Types of Forex Bonuses Explained
As mentioned above, there are a number of Forex bonus types, so here is the full list of those:
- Deposit bonuses
- Reload bonuses
- No deposit bonuses
- Pending bonuses
- Cashback bonuses
- Special bonuses for VIP accounts
Now let us go through each of these in greater detail.
Deposit Bonuses
The
deposit bonus, also known as the welcome Forex bonus, is one of the most common promotional tools used by brokerage companies in order to attract new customers. As the name suggests, this type of bonus applies to new, rather than existing clients.
What happens with most brokers is that they offer traders a bonus for fulfilling two requirements. Firstly, they need to register and open the trading account. Secondly, they need to make a deposit on their trading account.
The deposit bonuses are mostly expressed as a percentage of the size of the deposit, up to a certain amount. For example, the Forex brokerage firm might offer the new clients the 20% deposit bonus up to $500. This means that once the market participant makes his or her initial deposit, the broker will add 20% of the deposited amount. However, the maximum size of the bonus will be $500, regardless of the overall size of the deposit.
Traders then can use this bonus for trading in the Forex market. Now, consider the fact that this type of welcome bonus that Forex companies pay is just a one-off offer. This means that it is paid to clients only once. Therefore, it might not have a long term benefit for traders.
However, for Forex traders who are looking to open a new trading account, they might consider finding those brokers which offer such bonuses and deposit enough to get the most out of the promotion.
No Deposit Bonuses
In general, the majority of Forex brokerage companies do require their clients to make at least one deposit, before they can receive any bonuses. However, there are also some brokers that offer welcome bonuses just for opening the trading account.
The size of
this type of bonus is usually relatively small and typically ranges from $5 to $100. This is not surprising, since it represents a direct expense for brokers when they accept new customers. So here we are essentially dealing with just one type of advertising expense for the brokerage companies.
On some rare occasions, some brokers do offer bonuses higher than $100, but those cases are not very common and when it happens, it is usually a temporary promotional offer, which expires at a certain date.
The no-deposit bonus can be a nice addition to trading accounts. In fact, there are many people who are interested in Forex trading, but so far feel uncomfortable with depositing their hard earned money on the trading account and exposing those sums to risk. Consequently, it might be a good idea for those individuals to take full advantage of Forex no-deposit bonus trading accounts.
This allows traders to start trading on the platform without making any initial deposits. So it can be handy for those market participants who want to give a try to a new trading account without risking any amount of money in the process.
However, the fact of the matter is that these types of bonuses are usually only given once and represent a small amount of money. Consequently, despite its benefits, this type of bonus might have very little impact on the trader’s overall earnings.
Pending Bonuses
Some Forex deposit bonus brokers, in addition to the initial offer also offer a so-called pending Forex bonus. Now the exact terms and conditions of this type of offer may vary from broker to broker. However, the general idea here is that in order for traders to access this type of bonus, they need to execute one or some other specific number of trades.
Just like ordinary Forex deposit bonuses, these types of offers do have their own benefits. The fact of the matter is that when a new trader starts trading, there is no guarantee that he or she will definitely earn some payouts at the very start.
Consequently, knowing that there will be some bonus to collect, no matter the outcome of the initial trade can be very reassuring for the market participants. After all, they can just open a relatively low risk position and get access to this bonus with the minimal potential losses, in the worst case scenario.
Despite these upsides, it is worth noting that this type of bonus might not be sought after by some traders. Firstly, it is useful to point out that, just like the previous two cases we have discussed, this is usually a one-off offer. So traders will receive it only once. Secondly, traders need to deposit money and risk their capital in a trade, in order to get access to the bonus. Consequently, these obstacles might not be very appealing for some market participants.
Cashback Bonuses
Some brokerage companies instead of, or in addition to Forex trading deposit bonus, also offer the so-called ‘cashback bonus’. This essentially involves the broker returning some portion of the paid commissions back to the trader’s trading account.
Obviously, there are many Forex brokerage accounts available that do not charge any commissions for opening or closing trades. In those cases, the broker makes the money solely on spreads and on the commissions on the swap rates. The first category is represented by the difference between the buy and sell price of the given currency pair or commodity.
In case of the rollover charges, it is worth noting that the brokers do not simply pass on the exact interest rate differentials between the two currencies to the traders. They typically retain some portion of the interest for themselves, whether it will be the annual 0.1% or any other rate.
