Are Forex Bonuses a Scam?
Are Forex bonuses a scam? Well, yes and no. It really depends on the broker – a well-established broker that has been operating for many years, won’t risk their reputation and clientele to scam new traders out of a few hundred dollars. It’s simply an incentive to entice new traders to try their services. It also gives new traders a bit of a buffer to get used to the company’s platform and trading conditions.
Less than scrupulous brokers on the other hand might use bonuses to trick traders into depositing bigger amounts and might not even be able to withdrawal their profits, if those profits include the bonus. Another way nefarious brokers use bonuses is to keep their clients within their ecosystem – if they can’t withdraw their assets, they can’t and likely won’t leave. Now that I’ve shown you both side of the Forex bonus coin, let’s take a look at what they are, the types, some of the most common conditions associated with these promotions and what you should look out for before accepting a bonus and signing up for a forex trading account.
What is a Forex Bonus?
A Forex bonus is an incentive brokers offer to new or existing clients – think of it as being similar to a buy one get one free or free samples when a new product is launched.
A further benefit to the broker is that a bonus can encourage a bigger deposit especially if the bonus offered is a percentage of the Forex trader’s first deposit. Of course, to a trader the benefits may be much more – you get more tradable credit.
Types of Trading Bonuses
There are numerous types of bonuses brokers offer. Some are a flat amount when a new trader makes their first deposit. Others offer a percentage bonus that can vary greatly – from 5-10% to even 100%. Be weary of higher percentages as they usually come with more restrictive conditions. Smaller percentage bonuses usually allow for more freedom when it comes to withdrawals.
Common Trading Bonus Conditions
Some of the most common conditions when signing up for a Forex trading bonus is a restriction on the volume of trading you must preform before you are allowed to withdraw a part or even the entirety of your returns. Some brokers will break it down – make sure you calculate the full sum. For example, one company says you should trade $10,000 for each dollar of bonus you receive – even at a conservative $200 bonus, you would have to perform $2.000.000 worth of trades to able to withdraw any funds from your account. If you are a part-time trader, this can equate to a year or more of trading.
To ensure that your deposit and funds are available to you when you want them, make sure you read the client agreement for the terms and conditions of the bonus.
What to Look Out for
First, something to look out for when signing up for a forex trading account is regulation. A regulated broker must adhere to rules that ultimately are in place to protect traders.
The size of your account should also be a significant consideration – opening a $10,000 account could make the percentage bonus much more beneficial. You may make your initial deposit as large as you are comfortable with.