No Deposit Bonus for Forex Trading
It is worth noting that just like with any other types of bonuses
, the no deposit bonuses do have their advantages and drawbacks. Firstly, let us list some of its benefits:
- Unlike with several other types of bonuses, the no deposit bonus does not require anything from a trader, except for registration. So it is easy to secure and does not demand any financial commitment from a trader.
- It gives traders some amount of money to work with, something they can withdraw from the account later if they do not lose it.
- It gives the market participants an opportunity to make trades on the real trading account without depositing any money.
- With no deposit bonus trading accounts, traders can test the platform, execute trades and if they do not like it, they can move on without losing any money.
Now, let us move on to the list of Forex no deposit bonus downsides:
- Not all brokerage firms who offer no deposit bonuses are legitimate. Some of them might represent scams, so traders need to do their due diligence in order to avoid dealing with those.
- The actual size of the no deposit bonus is usually quite small, ranging from $5 to $100.
- The small size of the bonus means that traders can only execute trades with large amounts of leverage.
- In order for traders to reduce their risk exposure and have a realistic chance of earning meaningful payouts, they usually have to deposit money on the trading accounts.
Let us now go through each of those factors, described above in more detail.
Benefits of Forex No Deposit Welcome Bonus
It goes without saying that the no deposit bonus does have its distinct advantages. The fact of the matter is that there are many people who are interested in trading Forex and potentially earning some decent payouts from this market. However, for some of them depositing their hard earned money on the trading account represents a significant psychological obstacle.
During these times, many people are worried about losing money, instead of earning any amount. Consequently, some individuals do not take this ultimate step and as a result, never start trading Forex.
Now, this is exactly where the Forex no deposit bonuses come into play. It essentially gives traders some money to work with, yet it does not require from them anything except for completing the registration. The process is quite simple, the market participant has to fill out certain details about themselves and in many cases also verify the email and the phone number. Once the account is open, the brokerage company will make an initial deposit on the trader’s account.
After completing these simple steps, the market participants can start trading. This allows them to experience and test the real trading account, without taking any sort of financial risk. This helps those traders who had difficulty with depositing the money to overcome those psychological obstacles and get used to trading under real time conditions. They also have a wide range of Forex no deposit bonuses 2020 traders take advantage of, so there is no shortage of the available options.
Finally, if the market participants do not like the trading platform, spreads or commissions, then he or she can simply walk away and look for the better alternative elsewhere, without them having to pay any money. This means that unlike with deposit bonuses, there is no financial risk involved unless the trader for whatever reason decides to transfer money to the trading account.
Disadvantages of Using No Deposit Bonus Account
Now, despite all of the advantages we have described above, it is important to discuss some of the disadvantages of using no deposit bonuses as well. It goes without saying that there are many brokerage firms on the Forex no deposit bonus list, however, one thing we will likely notice straight away is that the actual amount they are offering is usually quite small. With the majority of brokers, the size of bonus typically ranges from $5 to $100.
This is problematic in several ways. Firstly, such a small size of the bonus suggests that most likely it will have very little impact on the trader’s earnings. Secondly, and more importantly, this does not allow traders to maintain any reasonable degree of risk management.
Here it is worth remembering that usually with brokerage companies, the minimum size of the opened trade is a mini lot. The standard lot represents 100,000 units of currency, while the mini lot is the equivalent of 10,000 units. This does not mean that a trader necessarily should have $10,000 at hand in order to open a single position. After all, they can always use leverage
Now, here it is important to remember that there are at least 2 important rules for risk management. Firstly, not to risk more than 2% of the trading capital and also not to take on unnecessarily high amounts of leverage. So if a trader manages to find a broker with the $100 no deposit bonus and start trading with this sum alone, he or she will be forced to ignore both of these rules.
Firstly, one usually can not open trades with $2 or even $5 for that matter. Even if the brokerage company offers 1:500 leverage, one has to invest $20 to meet the margin requirement. It goes without saying that in this case, the market participant will be taking on a huge amount of risk. After all, with this level of leverage, it only takes 0.2% adverse movement in the market for the entire position to be wiped out.
So, in the case of trading with just $100 no deposit bonus, traders essentially have two options. They can spread the risk by opening 5 trades with $20 each. Now obviously, risking 20% of the capital on a single trade is not the best option, but it is better than investing 100% of the amount in one position. However, the downside here is that by
Using 1:500 leverage, the risk of losing the entire capital is quite high.
Alternatively, they can open a single trade at $100, using only 1:100 leverage. In this case, it will take a 1% adverse market movement for the position to be wiped out, which is considerably better than 0.2%. However, it is quite obvious that risking 100% of one’s trading capital on a single trade is far from being a wise risk management strategy.
Finally, it is important not to forget that in some countries there are limits in place for the maximum amount of leverage one can use in Forex trading. For example, in the United States, the maximum level of leverage with major currencies is 1:50, while in the European Union, this limit is set at 1:30 for the same category.
So as we can see in every scenario, the trader has to simply disregard the risk management rules. This obviously, does not necessarily mean that traders will always lose their no deposit bonus, but the chance of this happening is quite high.
The fact of the matter is that the only way traders can maintain sound risk management principles is to make the deposit of their own and increase the trading capital to a reasonable level. However, this defeats the entire purpose of no deposit bonuses. After all, if a trader has to transfer money to the account anyway, then why settle for $100 with no deposit bonus, where there are plenty of deposit bonuses available, offering $500 or even higher amounts to traders?
The alternative to doing so is to take the enormous risks with the no deposit bonus amount and raise it by at least 10 times. However, achieving a 900% return with trading is an unrealistic task for most traders. This seems much closer to gambling than a proper Forex trading. Consequently, this is why no deposit bonuses are not that attractive to many traders.
Finding Legit Forex No Deposit Bonus Offers
Another major concern with no deposit bonus offers is the fact that not all of them are legitimate. In fact, not all bonus offers are under $100. There are some brokers who offer $500 or even $2,000 as a no deposit bonus. Obviously, if these were legitimate, then they would represent quite an attractive offer. However, it is not surprising that some traders think that it is too good to be true.
The fact of the matter is that there is no guarantee that a trader who makes use of the no deposit Forex bonus offer will definitely transfer funds to the trading account and starts trading on a regular basis. It is highly likely that a significant portion of those traders will simply lose their bonuses and leave the trading platform altogether. On the other hand, with deposit bonuses, only those traders who transfer amounts to their trading accounts would get payments. Consequently, it makes very little sense for brokers to offer thousands of dollars as a no deposit bonus to traders.
This is the main reason why some brokerage companies are more than willing to spend $500 or higher on deposit bonuses, however, they are reluctant to spend more than $100 on no deposit bonuses.
So the obvious question at this point is: what are the risks associated with those brokers who offer $500+ no deposit bonuses? Well, there can be several problems with them. Firstly, it is important to keep in mind that those brokers can always impose very difficult withdrawal requirements to the clients. They might require their customers to execute a very large number of trades.
However, this is not the most problematic aspect of those brokers. After all, if the broker is legitimate, then a successful trader can successfully fulfill those requirements and withdraw the money.
The obvious problem here is that brokers who are not properly regulated can use some dishonest methods to deprive clients of their ability to earn payouts and withdraw the funds to their personal accounts. Or alternatively, they might break their promise and do not give any bonuses to the new client. Unfortunately, these cases are still happening from time to time.
Consequently, one way to avoid this type of unpleasant experience is to check the regulatory bodies of the brokerage company before opening the account with them. It is indeed much better to get a small amount of bonus with a highly reputable company, rather than taking risks with the broker who offers the large bonuses but is not properly regulated.