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What is behind Forex Rebates?

Discussion in 'General Forex Talk' started by f-man, Dec 19, 2010.

  1. f-man

    f-man 4Xangels Representative

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    You would all agree, that Forex brokers are not known for giving money away just like that!
    I am now thinking to open an account through a Forex Rebate provider, since I will be getting money back for my trades without having to offer anything in exchange.
    We are in the Forex market and it sounds too good to be true. Are things really as described or is there anything behind it "written with small letters"?
     
  2. Pharaoh

    Pharaoh Colonel

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    Be careful. Some rebate IBs can have a contract with the broker that increases your spread. They get the normal IB fees, plus that extra spread, and then pay you back.

    Another thing to watch out for. Anyone offering to be your account manager, but only if you open an account using them as an IB (with or without rebates). Account managers should be paid for performance. Giving an account manager a cut of every trade encourages them to place more trades whether or not those trades are profitable.
     
  3. f-man

    f-man 4Xangels Representative

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    I was sure that it can not be a crystal clear money back rebate.
    I am seriously thinking to open two micro accounts with the same broker, but one through an IB. It will definately be very interesting to see the results!


    What exactly should I understand under "Account manager"?
     
  4. countingpips

    countingpips Recruit

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    I believe you are reffering to a portfolio/asset manager. Account manager is a term used more for a glorified 'sales' person of a forex company...or so i have come to believe.

    Any Company offering rebates may be doing so probably as an advertisement tool as they can afford to. most forex brokers will add at least 1 pip onto the spread they recieve from their counterparties; so in effect if they give you lets say 2 USD per lot traded they will basically make 8 USD per trade you make instead of 10, which they may see as a good deal as the rebate may increase the amount of trades you make by lets say >20% as well as give that broker an edge with respect to incentives they offer.
     
  5. Pharaoh

    Pharaoh Colonel

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    Ah, I see a potential issue with 2 meanings for one title.

    An Account Manager at a forex company is the glorified saleman who tries to get you to open a live account and to keep dumping more money into it.

    My warning was for the other type of Account Manager - someone who manages your forex account. This is a person who trades your account for you in exchange for various fees - usually a percentage of the profit. If you get one of these, make sure your broker provides you with a proper LPOA form to sign. Most brokers forbid you from letting anyone else trade your account unless there's an LPOA on file. If you break that rule, the broker's terms probably will allow them to cancel all of the trades in your account.

    The danger of mixing this type of account manager with an IB is that an IB gets a cut of each and every trade without regard to whether the trade is profitable. In cases where an IB can also manage your account, there will be a temptation to take extra trades to generate extra IB commissions - this is called churning. Even if your IB gives you back a percentage of his cut, you can end up having the part of the spread you don't get eating into your account balance for no good reason other than to line your IB's pockets.
     
  6. Cathy Corpuz

    Cathy Corpuz Recruit

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    Quoted by: F Man
    I was sure that it can not be a crystal clear money back rebate.
    I am seriously thinking to open two micro accounts with the same broker, but one through an IB. It will definately be very interesting to see the results!


    Thats very interesting act to do... Comparing with same broker but different means or way... :)
     
  7. TromS

    TromS Private

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    You are right! Small Forex brokers are market makers and will do everything to get your money: they can offer you rebates, deposit bonuses, no spreads and so on...

    What is under rebate - desire to get money!
     

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