What Is A Forex Deposit Bonus and How Does It Work?
Reading time: 16 minutes
When you decide to start trading Forex (FX) online, you will of course need to select a good broker. While traders will look for many useful features when choosing a Forex broker, they will also come across a lot of aggressive advertisements from various FX brokers, that will try to entice new traders with an attractive Forex deposit bonus. This article will explain in detail what this bonus is, how it can be useful, and what the best method for choosing a proper bonus is.
What is a deposit bonus? How does it work exactly? In general terms, a bonus is simply a way of compensating traders for choosing a certain broker. Once a person has opened an account with a Forex broker, they will be trading currency pairs, and will have to incur the same expenses as any other trader. The bonus is just a way for the broker to reward the trader's choice, and give all or some of these expenses back to the trader, once they have proven themself as an active one.
Please note: The European Securities and Markets Authority (ESMA) has agreed to place investor protection measures on the marketing, distribution, or sale of CFDs to retail clients, in effect since 1 August 2018. Those restrictions include a restriction that brokers like Admiral Markets do not directly or indirectly provide the retail client with a payment, monetary or excluded non-monetary benefit in relation to the marketing, distribution or sale of a CFD, other than the realised profits on any CFD provided. This means that the Deposit Bonus is not applicable for retail clients at this time.
How Does a Forex Deposit Bonus Work?
There are many bonuses offered by brokers, with some of them being given to you post-trading, and others being deposited to your account as soon as you have completed a deposit. Bonuses that are known as rebates are credited to your account once you have completed a trade, while regular bonuses may require you to carry out quite a number of trades first.
So how does the Forex deposit work? As this is a deposit bonus, a trader has to of course make a Forex deposit via an account manager, after they have accepted the terms & conditions and have successfully applied. Usually, once the account has been deposited, it may take a few hours (or days, in some exceptional cases) to actually receive the bonus on your account.
Once the bonus is there, a trader may start opening and closing positions with the aim to trade the required volume, in order to claim the bonus as their own property. Once a trader has completed the required volume, the bonus money can be transferred from the broker to the trader. After this, a person can do whatever they want with these funds.
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What Are the Different Types of Forex Bonuses?
So what types of Forex deposit bonuses are available to professional traders? Brokers will present their promotions in various packages. However, it's possible to subdivide almost every bonus into one of the categories mentioned below. Let's look at the categories of bonus you are most likely to encounter, and explore their benefits and drawbacks:
No Deposit Bonuses
This Forex trading bonus is given to traders without any deposit requested from their side. Usually, the size of such a bonus is modest, and varies between 5 USD and 50 USD. Brokers usually distribute such offers so that traders become more motivated to complete operations, and to learn how to trade currencies more effectively.
These bonuses can assist in previewing live conditions, as funds traded are on live servers. It is important to note that no deposit bonuses aren't very common. If you do find one, make sure that the broker offering it is trusted, otherwise you will end up wasting your time. This type of bonus is great for experienced traders. No deposit bonuses are extremely useful when it comes to the development of trading strategies.
This is because it allows traders to try out new strategies and trading styles without risking significant losses on their live account. Opening a no deposit bonus account provides the option of stress-free trading.The main disadvantage of these bonuses is that traders often choose to start with these Forex trading bonus offers when they are new to the market.
Instead of familiarising themselves with the market through a demo trading account, some beginner traders begin to trade on a no deposit bonus account. This can prevent them from learning the rules of risk management, and can also prevent them from benefiting from proper rewards for their time spent on trading. This is why as a novice trader you should not go for this type of bonus.
You may have heard of FX rebates, which is when a commission or a part of the spread is put back into the trader's account once they have closed a position. In some cases, the process of the rebate is rather fast. However, a lot of brokers tend to pay it back on a monthly basis. It is difficult to say whether this type of bonus is good or bad.
In order to clarify whether a rebate is close to the best Forex bonus or far from it, you'd need to examine the trading conditions of the broker. If a broker has, let's say, a spread on the EUR/USD currency pair of three pips (on average) and promises you a rebate of 20 USD per lot (per side), this can look like an attractive offer.
