What Is A Deposit Bonus
A deposit bonus is defined as extra money credited to a trader’s account based on the initial deposit a trader makes with the respective broker.
This is the very definition of a deposit bonus forex brokers typically offer, but they can differ in many ways.
Deposit Bonus Types
The most common difference between different bonuses is the amount of extra money the broker credits a trading account. This can differ based on a trading volume that is realised or simply based on a specific campaign that runs in a specific amount of time.
Such bonuses are also being called welcome bonuses and are offered with predilection to beginners on the forex market. The reason for that is to make the trading decision easier or, to be more exact, the funding of a trading account. It is one thing to fund your trading account with an amount and another thing if the broker comes and tells you that for every x amount of money deposited a bonus is going to be offered.
Trading Volume Needed
The simplest approach to a Forex deposit bonus is to tie it up with a trading volume request. It means that to clear the bonus (to withdraw the money), a trader needs to trade a specific number of trading lots or a volume.
This volume is usually quite substantial and traders are finding difficult to clear the bonus, but knowing a few tips and tricks can help.
For example, avoid trading the news as the risk of fake moves is bigger when news are being released. Therefore chances for the account suffer a loss are bigger. The way to avoid that is to look at the economic calendar and not trade during the “red” events. These events are the ones that create the most market movement so ignoring them will leave a trader with a ranging environment.
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Clearing A Bonus
Such an environment is ideal for clearing a bonus in the sense that one can easily trade in both directions, especially if hedging is allowed in the trading account.
There are other types of deposit bonus forex brokers offer, like the one that is added constantly on a trading account as long as trading goes on. It is known that brokers are earning the vast majority of their incomes from commissions so the idea is to get as many traders to trade as much as possible as this way commissions will grow on a constant basis.
Easy to say than done, but such bonuses achieve these result.
In such instances, the bonus size depends on the trading results a trader has in a specific amount of time. One example would be that $10 are offered per lot traded, and the bonus is valid for a specific amount of time.
Let’s assume the broker’s campaign is valid for a period of three months. If during these three months the trading volume in the trader’s account is, say, twenty lots, at the end of the period $200 will be credited to that trading account.
After the period expires, no more bonuses are offered until the next campaign. This way, traders are stimulated to trade more often and sometimes more aggressively in order to earn the bonus.
It is a great way for brokers to navigate through difficult financial periods as revenues from commissions will increase significantly as long as the bonus period is open. But for traders is not always a good decision to accept and hunt such a bonus.
The reason for that comes from the fact that hunting a Forex deposit bonus is extremely risky as sound money management techniques tend not to be respected anymore. Having said that, chances for the account to suffer larger losses than normal are increasingly higher during bonuses periods when compared with normal trading conditions.
Types Of Deposit Bonuses
Brokers are using different percentages to match a deposit and that represents the size of the bonus offered. It is a common approach for the bonus percentage to be bigger the larger the amount that is going to be deposited.
The best deposit forex bonus a broker can offer is a bonus that requires a smallvolume for clearing it. It doesn’t mean though that the broker is a good one just because is offering such easy conditions, as it may very well be a trick into getting as many traders to trade and to hook them for the long run.
When it comes to percentages, the largest forex deposit bonus may go all the way up to 100% of the deposited amount. As a rule of thumb, the bigger the deposit, the bigger the volume needed for it to be cleared, so a trader should know that consistent trading only can lead to the bonus to be withdrawn.
So far it seems that the biggest advantages are on the broker’s side, but traders do benefit as well out of these bonuses. Some bonuses are instant in the sense that by the time one makes a deposit, the advertised bonus is instantly credited to the trading account.
The advantage here is that the supplementary amount can be used in trading larger volumes, hence having more leverage for the swings the forex market is famous for.
However, on the run for the highest forex deposit bonus, a trader should carefully read the term and conditions before accepting the bonus. There are a lot of brokers trying to benefit either from the lack of regulation in a specific jurisdiction or simply trying to scam people.
The easiest way to do that is to condition any withdrawal (including the deposit a trader makes!!!) by the trading volume that is required for the bonus to be cleared. This is not a forex broker one wants to deal with as the trading volume is set at such ridiculous higher levels that it is almost impossible to be cleared without the whole amount to be lost.
Therefore, to avoid any kind of scam on any forex bonus on deposit, one should be sure that no such condition is in the terms and conditions agreement.
It wouldn’t hurt to find out other details about the broker, like if it is regulated or not, if it is offering segregated accounts or not, the spreads and commissions involved, as all these aspects matter when trying to clear the bonus.
A top forex deposit bonus is one that offers the possibility to earn progressively as the trading volume increases, and ideally it is one that doesn’t have a specific period attached to it.
This way there’s no pressure on the trader’s side to clear the bonus and money management rules can still be followed. But this kind of bonuses is really rare as it is not in the general interest of the broker, even though in reality it should be, as trader’s confidence is boosted and the broker eventually wins from more trading activity that generates more commissions.
A great way to get familiar with how to clear forex bonuses is to look for brokers that are offering small forex deposit bonuses.
It may sound ridiculous but the smaller the bonus, the smaller the volume that needs to be done, and this way the smaller the unnecessary risks to be taken.
As mentioned earlier, forex deposit bonus scams are very common, and the way to avoid them is to look for more details regarding broker’s activity. These can be found out by participating in forums dedicated to the forex industry where usually people are sharing their views on brokers, what’s good, what’s bad, their experiences, etc.
There’s a lot of useful information to be found out in this way and chances are higher for scams to be avoided.
All in all a deposit bonus forex brokers offer should be viewed as an opportunity both by the broker as well as the trader. The broker is happy that trading activity is picking up due to the trading volume required to clear the volume, while the trader is benefiting from the fact that the trading account has more free margin available that can be used either to soften the current exposure or to open new positions.
Best practices of trading with a forex deposit bonus are to use a combined approach of both technical and fundamental analysis when making a trading decision. Technical analysis deals with forecasting future price movements based on specific patterns that formed in the past, while fundamental analysis deals with interpreting economic releases in order to find out what the next move for a specific currency pair will be.
Combining the two gives an unparalleled approach to trading and is the only way for a trader to succeed. If in the meantime a specific campaign allows for a forex bonus to be incorporated in the overall bigger trading setup, then it should be taken. If not, it should be avoided as risks are bigger than the actual bonus offered.
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