Forex brokers earn their money through spreads and commissions. Spread is the difference between the ask and bid price. Some offer commission-free trades but notice that their spreads are larger compared to those with commissions. So how can you save on this cost? Is it even possible to lower these transaction costs? The possibility of decreasing transaction costs before was having special rates from the broker. The problem is you need to trade a huge amount of volume. This is only possible if you have a large capital to trade or work for one of the financial institutions.
With the popularity of online foreign exchange brokers increasing so is the competition. More and more companies are getting into the forex business. This also means that the competition in getting clients is getting tougher. Enter the cashback/rebate service providers, they became the Introducing Broker in the online world. IBs are people who refer clients to the broker in exchange for a referral fee. Instead of brokers spending so much time and effort in promoting their business, they use cashback service providers to do this job in return for a commission. This can be a one-time payment or a recurring commission that they get for every closed transaction their referral makes.
I started using PaybackFX as my first cashback rebate service. They have a good reputation since they were developed by the same company that developed myfxbook. There’s a ten-dollar bonus for every account you connect with them. You can see your rebates being credited in your PaybackFX account in minutes of closing a trade. You need to reach one hundred dollars in order to receive your first payment. If you are a small-time trader, it would take a long time before you reach this threshold. Small time traders usually trades 0.01 lot. The rebate for 1 lot traded is $2.625 if you are using IC Markets so you would need to close around 3500 trades in order to get your first payout.
I moved to another rebate service provider, CashbackForex, early this year. They have a small payment threshold, as low as one-dollar if you’re using skrill as a wallet. What I don’t like about them is that they have no real-time reporting of rebates so you will have to wait until payday to check if the payment matches your number of traded lots. They will beat any competitor rate provided you will submit a proof of their given rate. My $2.625 rate with IC Markets was countered with a $2.6257 per lot traded. I know it’s negligible but they also sent my paypal payments commission free.