However, through basic calculations, you will find that it is no better than just offering one pip spreads on EUR/USD. In other words, if you can find a broker that offers no rebates, but supplies spreads on EUR/USD that average 0.8 pips, you would be better off not opening an account with such a broker.
Forex rebates can be beneficial, as you are getting compensated for every single lot that you have traded, and there is no minimal set of conditions to satisfy in order to be eligible for the bonus. When searching for Forex brokers with bonus and promotions, you will often find that Forex rebates are quite popular through other third-party websites.
The main criticism of FX rebates is that such a bonus is simply not useful to traders. As mentioned, a rebate may look attractive to you, but in most cases it will end up being just a proportional compensation for your trading related expenses. Also, it is quite common for the size of the rebate to be rather small, so by trading with a rebate, you are saving only a small part of your funds.
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Forex Broker With A Bonus On Your Deposit
This is probably the best option, as the number of available bonus offers is quite good. Generally, you should be able to easily find a deposit bonus offer that ranges from 10% to something more significant like 400%. Remember though, FX bonuses is not an area where bigger is always better. In fact, in many cases you would be better off choosing a small bonus deal over a big one.
When going for a bonus, the selection of the Forex broker bonus offer is absolutely vital. Many traders choose brokers only by measuring the amount of the bonus offered, and then picking the largest available. This is certainly not the way to do it, and in most cases it is a reason why traders have experienced bad luck when trying to cash out their deposit bonuses.
When choosing the bonus for your next deposit, the main idea is to open an account with a reliable broker, and only after that, make sure that this broker can offer bonuses. If it doesn't, it's not a big deal, because you will at least be able to trade FX safely in the knowledge that your funds are segregated, and that you're protected.
On the other hand, if you choose to claim a 200% deposit bonus through an unreliable broker, you run the risk of facing problems later on when you attempt to cash out your bonuses. Don't waste your time and risk your funds - stick to what you know. When choosing Forex broker bonuses, you should shortlist the brokers you feel comfortable with.
Once you have your list, start exploring the bonus possibilities. Do not be afraid to make direct enquiries - even if the broker does not publicly offer bonus campaigns, you may be offered custom bonuses by an account manager. The main rule here is to select the broker, not the bonus.
Forex Trading Gifts
You'll often see brokers offering smartphones, tablets, and other similar items as a gift for your deposit. This can be an attractive option to a lot of traders. However, the reality is that none of the reputable brokers would offer such a 'best bonus for Forex'. Why? Because there is no profit in sending clients expensive items right after they have opened an account.
Unreputable brokers are willing to make these offers because they have nothing to lose. Such brokers will often make this offer, and then simply not send the goods, or change the campaign, and then substitute the item for something of much lower value, or they could even cancel the offer altogether. They aren't interested in maintaining a reputation, so they will take the negative feedback.
Sometimes gift promotions offer to provide you with a gift only after you have completed a certain amount of trades. This is a more honest and reliable approach, but still, the advantages of this are limited. Instead of settling for a gift bonus campaign, you are probably still better off having the best Forex bonuses on your deposit, as the monetary value of bonuses may end up exceeding what a smartphone or tablet is worth.
Trading With A Demo Account
Trader's also have the ability to trade risk-free with a demo trading account. This means that traders can avoid putting their capital at risk, and they can choose when they wish to move to the live markets. For instance, Admiral Markets' demo trading account enables traders to gain access to the latest real-time market data, the ability to trade with virtual currency, and access to the latest trading insights from expert traders.
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How to Choose a Good Forex Trading Deposit Bonus
When it comes to bonuses, it is often hard to find decent articles that illustrate the best practices of choosing FX bonuses. Here are three easy steps that will help you to choose a good Forex trading deposit bonus:
Selecting a Good Broker
No matter how good the offered bonuses are, always remember - the broker comes first. Initially you should only open an account and make a deposit with a broker that you trust, whose platform you can use with ease, and whose conditions you find attractive. It is vital to understand one simple thing - you are going to trade in order to achieve profit, and this should be treated as your main income. A bonus should only be seen as a secondary benefit.
