Why Most Traders Lose Money Even with Cashback (Study)
Cashback in trading is marketed as a risk-free reward—“earn money on every trade, win or lose.” It’s a smart concept on paper. You place trades, and a portion of the broker’s spread or commission is returned to your account. Yet despite this incentive, a majority of retail traders still end up losing money. So why doesn’t cashback help them turn the tide?
A recent study of trading behavior across multiple brokerage platforms reveals several surprising reasons why most traders continue to bleed capital—even with the lure of cashback rebates. Let’s unpack the findings and the psychology behind this disconnect.
1. Cashback Doesn’t Offset Poor Strategy
Cashback is a rebate—not a trading edge. A $2–$10 rebate per lot doesn’t mean much if your strategy consistently loses 20–30 pips per trade. Many traders mistakenly believe that cashback can “soften the blow” of bad entries, poor risk management, or overtrading.
🎯 Truth: Cashback rewards volume, not performance. Without a profitable system, it simply slows down inevitable losses.
2. The Illusion of Profitability
Receiving rebates regularly creates a false sense of progress. Traders often feel they’re “earning something back,” which encourages more trades—often without sufficient analysis. The cashback feels like a win, even when their net equity keeps dropping.
🧠 Cognitive Trap: Small, frequent rewards can mask long-term losses.
3. Incentivized Overtrading
One of the most common traps is trading more just to earn more cashback. This leads to overleveraging, emotional decisions, and chasing setups that don’t meet strategic criteria.
📉 Result: Increased exposure with diminished accuracy—fast-tracking losses even while collecting rebates.
4. Hidden Costs Cancel Out Rebates
Many brokers offering cashback operate with slightly wider spreads or higher commissions. The extra cost is subtle, but over thousands of trades, it eats into profits more than cashback gives back.
💸 Net Effect: You “earn” cashback while silently overpaying per trade.
5. Psychological Anchoring on Rebates
Some traders fixate on cashback as a measurable goal, focusing more on how many lots they’ve traded than how well they’ve traded. This creates performance blindness, where quantity overtakes quality.
⚠️ Red Flag: When the rebate dashboard matters more than the trade journal, losses follow.
6. Lack of Risk Control
The study found that over 70% of traders using cashback programs had poor stop-loss discipline. Cashback gave them a false cushion of safety, encouraging wider stops or no stops at all.
🔥 Danger Zone: Cashback without disciplined risk management becomes a gambler’s bonus.
7. Broker-Driven Behavior
Let’s not forget: cashback isn’t charity. It’s a broker’s tool to boost volume. Some brokers even gamify rebates, offering tiered levels and monthly challenges to encourage more trading.
🎮 Hidden Agenda: The more you trade, the more the broker earns—whether you win or not.
Conclusion: Cashback Is a Tool, Not a Solution
Cashback is not inherently bad. In fact, for disciplined, consistently profitable traders, it’s a smart way to recover part of the cost of doing business. But for most traders, cashback becomes a psychological distraction, an illusion of success that masks deeper issues in strategy, risk, and mindset.
Final Takeaways
- Evaluate strategy first. Cashback doesn’t fix bad trading habits.
- Use cashback as a bonus, not a goal. Never trade for rebates.
- Track net results, not just rebates earned.
- Understand your broker’s terms—spreads, commissions, payout rules.
- Stay grounded. Cashback is helpful—but only when your edge already exists.