A study over 100 brokers shows that forex bonuses are popular among brokers and deposit bonus is the most chosen promotion over welcome bonus and rebate programs.
Forex brokers are undoubtedly a crucial part in the forex trading space. They act as the middleman between traders and the broader market, allowing traders to make speculations based on price movements of currencies or other instruments in the market. Over the years, the competition between brokers is getting fiercer, so they have had to come up with innovative ways to attract clients. Forex bonus promotions are one of the tools that often draw the attention of traders.
While these bonuses can offer a number of benefits, they also present challenges both for brokers and traders. In this article, we're going to discuss a case study on forex bonus promotions that is based on a sample of 100 brokers around the world.
According to a study conducted by Brokeree, about 42.6% of forex brokers surveyed offer bonuses in their promotional campaigns. Each broker has different goals that they want to achieve with these campaigns, but most of them are aiming to increase demands on specific assets, get more deposit funds, and increase trading activity.
Contents
Which Type of Forex Bonuses is the Most Popular?
Forex brokers can offer bonuses in various forms, such as additional capital, credit, access to exclusive benefits, special assistance, or others. They usually require traders to do certain tasks, like opening a live account with the broker, depositing a certain amount of money, or trading with a certain number of lot sizes. On top of that, some bonuses have an expiration date and they usually cannot be withdrawn directly.
To understand more about these programs, let's take a look at each of them in the more detailed explanation below.
Welcome Bonus
Welcome bonus is one of the most popular promotional campaigns offered by forex brokers. Basically, welcome bonus is a one-time offer that rewards traders for performing a specific action, like opening an account, making a deposit for the first time, or completing the KYC verification process. Each broker may have different terms and reward amounts, but the main idea is to thank traders for choosing the broker's service and welcome them as new clients.
One easy example of a welcome bonus is an offer that adds extra capital to the trader's balance, based on a certain percentage of the trader's first deposit amount. The percentage of bonuses may increase in proportion to the deposit amount, so, it would give a higher bonus for larger deposits. Due to the one-time deal situation, this program can be quite an effective method to incentivize traders to deposit a large amount of money at once.
In other cases, brokers may offer more interactive rewards such as access to welcome accounts, where traders can open positions with a certain amount of free cash for 60 days and try all the broker's features for free. After the period ends, they can withdraw the earned profits to their real trading account, after depositing a certain amount of funds.
Some brokers allow traders to claim the bonus within a specific period of time by making regular deposits. For instance, the broker would give bonuses to clients that deposit at least $1000. In this case, clients can choose to deposit $1000 and claim the bonus straight away or deposit $200 for five consecutive months. This gives the opportunity for all traders to enjoy the same benefit according to their capabilities.
Deposit Bonus
Similar to the welcome bonus, deposit bonus is another common method used by brokers to encourage traders to fund their accounts and increase the size of a single deposit. Due to its popularity, deposit bonus is practically the kind of bonus that most traders would expect from a reputable broker.
In most cases, deposit bonus rewards traders with a temporary payout based on the trader's deposit amount. The payouts usually vary from 30 to 50% of the deposit amount, but some brokers may go beyond that and offer up to a 100% bonus for deposit doubling campaigns. The bonus can then be used to increase the client's trade size and potential profit.
Typically, such bonuses are paid using a multi-tier model, so the amount may differ from one trader to another. Big traders are more likely to earn higher rewards than smaller traders. For example, the broker can offer a 50% bonus for deposits up to $1000, 30% for deposits up to $3000, and 20% for deposits above $3000. However, there might also be an upper limit for this.
Other brokers may offer the balance interest bonus, which gives periodic payouts for traders' free margins (funds that stay idle in the trading account). Brokers can make modifications like this to achieve different goals, such as to encourage traders to make bigger deposits by calculating interest based on their amount or protect traders from unexpected margin calls and stop outs by keeping higher free margins.
Rebate Bonus
A rebate, also known as cash back, is another common bonus type offered by forex brokers. The most distinctive aspect of this type is that instead of relying on deposits, rebate programs rely on the trader's trading volume.
In the standard rebate model, a broker would set a certain number of rebates to each symbol, which is then multiplied by the number of closed lots. For instance, a broker may offer $2 for each closed lot of EUR/USD trade and $3 for each closed lot of USD/JPY trade. So, if the trader closes 10 lots of EUR/USD and another 10 of USD/JPY, the rebate bonus would be $50. This method can be used to encourage traders to trade more and focus on specific symbols.
But apart from that, there are loads of other rebate programs that involve different conditions and rewards. For example, some brokers would give rewards to clients for trading a certain amount of lot sizes, regardless of the symbols. Some others would reward traders with spread reduction or other benefits, like virtual points that can be exchanged with physical gifts.
Since rebate programs are based on the trader's trading volume, this can be a rather powerful tool to influence clients' trading behavior. As for clients, rebates can offer a good opportunity to increase the total trading volume and improve their trades in general.
What Did the Research Say?