This means that, for example, if the interest rate differential is 1% in favor of the trader, the broker might pay 0.9% to the market participant and keep the remaining 0.1%. Alternatively, if the differential is 1% against the trader, then the brokerage company might charge 1.1%, by factoring in 0.1% commission.
Now, it goes without saying that this is not the only type of account the brokers offer to the market participants. There are accounts where the brokerage company in exchange for a flat fee per trader allows traders to benefit from much tighter spreads or avoid any rollover charges. This is exactly where the Forex cashback bonus comes into play.
This flat fee is typically within $5 to $10 range, although there can be some exceptions. So for example, if the trader has to pay $10 commissions for opening positions, then the broker might offer to return $3 out of this sum as a bonus to the trader’s account.
Now, this might seem like a very small benefit for some traders. However, the upside to this bonus is the fact that unlike all previous bonus options we discussed so far, this one usually does not represent a one-off offer. Instead, the market participants can benefit from this bonus on a regular basis. Also, it is worth keeping in mind that, although the bonus amount for a single trade might be too small, if the trader maintains its trading activities, over time it can add up to a notable sum of money.
This means that traders can still benefit from narrow spreads or no rollover trading and at the same time get some of the commission money back to his or her trading account. Also, it is worth noting that the brokers typically do not require their clients to make regular deposits in order to receive the bonus. All they need to do is to trade regularly on their trading account.
Just like with even some of the best Forex bonus types, this one also has some disadvantages. Firstly, it is important to remember that these types of offers are not usually available to commission free trading accounts. Also, because of the small size of the bonus, traders need to keep trading for a long time, for the bonus amount they receive to make any significant impact on their trading capital.
Reload Bonuses
The reload bonuses essentially represent one of the Forex trading deposit bonus types. Now, the main difference between these and other types of deposit bonus offers is that here, traders receive bonuses every time they deposit amounts to their trading account.
For example, if a brokerage company offers a 10% reload bonus, this means that if a trader deposits $1,000 on the trading account, he or she will receive $100 extra funds to trade.
Now, the actual percentage amount of the bonus might be lower to the welcome bonuses, because the brokerage company has to pay those payments to its clients on a regular basis, rather than just once. However, this does not really change the fact that it is one of the most attractive options for market participants.
This is because of the fact that, since traders are getting reload bonuses every time they deposit money, over time, they can accumulate a significant amount of capital from these payments. Consequently, it is highly likely that these types of bonuses in the long term can have the most sizable impact on one’s trading account, compared to other options we discussed earlier. Consequently, it is not surprising that some traders regard it as the best Forex broker bonuses available on the market.
The only downside to this type of bonus is the fact that the market participants do have to deposit money to receive it. Consequently, these traders who have such a large account that they no longer deposit any money, will not get any bonuses from the broker, regardless of their trading activities. Yet, this still does not change the fact that it can be considered as one of the best Forex bonus 2020 traders can make use of.
Special bonuses for VIP accounts
Finally, on our list we have so-called VIP accounts. As the name suggests, these types of bonuses are usually available only with VIP accounts. Here it is worth mentioning that every brokerage company has its own approach to this subject.
Some brokers simply do not have any VIP accounts and consequently, they do not offer these types of bonuses. However, many of them do have them and each of them has their own set of requirements for clients in order to give them access to these accounts.
For example, some brokerage companies might charge a flat monthly fee for VIP accounts, others might require some specific amount of capital to be deposited. There are also brokers who only give access to these accounts to experienced traders.
So why would anyone be interested in paying a regular fee or maintain their loyalty to one broker in order to get access to VIP accounts? Well, the main reason here is that brokerage companies give a range of benefits to their VIP clients.
This can range from tighter spreads to VIP bonuses. The latter one can include just a lump sum deposited to the trader’s account as a bonus, or it can operate as reload bonuses. It goes without saying that these offers can be quite beneficial to Forex traders and some might consider it as the best Forex bonus account.
One additional thing to note about the VIP accounts is that with these, not all offers are standardized and pre-determined. In some cases, clients might receive some special custom offers, specially designed for them. This can include some large bonuses in percentage terms, for making a deposit until a specific date, or some other opportunity to earn even higher amounts with bonuses.
The only downside with these types of bonuses is that the trader has to overcome some obstacles in order to get a VIP account, something which can be inconvenient for some traders.