If you are trading currency pairs, you must have detailed knowledge about Forex Rebates, as if you opt for it without knowing, you may get trapped and incur huge losses.
Several traders who availed the services of companies and individuals, who serve as Introducing Brokers, often came out disappointed; therefore, it is better for you to know about Forex rebates in advance.
Traders believe that though the Forex Rebate that enables traders to increase their earning from their trades is now very popular, there are inherent disadvantages from it.
For instance, they claim that a Forex rebate can make traders complacent. Their reasoning is based on the fact that if traders are assured about the extra money they become complacent and do not try to excel in learning new tricks to earn more.
Another disadvantage associated with Forex rebates is that traders become reckless i.e. since traders are getting rebates on their trades, they win or lose the tendency is to go rash.
Similarly, when traders get Forex rebates they have no incentive to become a better trader i.e. pursuit to become an excellent trader by learning new skill goes down as they are assured of profits.
Money management is important for Forex traders and they know and understand their investment; however, a common trait that has been seen among traders who get Forex rebates is that they are careless about the rebate.
They often fail in managing the Forex rebate that is bestowed upon them and seldom profit from it.
Traders do not understand that Forex rebates are to trap them and not to help them make money. It is made lucrative so that traders open a trading account with the brokerage firm.
Once the customer is intoxicated by the offer, he becomes a permanent customer and often falls prey to ‘Gambler’s Fallacy.’
Some Advantage of Forex Rebate
Forex rebate cannot be rejected absolutely as there are various advantages associated with it; for instance, traders are rewarded just for making trades which is quite encouraging for new traders, almost 95% traders lose in their first trade and get scared after losing initially.
Similarly, Forex rebates help traders make their trading more profitable; for instance, if they are having a bad run of losing trades, rebates can help them make up for it by giving them back some of the money they just lost.