Bonuses are one of the main driving forces of a large chunk of the FX industry. The reality is that innumerable brokers rely on bonuses to attract an audience.
Officially, most brokers will say that bonuses act as surplus margin to the user’s equity so that more trades can be placed and thus more profit made. However, what many companies will hide (sometimes in plain sight) is that bonuses are, indeed used as trading equity supplied by the broker, but are not always available for withdrawing. Buried in the Bonus Terms and Conditions are clauses that expand on this fact and further complicate things.
The unofficial purpose of FX broker bonuses has always been to keep the user invested in the broker. Say you get a $200 bonus on an initial $500 deposit. The trading capital increases to $700. As of now, the user cannot withdraw her money simply because of a plethora of conditions that the user must meet. These are usually vaguely referred to and kept out of sight, so as to not meddle with the decision of the client.
So what follows now? How can the investor withdraw her funds? Well, one of the most notorious preconditions (aside from clauses prohibiting the withdrawal of bonuses) is to complete a turnover requirement that demands each dollar of the bonus to be traded a certain amount of times. Some brokers require a 30* turnover, while others may exceed this value- we have seen requirements stating that each dollar must be traded at least 10 000 times. The end result is the same- an enormous amount of effort put into trading the bonus so that it can be released to the user, in reality, isn’t worth it. Moreover, considering that most bonuses are relatively humble in size- ranging between $20 and $300- the risks (and effort) greatly outweigh the potential gains.
And these are just two of the conditions set by 99% of Bonus Terms and Conditions. Very rarely is a bonus scheme so light as to include just a turnover requirement or a non-withdrawal policy. Usually, these are contained within a single clause in a multi-page set of provisions that include dozens of further stipulations that the user must agree to, many of which may seem even more ridiculous. Bonuses can be oftentimes canceled without warning, for example, or even removed from the client’s equity if the user’s initial capital falls below the bonus amount. Brokers have been known to alter bonus conditions without updating the client. In other words, bonuses involve a lot of risks!
Considering this, many experts and users tend to think that bonuses occupy a gray area, between what is considered legal and what isn’t, and due to this tendency, bonuses are more prevalent with mediocre brokerages and especially with fraudulent ones.
The moral ground is made more precarious when contemplating that bonuses have always been aimed at novice and somewhat naive users. Pro clients ignore bonus schemes, for their expertise surpasses any impulse, but rookie traders may be attracted to the prospect of “easy” or “free” money.
With that said, let’s have a closer look at some of the most universal bonuses by FX brokers. All bonuses can be calculated in currencies or percentages.
- Initial Deposit Bonus. This bonus is available to first-time depositors, making it a convenient. albeit risky, cash-grab opportunity for many reluctant users.
- No Deposit Bonus. By far the most alluring of all deposits, the non-deposit bonus seemingly grants free trading credit that can, in all actuality, rarely be withdrawn, and when it can be, the preconditions to doing so are very taxing. This is by far the most popular bonus applied for by newcomer investors, and because of this many scammers greatly rely on it
- Bonus on Each Deposit: This is a bonus that reoccurs with each deposit made by the user, no matter how many she has made thus far. Terms and conditions may be less daunting, yet the risk of losing money lingers.
- Forex Deposit Bonuses: Awarded for depositing a specific amount to your account. The bonus is given only if the user meets the initial bonus deposit requirement. For example, the firm unlocks a $200 bonus on a $1000 minimum deposit or higher. The accompanying terms and conditions may foster some nasty clauses.
- Day Trading Bonus: Some days of the week hold specific bonuses over others. For instance, each Tuesday there might be an offer pertaining to a 30% percent bonus (calculated based on the initial deposit, so 30% of a $200 minimum deposit is equal to $60, so with the bonus the initial equity increases to $260). It goes without saying that T/Cs apply.
- Refer a Friend Bonus: Referring a friend grants both parties a bonus. Obviously, a savvy way to gather more users, yet is not the most popular of the bonuses. Of course, all bonus terms and conditions apply.
If you feel confident that a bonus if for you, the last advice we can offer you is to carefully go through all of the bonus terms and conditions.