In this episode of Truth About FX, Walter gives light as to how forex rebates work and whether you can actually benefit from this. He shares some insider information on the real story behind this, how will you know a legit broker and how the system works . How do brokers work? Is there really money in this kind of networking? And how can you minimize your risks.

Hugh also shares his thoughts on this. Walter also shares his first trading job why he would never go back at it.

Download (Duration: 06:26 / 7.4 MB)

In This Episode:

00:58 – set up a deal

02:50 – cater to that style of trading

03:23 – meat on the bone

05:18 – conflict of interest

Tweetables:

There’s not much meat on the bone [Click To Tweet].

Check and ask your broker  [Click To Tweet].

Be careful [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Hi, Walter. How do forex rebates work and are they good for traders?

Walter: The story on this is — what the introducing brokers or the brokers will tell you — they don’t really add anything to the spread. Here’s the thing: you can tell your broker, “Hey, can you inflate?” For example, if you’re trading someone’s account… This will be really dodgy by the way and I know people that do this or have done this in the past where let’s say — they say — “Hey Hugh, you’re a great trader. I want to give you this money and I want you to trade my account.”

You could set a deal up with a broker and you say, “Okay, sure. Open up an account with this broker and then I’ll get trading rights and then sign over the trading rights to the account to me.”

And then, you could set up a deal with a broker when the broker inflates the spread so everytime you take a trade on your buddy’s account, you get a kick-back from the broker.

You could also do that with your own account. You can tell your broker, “Hey, can you inflate this spread and just send me a check every month for those?” And they’ll do it. It’s no problem.

But the thing is, I think what you are talking about is more like along the lines of the introducing brokers where they’ll say, “Look, we will introduce you. If you sign up through us, we get paid from the broker for signing you up this new accounts and then we’ll give you rebates.”

And they’ll tell you like, “The spread is the same. If you go to the broker and you opened up an account or you come to us and we open up an account, it’s going to be the same spread. There’s no difference.

The only difference is if you go to us, the introducing broker, we’re going to get paid for claiming you as a client and giving you to the broker and say ‘Hey, this is our guy and we’re going to give you an account’. And then, we pass on the money that they give to us. We pass on some of that to you.”

In theory, it is a great way to do it. In practice though, you have to be careful. You have to make sure that’s true.