Have you seen any of these headlines while you are browsing the internet for the best forex brokers? Get a 100% deposit bonus, or claim your $30 no deposit bonus now! Yes, these are marketing tactics used by brokers to entice people to join them. It comes as no surprise, since there are dozens of brokers in the market competing for one client.
Each broker must stand out from the others. And one way of doing this is by offering promotions and bonuses. While these are enticing offers, there are conditions that you must understand before signing in with the broker. Let us discuss the types of forex bonuses and how to use each one.
What is a forex bonus?
A forex bonus is a promotion offered by a brokerage firm to get new clients. Some brokers offer a fixed amount of money (usually in US dollars). Or a percentage of the deposit from their accounts. You can also think of it as compensation or reward for choosing one broker over the other. There are two types of forex bonuses offered by many of the regulated brokers.
- No-deposit bonus
- Deposit bonus
The first type is called a no-deposit bonus. It is a cash value credited into the account of the client. It comes from the broker. But you need to have a verified account first before you can enjoy this benefit. It helps to avoid fraud and to comply with regulations from the authorities.
This offer is also called ‘free bonus without deposit’ since there is no need to deposit money into the account. All types of traders can use it. Whether you are a newbie or an experienced trader, you can qualify for this bonus program. But you must follow certain conditions before getting this bonus. You must also load money to withdraw from this account.
With only $5 to $50 credit, the value offered is not too much. But it can be valuable! First, it gives live exposure to the client on trading. It is the opposite of a demo account. In this virtual account, you are trading in a simulated environment. Wherein you are using data and market conditions from the past to try and predict how the market will react.
It is available to all traders, whether you are a beginner or advanced. Many traders think that newbies will benefit most from it. But it is the experienced traders who will find it more useful. Remember that a no deposit bonus only has a small amount of monetary credit. It means that it is not the best option to learn the basics of trading.
You can use it if you already have a trading strategy to test in a live environment without the risk of losing any of your cash. If you need to revise it, you can do so without worries. Keep on practicing until you find the winning trading strategy that fits your personality.
So, what should newbies be using if not a no-deposit bonus? Beginners should use the demo account in forex trading. One advantage is that these virtual accounts have much bigger credit, some reaching as high as $100,000.
With this money, you can learn the basics of trading, try different plans, test strategies, and adjust as many as you want. You will also learn how to be disciplined and manage the risks at your own pace. And not under the time pressure that comes with a no-deposit bonus.
The second type of forex bonus is the forex deposit bonus. It is an extra credit applied to your account linked to the deposits that you make. It is in percentage (or %) of the deposit. The deposit bonus is the most popular type of bonus offered by trusted brokers.
For new users of the platform or broker, this bonus gets calculated from the initial deposit. For existing clients, this applied to succeeding deposits. So, if your broker has a current promotion of a 50% deposit bonus for a $200 deposit, then your actual credit will be $300. (Get 50% of your $200 deposit which is $100, and add them together to get $300).
A forex deposit bonus can range from 10% to as high as 400%. As a guideline, the higher number is not always the best criteria in choosing a broker. The first thing to look out for is whether the broker is regulated or not. Some scammers will try to get your money by offering big bonuses. And once you try to withdraw the funds, you will find out that all your money, including the initial deposit, is missing.
It’s a waste of both your time and money. Legit brokers are happy to offer deposit bonuses to their clients, even if they don’t have that offer on their website. You can ask your customer service agent when you open the account. Choose the broker wisely based on their credentials and not on the bonus offered.
Remember too that a forex deposit bonus is not unlimited. It will have a maximum amount or cap. For example, if the deposit bonus is 100% capped at $1,000, even if you deposit $10,000, you will only get a bonus value of $1,000.
So, before you make that deposit, make sure to check the fine print. And by closely examining the terms and conditions, you will see more factors you should check. After all, we mentioned that a forex bonus is a marketing tool to get people to choose a broker over the other.
What are the factors to consider in selecting the best forex bonus?
