This is the ultimate show down, we all know what a rebate and a bonus is, but do we really understand the pros and cons of each? Watch out for sucker punches!
The broker bonus is commonly used by brokers to entice business their way. It usually works as an addition to the equity and is vested on a volume of completed trading.
Most deduct the extra equity when the client withdraws before completing the required trading volume, and so binding the client to keep their money with the broker until that point.
Heres the deal folks
The extra buying power of the bonus can greatly assist some trading strategies, even if it is not realised. It can be seen as an insurance against a position going against the trader and an account that may have been lost will still be able to be held until turning positive.
When the bonus is realised the broker essentially pays back a portion of the brokerage that has been collected up until that time.
The rebate is earned from trade no 1. Each position either profits more by the amount of the rebate or loses less by the amount of the rebate. The buying power is not as great as with a bonus but there is no trading volume requirement.
Traders that are prolific and making in and out moves with thin take profits and stop losses and sensible money management practices will benefit more from a rebate as each trade counts and the margins are where the profits are to be had.
The spread is influential in the resulting profit or loss and a discount or rebate can actually make the difference.