Many brokers offer bonus programs with a wide range of rewards to attract new clients. Are these promotions really worth trying? Let's check the pros and cons.

Trading bonus pros and cons

Fierce competition in the market has led brokers to promote their services using a wide variety of bonus deals. The idea is to essentially attract new clients and reward them for choosing a certain broker. Bonuses are highly popular among traders these days because they help to generate more income and even provide an opportunity to earn money without having to invest funds in advance.

However, such special programs can be confusing at first. Brokers have nearly unlimited variations when it comes to creating a promotion or campaign. Some brokers even give rewards for account verification. As a trader, it's important to understand the different types of bonuses that companies usually offer in order to get maximum advantage. And that is precisely what we're going to tackle in this article. We'll talk about 3 of the most common trading bonuses out there as well as the pros and cons of each one.

 

Welcome Bonus

Welcome bonus is a type of bonus that traders can get after registering as a new client in a particular broker. The bonus is typically rewarded for opening a live trading account, but some brokers may require additional action like making the first deposit into the new account.

The reward for this type of bonus varies from broker to broker, but it could reach up to 100% depending on the trader's first deposit amount. So, if the trader deposits $500, the broker will grant an additional $500 which can be used to trade on margin. In other words, the new trader will have $500 of the initial deposit to trade and another $500 to trade on margin. Usually, the bonus is credited immediately into the client's account and available to use for approximately six months after the registration date.

The Pros

  • It's undeniable that welcome bonus is a great attraction to join a new broker. New clients often look for bonuses that can help them in their early days, so this option certainly offers a good solution.
  • The bonus can be used for margin trading, so you can amplify the value of your current position and increase the overall potential profit.

The Cons

  • To receive the bonus, you must first understand all of the sign-up and deposit requirements in that broker, which may or may not be doable for all traders.
  • Trading on margin presents additional risks that must be considered by both new and expert traders.

 

Deposit Bonus

Deposit bonus is one of the most common promotional deals used by brokerage firms to attract new customers. As the name suggests, it is the type of bonus that's given after the client makes a deposit to their account. Traders can then use the deposit bonus for trading in financial markets. This bonus is usually intended for new clients only (first deposit), but some programs give the reward each time a client makes a deposit. 

Most brokers would require the trader to fulfill two requirements. Firstly, traders need to register and open a trading account. Secondly, they need to fund their account with any of the available payment methods.

The deposit bonus is usually rewarded as a percentage of the amount of the deposit. For instance, a broker may offer a 20% deposit bonus. If a client deposits, let's say $100, then they will get an extra $20 bonus added to their account.

The Pros

  • The requirements are usually very simple. You just need to open a live account and deposit some funds.
  • The bonus can be used as an additional margin, so you can open larger trades.
  • In some brokers, the deposit bonus is not a one-time deal, so you can enjoy the bonus in the long term. 

The Cons

  • Depending on the broker, the minimum deposit may be too high for some traders. Make sure to check the terms and conditions before registering.
  • Large trades mean higher risks, so trading with the bonus may increase your overall trading risks.

 

No Deposit Bonus

This bonus type is often marketed as a "free bonus without deposit", so traders are not required to fund the trading account to earn this reward. Unlike the welcome bonus that can be used as margin only, most no deposit bonus is usually fully tradable on the markets and the profit can be withdrawn. This gives traders the opportunity to earn without making any investments.

The Pros

  • There is no need to deposit a certain amount to receive the bonus.
  • Since the bonus comes in the form of free money, you can use it for various purposes like trading and using innovative tools.
  • The profit made from trading with the bonus can be withdrawn at any time.

The Cons

  • The bonus is typically small in amount compared to other types, so it can only slightly boost your trade.
  • The maximum withdrawal is usually quite low.
  • Most brokers typically don't allow traders to accept both welcome bonus and no deposit bonus at the same time.

 

Forex Rebate

Some brokers offer forex rebates which allow traders to gain extra cash from their positions regardless of the trading outcome. In order to get rebates, traders simply need to signup with the broker and make trades. Forex rebates will be paid regularly, either on a weekly on a monthly basis.

Forex rebates can be a great alternative to earn compensation in every trade. However, the amount is usually small compared to other bonus options.

The Pros

  • Unlike other bonus programs, this option is not a one-time offer. Instead, traders can benefit from this bonus type on a regular basis. While the bonus amount for a single trade is small, it can pile up over time.
  • Brokers typically don't require traders to make regular deposits to earn rebates. Traders simply need to trade actively using their trading account.

The Cons

  • This type of bonus is usually not available in commission-free trading accounts.
  • Since the amount is small, traders need to be actively trading for a long time to make a significant amount.

 

Refer a Friend Trading Bonus

This type of bonus is getting more popular these days, mainly because it's an excellent solution that benefits both the broker and the trader. The concept is actually pretty simple. Traders need to refer the broker to a friend or family and encourage them to register with the broker. Once they successfully registered and made a fully-verified account, the referral trader will receive a bonus from the broker.

The reward can come in various forms. Some brokers give free stocks to the referring trader who managed to convince their friend to register. Others even offer actual cash to the referring trader. For example, a broker will give $500 for every new client referred by the referring trader. However, it is worth mentioning that some companies may limit the number of friends that can be referred using this program and impose other limitations.

The Pros
You can get considerable incentive simply for recommending a broker to your friends. This way, you can help your friend find the perfect broker and get paid for doing so.

The Cons
If the broker is not reliable, you may raise a conflict with your friend. This is why it's highly crucial to only refer a broker that you trust. In order to do so, you can check the broker's trust score online or register with the broker yourself.

 

Summary

Forex trading has become more attractive nowadays thanks to the evolution of bonus deals offered by brokers. Now, there are many programs that offer considerable rewards and offer more opportunities to generate higher potential profits in the market. However, you need to be aware of the terms and conditions of each bonus scheme before registering because some brokers may require conditions that are too difficult to achieve or don't allow traders to withdraw the bonus at all.

Not only that but there is also a risk of overtrading due to the hard conditions set by the broker. So, make sure to stay informed in order to choose the right programs and make better decisions in the market.