Marketing promotions have a lot of terms and conditions that are hidden upfront. You will see them in posters printed in small fonts or on the website with two or more pages of text. It is the same with forex bonuses. We tend to ignore or accept it. But it is vital to examine the details. Here are the usual terms and conditions of forex bonus programs.
Withdrawal policy
It is vital to know how you can use the forex bonus. We already know how to compute it, but we need to know also how to use it. Can you withdraw the amount directly after it reflects in your account? No. Aside from being a direct loss to the broker’s funds, it defeats the purpose of the forex bonus. The idea is to have more money to trade in the forex market. And not to gain from questionable schemes. Here are the three methods used by brokers to regulate withdrawals.
Trading volume
Some brokers will only allow withdrawal of the bonus credits if you increase your trading volume to a particular number. If the broker sets the minimum trading value at ten times, you will need to increase the bonus value from $100 to $1,000 before you can withdraw this amount. (In this example, if the forex bonus value is $100 x 10 minimum trading volume, the minimum amount needed is equal to $1,000).
The number of trading lots
It is one of the conditions that make a large bonus amount undesirable. It means that the broker has set a requirement for a lot for every fraction of the bonus received. To illustrate, the broker you selected gave you a $100 bonus credit, but you must trade one standard lot for every $10. So, for the $100, you need ten lots (or $100 divided by $10). Remember that each lot is 100,000, so 100,000 x 10 will give you 1 million. It means that before you can withdraw the $100 bonus credit, you must execute $1 million worth of trading.
Commissions payment
Another method to ensure their profitability is the inclusion of minimum commissions gained from your trading activities. For example, for you want to withdraw the $100 bonus credit, you must have participated in daily trading activities that allowed the broker to earn $1,000 in commissions from spreads, pips, or roll-over rates.
Time limit
Another vital point is the time frame given for you to complete any of the conditions on withdrawal. It doesn’t matter if it uses trading volume, trading lots, or commissions. The time limit is usually between 30 days to six months. Ensure that this is enough time to fulfill the conditions. Or you will lose all the forex bonus you earned.
Currency pairings
There are three types of currency pairs: major, minor, and exotic pairings. Make sure that your selected currency pair is part of the list of allowed pairs where you can use the trading bonus.
Geographic limitations
Regulated brokers are under the strict watch of the authorities. For example, in Europe, bonuses are banned by the European Securities and Markets Authority. But in the US, brokers are allowed to offer it to clients under defined rules and regulations.
Which broker gives a free bonus?
Almost all the regulated brokers give out free bonuses to their clients. But these bonuses vary from broker to broker. Also, check your country or region as there are limits and restrictions from the authorities on what they can offer. Visit the websites of your chosen broker to find out more information. And don’t forget to check out the terms and conditions.
XM is one of the top brokers that offer both the no-deposit bonus and the forex deposit bonus types. For the no-deposit bonus, clients get $30 worth of credits. All you need to do is create an account, and once it passes the verification process, you can start to use the bonus credits in your forex trading activities.
It implements a flexible policy on withdrawals of both the forex bonus and the profits that you gained. For the forex deposit bonus program, it implements a two-stage bonus. First, you get a 50% bonus for your deposits up to $1,000. Anything more than $1,000 will have a 20% additional bonus. That’s double the bonus credits for your money’s worth. But the maximum credit is limited to $4,500 per trading account.
Which broker is giving a bonus?
Most of the brokers are giving out bonuses to traders who join them. But if you live in Europe, you will not find legit brokers that give bonuses due to strict guidelines from the regulator. But for other parts of the world, you can check out RoboFrex. It offers one of the lowest initial deposits that will earn bonus credits. All new clients get a 10% welcome bonus for just a $100 deposit. Note that the maximum bonus amount is $5,000 per client. But HYCM will require trading 30 standard lots for every $1,000 bonus credit. And you only have two months to reach this trading volume, or the bonus credits get forfeited.
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