As a type of broker bonus, the advantages of forex cash back are undeniable. However, is there any drawback that you need to pay attention to?

Forex Cashback

In a literal context, cash back can be inferred as having your money back after using it for a transaction. But in trading, forex cash back from brokers is not always in cash. Forex cashback, a rebate, gives a commission from each position traded. So, the more (and bigger) a trader opens a position, the higher the chance and the size of forex cashback.

 

Forex Cashbacks in Brokers

  1. Pepperstone: Pepperstone offers an enticing rebate program called the Active Trader program, designed to reward its members with discounts on trading commissions. The program operates on a tiered structure, where the discount traders receive depends on the number of standard lots you trade each month.
  2. InstaForex: InstaForex offers a rebate program that rewards 1.5 pips for each closed trade. This means that regardless of whether your profit or loss is just one pip, you will receive a rebate of $15 for every trading lot.
  3. FBS: FBS provides a cashback incentive for every trade you make. Regardless of the outcome, you can get up to $15 per lot traders.
  4. Exness: This broker offers rebates in the form of a loyalty program. Traders will get rewards in Exness dollars, 1 Exness dollar equals $ 1.
  5. Admiral Markets: This broker offers $1 per million USD rebates of notional volume. It is available for new and existing clients in all account types.

 

Forex Cashback Has Pros and Cons

Pros:

  • It is easier to get and is even more common than deposit bonuses. Unlike some welcome bonuses with expiration dates, brokers usually reward rebates continuously.
  • Forex cashback can increase profits on the winning trades and reduce losses on the losing trades since it applies to every transaction, no matter what the result of the position is.
  • Very compatible with aggressive traders.

Cons:

  • If triggers the habit of underestimating the market. The ease of getting forex cash back often encourages traders to start trading without considering the quality of the trades. "Why do we need to analyze the price properly? If we lose, we will get some cash back anyway." Such thoughts are common if traders continually get "compensation" for losing positions.
  • Forex cashback from brokers may reduce traders' motivation to increase their skills. Rebates for losing positions once again cause it. Without the push to recover from losses, traders would not want to learn better and improve their trading performance.
  • The cause of overtrading. The forex cashback rewarded in every trading position often leads traders to increase their trades to collect rebates. If the motivation is not based on the market condition, the added trades are unnecessary and only increase the traders' exposure to higher risks.

Now that we've discussed it, the harmful effects of forex cashback don't stem from the program itself but from the way traders misuse it. In other words, forex rebates are unsafe for inexperienced traders who don't know how to use the reward with the right mindset.

 

How to Utilize Forex Cashback from Brokers the Right Way

Here's what you need to do so you don't abuse the reward and end up having more losses:

 

1. Focus on the Profit, Not the Cashback

The essence of forex trading is to benefit from the differences in price movements. That is the principle you need to emphasize if you want to be free from the negative trap of forex cash back from brokers.

Even though cashback is instrumental in boosting your profit or reducing some of your trading losses, you should not include potential rebates when setting up your profit/loss targets. Instead, focus on setting the targets based on the market's opportunity, not on the size of forex cash back.

Think of the cashback as a side benefit or a "sweetener". You will become too dependent on it when you take it too seriously. That is when you start to let your trading mindset and habit get ruined.

 

2. Stay True to Your Trading Plan

A trading plan is a must-have for all traders. What separates real traders from amateurs is the use of a trading plan. So if you have a trading plan, always follow the rules consistently. Changing your trading plan is wrong because you're eager to gain forex cash back.

Say you have drawn up rules as a swing trader, do not suddenly turn into a scalper to increase your cash back. In the end, the discipline of implementing a trading plan is the key to distancing yourself from the adverse psychological effects of forex cash back.

 

3. Don't Get Obsessed with Rebates

Again, forex cashback is not the primary goal of your trading. No matter how big your rebate size, the results will only contribute as an addition. Profits from price changes should remain your top priority.

So if you start getting obsessed with collecting cash back and putting aside your initial goals to profit from the market, get a hold of yourself and reset your plan.

Forex cashback from brokers has advantages and disadvantages. Its safety can be completely up to you. It won't be hard to get the advantages if you can grasp the right idea of forex cashback and use it wisely. But if you let greed take over your conscience, don't be surprised if you end up with more losses in the long term.

 

In addition to forex cashback, no deposit bonuses from brokers also need to be used properly so that it doesn't turn into a damaging tool for your account. Read all about it in How to Maximize Your Forex No Deposit Bonus.