Deposit Requirements |
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11 | HYCM | 10% Welcome Bonus up to $5,000 |
Min. Deposit: $100 |
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12 | Plus500 | 10%-30% Deposit Bonus up to AU$15,000 |
Min. Deposit: $200 |
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13 | Markets.com | 35% Deposit Bonus up to $3,500 |
Min. Deposit: $100 |
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14 | Forex.com | 20% Forex.com Deposit Bonus up to $5000 |
Min. Deposit: $100 |
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All FX and CFD transactions are accompanied by two or more cost components, including spreads, commissions, SWAP, and other trading costs. A typical spread of an STP account is in the region of 1–2 pips for the major EUR/USD pair, while the same pair can quote around 0.1–0.8 pips in an ECN account.
Of course, ECN accounts may also charge a commission, ranging from $2 to $10 per round lot traded. These costs add up to a significant amount over a trading period, especially if you are a high-frequency or high-volume trader. It should also be noted that a broker is compensated directly by these costs, which means that these transaction costs are a broker’s bread and butter.
As a result, it is not uncommon for traders to spend hundreds or even thousands of dollars (or other currencies equivalent) per month on trading costs alone. This is where a Forex cashback rebate program helps traders claw back some of the transaction costs in the form of a Forex rebate.
The broker refunds merely a small fraction of the trading cost to the trader. For all intents and purposes, the terms “cashback” and “rebate” are usually interchangeable in the context of FX trading.
In broad terms, an FX rebate is the refund of a part of the transaction cost that is credited into a trader’s account after the transaction is processed. At the same time, a cashback Forex offer pays out fixed prize money to traders for accumulating a certain trading volume over a fixed period.
We will now take a closer look at these concepts in the following sections, and we will also provide an account of some of the major differences between the two.
Forex Cashback — A cashback offer is usually offered to clients in the form of a loyalty program, where the clients are rewarded every time they accumulate a certain trading volume during a particular period. Brokers pay out a fixed amount of money to their clients when they accumulate a specific cumulative trading volume.
Each client’s trading status is tracked with the help of a loyalty program, which adopts a tiered model. A higher loyalty status implies a better chance of winning more money back from the broker, and traders can move up the different tiers by transacting higher volumes of trade with more frequency.
Some of the top cashback Forex brokers are known to offer great prize money to their clients through their loyalty programs, which can help traders recover a significant chunk of the fees they paid while trading the markets.
However, in some cases, these loyalty programs may offer different rewards, including expensive gifts, luxury vehicles, electronic gadgets, invitations to VIP events, and fully paid vacations to exotic locations. Regardless, these programs offer a trader remarkable value and can provide the much-needed motivation to keep excelling in the risky FX market.
Forex Rebate — To better understand what а Forex rebate is, let us consider an example where a cashback Forex broker charges its clients 1 pip for trading the EUR/USD pair and pays back 0.2 pips as an FX rebate. This rebate is usually paid in the form of cash or trading credits and is credited directly into the trader’s account, usually at the close of a trade or at the end of a trading cycle.
Therefore, a trader effectively pays only 0.8 pips per trade, even if they pay the full spread at the time of transaction. The same rule may also apply to a commission-based ECN account, where the broker may pay back a percentage of the commission.
Although we have outlined a hypothetical scenario above, the best Forex rebate rates in the market can reach up to 40%–50% of the transaction costs. Hence, the final cashback can be worth up to 0.5 pips for a currency pair with a 1 pip spread and up to a $1 rebate for an ECN commission of $2 per round turn.
Therefore, choosing the right Forex cashback rebate broker can have a massive impact on your bottom line, especially if you trade higher volumes or have a high trading frequency.
FX brokers are financial companies that adopt an operating protocol reminiscent of other financial entities in the market. Like a credit card company that offers rebates, discounts, and cashback to its clients or a bank that rewards its most loyal customers through lower interest rates, FX companies are also in the business of pleasing their clients through outstanding customer service.
Therefore, one of the best ways to please a loyal customer is to give back a portion of the company’s profits to clients as a goodwill gesture.
The promise of cashback and rebates will entice traders to continue trading with the broker, and it will help avoid any switching costs, all the while keeping the trading costs reasonable. Nowadays, regulatory restrictions force companies to refrain from offering bonuses or similar promotions to their clients.
However, a loyalty program or a Forex cashback rebate program does not fall into the category of free money promotions. Therefore, these programs offer brokers an extra option of retaining loyal traders and attracting new customers by offering the best Forex rebate in the market.
Unlike a normal deposit bonus, cashback and rebates are only offered for certain categories of clients. Here are some of the most basic eligibility criteria for taking part in a Forex cashback rebate program:
There are numerous advantages to using an FX cashback rebate program. Here is how it can positively affect your trading account:
You should also be aware of some of the pitfalls of a cashback Forex program, which are outlined below:
We can’t stress the importance of free trading credits and their benefits in the risky world of retail FX trading. Every minute edge in the markets can indeed make all the difference. Forex bonuses are an excellent way to minimize your initial capital outflow while also helping you minimize your risk exposure.
However, bonuses have distinct drawbacks, and this is not a long-term solution for receiving free trading credits regularly. The best Forex rebate, on the other hand, allows you to reduce your trading costs and helps you save money for a better return on your performance in the long run.
Both types of offers have their distinctive advantages. New traders are more inclined to choose a deposit or welcome bonus to supplement their initial capital. It not only allows them to increase their equity but will also help them increase their exposure in the markets with smaller trading capital.
However, advanced traders would prefer to get Forex cashback or the best Forex rebate in the market since they are bound to trade higher volumes with higher frequency. Therefore, their trading activity may qualify for higher cashback and FX rebates, which would easily surpass any of the top bonus offers in the market.
There were instances in the past where brokers increased their transaction costs to account for their losses while offering cashback or rebate programs. However, this is not a common phenomenon among reputed and reliable companies since the brokers that we recommend always act in the best interest of their clients.
We routinely audit brokers for their pricing policies, and we do keep track of any abnormal spreads or slippages that may be unfavorable from a trader’s perspective. We always ensure that our readers get Forex cashback without compromising the overall transaction costs or the trading environment.