Once you have shortlisted a few brokers that you feel comfortable with, only then should you start checking which one of them offers attractive bonuses. If you don't see any bonuses on offer, do not be afraid be afraid to ask - good brokers are happy to offer custom bonus proposals.
Choosing the Bonus Terms
Many deposit bonus Forex brokers will offer you terms that cannot be achieved unless you completely neglect risk management principles. When going for a deposit bonus offer, always go for brokers that can offer you terms that you can achieve within your normal trading regime.
In fact, you should actually choose terms that allow you to trade in a relaxed way. How do you achieve this? Check how many days a broker offers to achieve the trading volume, then check how much volume you have achieved within the same amount of days in the past, and simply take 80% of it. This way you will be able to focus on your trading, rather than measuring the volume daily, and then thinking about how much more you have to achieve.
This is a very important rule, as some bonus traders often make silly trades just so they can achieve the volume. In such cases, your losses incurred due to the silly trades may easily exceed the size of the bonus. Also, keep an eye on the deposit Forex bonus terms and conditions, as some brokers can often restrict scalpers from achieving their trading volume, by limiting the amount of the minimum qualifying trades to 15 minutes.
Trading the Bonus
In general, you should not employ any trading strategy just to to cash out the bonus. The main idea is to choose a bonus that fits your trading strategy, rather than attempting to adapt your strategy to the bonus. Once you have selected such a bonus, cashing it out will be rather easy, so trading it is not as important as selecting it.
However, you may often find yourself in such situations wherein the bonus is about to expire, yet you still have some some volume to achieve. In such cases, you should simply calculate what the trading expenses for this volume are, and compare it to the size of the bonus. If the size of the bonus is larger, then you should simply hedge your deals and achieve the volume without much risk. However, this should only be completed if the Forex broker bonus deposit terms allow hedging.
Deposit Bonus Forex Broker Offers to Avoid
It may seem like a simple idea - open an account, make a deposit, and get your bonus, however, it is never this easy, and there are often tricks that will attempt to trip you up. First of all many novice traders are looking for the biggest possible bonus, and they simply think that the largest bonus is the best Forex deposit bonus. This is of course wrong in many ways, as the only way to understand bonuses is by carefully reading the terms and conditions.
Brokers that are offering 50%, 100%, or even 200% bonuses are not actually offering a trader anything of any real value. In most cases, such a bonus simply increases your leverage, blocks your withdrawals, and leads you to performing risky trades. It is important to note that large bonuses are usually not available for withdrawal, or the trading conditions attached to them are hardly achievable, especially when a trader implements proper risk management.
The rule of thumb here is that you should always read the terms and conditions, and search for the bonus that you can cash out. Once you have found such a bonus, revise the trading requirements, and see if this is something you can achieve. Never go for the bonus just because it's bigger than the other offers in the market. Also, many shady brokers will provide you with very attractive offers - do not fall for a scam, and avoid the offers which are attractive, but come from untrusted brokers.
Admiral Markets is a regulated broker that offers bonuses to professional clients. Admiral Markets investment firms operating under the Admiral Markets trademark, are leading online trading service providers, offering investment services for trading with Forex and CFDs on indices, metals, energies, stocks, bonds and cryptocurrencies.
- Admiral Markets UK Ltd is authorised and regulated by the Financial Conduct Authority (FCA), FRN: 595450.
- Admiral Markets AS is licensed and authorised by the Estonian Financial Supervision Authority (EFSA license № 4.1-1/46).
- Admiral Markets Cyprus Ltd is authorised and regulated by the Cyprus Securities and Exchange Commission (CySEC), with license number 201/13, the supervisory and regulatory body for investment services firms in Cyprus.
- Admiral Markets Pty Ltd in Australia is licenced to provide financial services by the Australian Securities and Investments Commission (ASIC) under Australian Financial Services Licence number 410681
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.