According to Brokeree's recent study, about 20% of the analyzed brokers in this study use welcome bonus to attract new clients. It is apparently the least promotion used as 24% of them choose deposit bonuses while rebate comes second with 21%. According to the study, about one in five analyzed brokers offer this type of promotion.
Is it possible for any broker to offer more than one type of bonus? Absolutely so. In fact, the majority of brokers offering bonus programs tend to vary their promotions to attract more clients. Regarding this matter, Anton Sokolov from Brokeree concluded that the number of brokers that only offer one bonus type is almost equal to the number of brokers that offer two or more bonuses.
The deposit bonus is the most popular choice in the first group, whereas the second and third group tends to use a combination of welcome bonuses and rebates.
Conclusion
The study shows that bonus promotions are quite essential for most brokers in the market. Apparently, the majority of brokers offering one type of bonus program prefer to use deposit bonus. The reason why is mostly because it is the most effective campaign to attract clients; it applies regularly, not a one-time thing like the welcome bonus, and traders are not required to increase their trades like what rebates do.
If you want to explore forex bonus promotions further, there's an interesting insight on how to successfully use a broker bonus. See the article on this page.
5 Comments
Mar 9 2023
So, here's the deal: rebate programs are based on the trader's trading volume, and brokers set specific rebate amounts for each symbol. But how do brokers make money in this scenario? Can you explain the mechanics behind it? I'm curious to know how brokers determine the rebate amount and calculate it based on the trader's closed lots. Is there a secret formula or percentage they use? And what's the main motivation for brokers to offer rebate programs? Is it to encourage more trading activity or to steer traders towards specific symbols? Let's unravel the mystery of how brokers make rebates work!
Jun 7 2023
When forex brokers offer rebate programs that are based on a trader's trading volume rather than deposits, it makes me wonder about the source of the broker's profit in such scenarios. Could you shed some light on where brokers derive their profits when they provide rebate programs? How does the structure of these programs allow brokers to offer cash back to traders based on their trading volume? Additionally, are there any specific mechanisms or strategies that brokers employ to ensure their profitability while providing rebates? I'm curious to understand the dynamics behind these rebate programs and how brokers are able to sustain their operations and profitability in light of offering cash back to traders
Jun 13 2023
@Bruno: Ah, rebate programs in forex trading, an intriguing topic indeed! So, let's unravel the mystery behind the profitability of brokers in these scenarios. When brokers offer rebate programs based on trading volume, they actually earn their profits through a variety of means.
Firstly, brokers typically have agreements with liquidity providers and market makers. They receive rebates or discounts on the spreads they pay when executing trades on behalf of their clients. These rebates serve as a source of income for the brokers.
Secondly, the structure of rebate programs allows brokers to retain a portion of the spread or commission charged to traders. While they offer cash back to traders based on their trading volume, they still generate revenue from the overall trading activity.
Now, to ensure profitability, brokers employ various mechanisms and strategies. They often set specific trading conditions or requirements for traders to qualify for rebates. These conditions may include minimum trading volumes, trading frequency, or specific account types. By doing so, brokers encourage increased trading activity, which in turn generates more revenue for them.
Additionally, brokers carefully manage their overall business operations, including risk management and cost control. They maintain efficient trading systems, utilize technology to minimize costs, and manage their exposure to market risks effectively.
For more information about rebate, you can read at here : What Is Rebate In Forex Brokers?
Jun 26 2023
Hey there! Welcome bonuses are awesome incentives offered by forex brokers to show appreciation to traders for choosing their services. I've noticed that some brokers require traders to complete the KYC (Know Your Customer) verification process to be eligible for the welcome bonus. Now, I'm curious, why is it necessary to go through the KYC process to claim the bonus? What role does KYC play in the broker's relationship with their clients? I'd love to understand the importance of KYC in terms of ensuring security, compliance with regulations, and building a trustworthy environment for both the broker and the traders. So, why is the KYC verification process a prerequisite for accessing welcome bonuses, and how does it benefit both parties involved?
Jul 3 2023
@Iglesias: Hey there! Welcome bonuses in the forex world are super cool, right? But have you ever wondered why brokers ask you to go through the KYC verification process to claim them? Well, it's all about keeping things secure and building trust between the broker and the traders.
So, here's the deal: KYC, which stands for Know Your Customer, is a process where brokers verify your identity and other important details. It's like showing your ID at the door of a fancy club, but in the forex world. By doing this, brokers can make sure you're a real person and not some shady character trying to pull off some sneaky business.
Not only does KYC help protect you and other traders from fraud and identity theft, but it also helps brokers comply with regulations. You see, the forex industry has rules to prevent money laundering and other naughty stuff. By going through the KYC process, brokers can show that they're playing by the rules and keeping things above board.
But it's not just about rules and security. KYC also helps create a trustworthy relationship between the broker and the traders. By verifying your identity, the broker knows they can trust you, and you know they're serious about providing a safe and reliable trading environment.