Forex Deposit Bonus Explained
Before moving on to the discussion of the advantages and disadvantages of Forex deposit bonuses, it is worth addressing how one can receive this type of bonus. Now, the exact terms and conditions for benefiting from this type of promotion might vary from broker to broker. However, generally, this involves taking the following steps:
- Registering for the trading account, at the broker’s website
- Verifying the email and telephone number
- Verifying the identity by scanning or posting the copy of ID card or passport
- Making the initial deposit to the trading account
Once the trader completes all of these steps, he or she should receive the bonus amount on the trading account. The time of processing this payment does depend on the broker. Consequently, with some brokerage companies, it might take just several minutes, which with others it might take more time. However, in most cases, traders should receive a bonus amount within 24 hours after making the first deposit.
Ordinary Forex Deposit Bonus
At this point, some people might wonder about what are some of the benefits with the typical Forex Deposit Bonus 2020 traders should be aware of. Firstly, it is worth mentioning that here we are dealing with two possible options.
In the first case, the brokerage companies offer traders the fixed amount of money for trading, in exchange for them making the first deposit. For example, the broker might offer the market participant $100, once he or she makes the initial transfer to the trading account.
Another even more common option is the brokerage company to give the new clients the sum, which will be the equivalent of the specific percentage of the initial deposit. However, here it is worth noting that the majority of brokers do impose some sort of cap on these bonuses.
After all, it makes sense that if the trader were to deposit $100,000 on an account with a 20% bonus offer, not many brokerage companies will be willing to grant them $20,000 as additional trading money. Consequently, it is very common for brokers to impose some upper limit on those payments.
For example, the promotion might offer traders a 50% deposit bonus of up to $3,000. This means that for depositing $6,000, the market participants will receive $3,000. However, if they deposit more than $6,000, the bonus amount will still remain unchanged at $3,000. This allows the brokerage company to put some limit on the amount of money they spend on bonuses, while still attracting some new clients.
It goes without saying that these types of bonuses do have significant advantages. In many cases this allows the market participants to increase their initial capital considerably. Even if the traders get an extra $500 or $1,000 in bonuses, it can have some meaningful impact on their earnings.
Despite these advantages, it is worth mentioning that the majority of the Forex deposit bonuses are paid only once to the new clients. Consequently, if the trader likes the trading platforms
and decides to remain with the same broker, he or she might not receive any bonuses. Consequently, those traders who are concerned about this might look for other options.
Other Types of Forex Deposit Bonuses
At this stage, it is worth mentioning that many brokers understand that a significant portion of traders want their loyalty to the brokerage company to be rewarded, rather than just receiving a single bonus payment when opening the trading account.
Consequently, some brokerage companies offer the market participants bonuses for every time they deposit money to their trading account. These are also known as the reload bonuses.
Now, here it is worth noting that in most cases the percentage amount of bonus might be lower than with the ordinary welcome bonuses. This makes sense since the regular payments associated with the reload bonuses represent a much larger amount of long term expenditure, compared to in the cases of the welcome bonuses.
However, it goes without saying that these types of bonuses are popular with a significant number of traders. Here, instead of just receiving a single bonus payment, the market participants can increase the size of their trading capital considerably due to these reload bonuses. In this case, the traders not only receive benefits for opening the new account but also for every time they make a deposit.
Just like any other type of Forex bonus, the reload bonuses do have their own disadvantages as well. The fact of the matter is that some of the traders who are already earning consistent payouts from trading, no longer need to deposit anything to their trading account, since its size is already enough to fund their trades.
This means that those traders will not receive any bonuses if they do not make additional deposits, even if they maintain the high trading volume. Consequently, such traders might be more interested in Forex accounts which offer cashback bonuses. In these cases, the actual amount of the bonus depends on the number of executed trades, rather than on the size of the additional deposits.
Other Considerations with Forex Deposit Bonuses
It goes without saying that when choosing between different brokers, the decent deposit bonus is a plus. However, it is important not to make this the only decisive factor in the decision-making process.
The fact of the matter is that there are several other factors that can have a sizable impact on the trader’s earnings. Firstly, one thing traders might want to avoid is the commission per trade. The standard fee typically ranges from $5 to $10. However, if the market participant makes even a moderate amount of trades per day on a regular basis, then this expense can eventually add up to a significant amount.
Therefore, earning a $500 as a deposit bonus is helpful; however, if it ends up consumed by the trading commission in a month, then this might not be that useful. Luckily, there are plenty of commission free trading accounts which traders can make use of.
Another major consideration here is the size of the spreads. Obviously, this is an unavoidable expense, since the brokerage companies also need to earn some income. However, the reality of the matter is that brokers have their own policy on spreads. Consequently, spreads with some brokerage companies tend to be more competitive than others.
It is a relatively less visible expense for traders; however, just like in the previous case, it can make a significant difference in the long term. This is especially true for scalpers and day traders, who typically execute the large volume of trades within a short period of time.
Therefore, when making a choice between a broker with tight spreads and no bonus, and the one with wider spreads and deposit bonus, it might be a good idea for traders not to rush into favoring the latter category. In some cases, it can be a better idea to choose the one with no deposit bonus, but with much more favorable spreads, depending upon the circumstances.
Finally, it is also helpful to be mindful of the fact that the difference in the quality of the service, as well as the reliability of the broker, is important. If a broker has poor quality service, with slow execution of trades and dealing desk, it can create a lot of problems for traders.
For example, traders might find some good entry or exit points for their trades, but they might get rejected by the dealing desk, or the platform might not execute the trade soon enough. It is understandable that a couple of seconds worth of delay, might not pose serious problems most of the time.
However, this is not always the case. Here it is worth remembering that in times of the major economic announcements, such as the latest interest rate decisions, the GDP, the consumer price index, or unemployment rate publications can lead to much higher volatility for the currency pairs, than under the normal circumstances. In some cases, the pairs might gain or lose 50 or even 100 pips just in the course of several seconds. Consequently, any delay for the execution of the trade, due to the involvement of the dealing desk or for any other reason can lead to traders taking significant losses.
Therefore, the quality factor should never be underestimated. If there is a choice with a broker with a sizable deposit bonus, but with poor execution of trades and a dealing desk, and the broker with no deposit bonus, but high-quality service, then it might be a worthy decision to favor the second option.
The fact of the matter is that traders sooner or later will spend their bonuses; however, they will still have to deal with the poor quality of trade execution by the broker. Consequently, it makes sense to make the quality a priority over the size of the trading bonuses.