When looking for a good broker, what attracts you the most? If you put importance on the bonus, here are 5 key things you should know about forex deposit bonus.

forex deposit bonus

Forex bonuses come in many types and forms. The two most commonly seen are trading rewards and deposit bonuses. While trading rewards are acquired for every order executed, deposit bonuses are provided when traders fund their accounts.

Nevertheless, there are 5 things you should consider about forex deposit bonus:

  1. The amount of broker bonus
  2. Treat no deposit bonus as your own money
  3. T&C must fit with the trading system
  4. Pros and cons must be balanced
  5. It's the same as an additional margin

What does it mean? Let's discuss each point in this article below.

 

1. Bigger is Not Always Better

The amount of bonus in every broker typically ranges from small to huge, depending on each broker's decision to what extent they're prepared to set the bonus size to attract clients.

Does it mean that a bigger bonus is a better offer? Not necessarily so.

Remember that a brokerage company is still a business. If they're giving too much just for the sake of recruiting clients, how can they compensate their losses? One way or another, they would try to offset the expenses from the deposit bonus. It can come from the way they set the rules to withdraw the bonus or something else.

Traders can be required to trade in a certain transaction size to withdraw some bonus funds or just to maintain their eligibility. The required trading volume is usually quite unreachable for beginners or short-term traders in general.

This condition is common to make sure that the broker still gets some benefits from the bonus program, as spreads and/or commissions from clients' transactions are their main sources of income. So, by offering a bonus, brokers can indirectly demand their traders to increase their transactions so they can get more income from spreads and/or commissions.

Considering that point, it's only normal to expect higher trading requirements for bigger deposit bonuses. A 25% deposit bonus may only require traders to trade 2 accumulative lots in a month, but a 60% welcome bonus can demand traders to trade 5 lots within the same duration of time.

Consequently, traders will increase their trading risks when they apply for a big deposit bonus. If they're not used to trade with the required transaction size, they will be only pushed to overtrade just to accommodate the bonus' terms. And if you're familiar with beginners' mistakes, you'll know that overtrading is one of the greatest sins a trader can commit.

 

2. No Deposit Bonus is Not Free Money

If you're receiving a no deposit bonus, treat it like your real money. Don't underestimate the risk of losing it just because it doesn't come from your bank account.

The moment you consider it as free money from the broker, you'll be trading carelessly and tend to forget that you're losing some real money if you fail to win the trade. It can lead to a bad habit that affects you in the long term, so it's better to always consider the no deposit bonus as your own money.

Treating it seriously can help you build a winning trading personality. Plus, if you win the trade with the no deposit bonus, you can always use it again to open more trades and gain some more profits.

See also: Forex Broker Bonuses

 

3. Mind the Terms

Terms and conditions of a forex deposit bonus mainly revolve around transaction size requirements. But there have been many cases where brokers apply other terms for aspects like leverage, trading instruments, and the strategies allowed. For example, XYZ broker promotes a $100 welcome bonus with the following requirements:

  • Account leverage is set to 1:100 (compared to the broker's capability of providing 1:500 leverage in a normal setting).
  • Transaction size has to reach 3 lots by the end of the month.
  • Only XAU/USD and EUR/USD positions will be accounted for.
  • No scalping and trading during the news.

Those are only a small example of bonus rules normally given by the brokers. If you don't read them carefully and miss one of the conditions, there will be some serious consequences that may come to bite you in the back.

The impact can range from minor problems like receiving a warning from the broker to some major issues like having your bonus rewards plus the profits entirely canceled. If you're found to have violated the rules repeatedly, the broker may even block your account and put your name on their blacklist.

 

4. Weigh on the Pros and Cons

With all of the abovementioned points, it's clear that joining a deposit bonus program has its pros and cons. You may receive additional margin or even free money for your trades, but there are requirements and some trading restrictions to think about.

Therefore, consider the pros and cons carefully and what they mean for you. Make sure that the cons don't overcome the pros when it comes to your trading style and tolerance, so the risks you will be taking can be really worth it.

Let's say you tend to fund your account frequently and the expenses from the conversion rates have been bothering you for some time. You can decide to get a deposit bonus to lessen the fees IF the terms and conditions don't interfere with your trading plan or put more stress on you.

In this case, you need to really understand every rule from the bonus program and consider each of them as normal. If there's ever a slight chance that you may think the rule is too ridiculous or that you won't be able to comply with it, it's better to pass the bonus offer.

 

5. Don't Aim to Withdraw the Bonus

Did you know? The majority of complex bonus rules focus on the requirement to withdraw the bonus. If you think about it, it's actually quite normal because bonus rewards come from the broker.

Now try to divert your attention to the other important matter, that is earning profits from the trades opened with the margin bonus. You'll get almost no restrictions and complications whatsoever. Why so?

Because the profit is something you win from the market, not a giveaway from the broker. It is in your right to withdraw it anytime or any way you want. Many even consider that putting some conditions on profit withdrawal has come across as too restricting on the broker's part.

So, instead of fighting your way to fulfill the required transaction size to withdraw the bonus, focus on your trades so you can earn some market profits from the provided bonus. After all, deposit bonus is actually an additional margin for you to have more "power" in opening positions. It's only fair to optimize it by trying to win the trades as best as possible.

 

Types of Bonus

The scheme doesn't stop there. In fact, there are more classifications when it comes to how deposit bonuses are rewarded.

 

Welcome Bonus

Just like its name, a welcome bonus means a reward to greet new clients for their initial account opening. That's why welcome bonuses only apply to the first deposit and nothing more. Some brokers promote their reward sizes clearly like "$30 welcome bonus", while the rest choose to present it as a percentage from the size of the first deposit.

Usually, the second type has a maximum limit so the amount of free money is still restricted to some level after all. Say you apply for a 20% welcome bonus with a reward of up to $2000. That means no matter how much your initial deposit, the highest amount of bonus given will always be $2000.

 

No Deposit Bonus

This bonus is quite special because it gives you the opportunity to trade without depositing any money. Instead, the broker will fund your account with the amount of no deposit bonus offered. Because of its generous nature, no deposit bonus is mostly offered as a one-time reward that applies to a client's initial account opening. That's why no deposit bonus is sometimes also labeled as a welcome bonus.

See also: Forex Broker Promotions

 

Deposit Bonus

The main difference between welcome bonus, no deposit bonus, and the deposit bonus itself is the frequency. In the regular deposit bonus, there is no special occasion in which it is given (like in welcome bonus) nor a specific condition that makes it suitable for a one-time reward. In fact, deposit bonus stays true to its name as a forex bonus that applies to every deposit, thus benefiting all clients; both new and recurring.

This kind of bonus may relieve some additional fees especially for traders who need to convert their currencies to the account's base currency. Forex deposit bonus is frequently offered in a percentage of the deposit size. For instance, a 30% deposit bonus infers that traders would acquire an additional 30% of the fund they transfer to the trading account.

Considering the various schemes of deposit bonuses presented for traders today, it shouldn't be a surprise that the terms and conditions attached can get quite complicated. Failing to comprehend and abide by the rules may lead to some losses, so prepare yourself with 5 tips below before applying for a deposit bonus.

 

Final Thoughts

Claiming a forex deposit bonus is a good measure to help you in some ways, but it can be tricky if you don't treat it with the right mind. The 5 things above can help you be on track to be a good trader who can optimize bonus rewards. Avoid bonuses with terms and conditions that you can't afford, and you're set to make the bonus rewards your stepping tool rather than the thing that stresses you out.