The FX trading industry offers something that you have rarely seen in any other market and fact, it is something that cannot and will not be given in the stock market industry, This is what is called forex trading with the bonus. What this means is that you, as a trader, will be given a bonus (apart from your deposit) to boost your account value so that you can trade more, and in theory, can also earn more.
This offer is given by various FX brokers all around the world and it is something that is loved by the traders. After all, who doesn’t want free money and an opportunity to make more money than what you usually can with your own funds? This cannot be offered in the stock market industry as the trades are directly settled with the exchanges which are very tightly controlled and regulated by the regulators in various countries. Since there is no such tight regulation of settlements in the FX industry, each broker is free to give offers, bonuses, and discounts as they deem fit. There are not many regulations surrounding these offers and are viewed more as a marketing technique to attract users.
No Deposit Bonus Explained
One of the most famous kinds of bonuses in forex trading is what is called a free deposit bonus. What it basically means is that all that the trader needs to be is sign up with the broker when the offer is in effect and he need not deposit any funds at all but he will be allocated an account with some free funds already in it which he can use for trading. It may sound unbelievable to those who are new to FX trading that brokers give money away for free but there is a lot of hidden tricks in it.
One of the main reasons that this is done is that it is a marketing technique. If it costs say $50 for an FX broker to acquire a new customer, it does make business sense for them to rather give out a bonus for $25 than spend $50 in acquiring the customer. This is a cheap and easy way for acquiring a new customer as far as the broker is concerned. Once the customer opens his account, the broker has all his contact details which he can use later to pitch his other products. And once the client is hooked to a specific broker, it is rare for him to immediately leave that broker and so it makes a lot of business sense to give this offer.
Another point to note is the fact that such offers are always accompanied by a big set of terms and conditions which are very difficult for a normal and new trader to achieve. In other words, the trader cannot just withdraw these bonus funds, there is a set of criteria that he needs to fulfill before he can do that. Most of the time, the bonus is given only for trading and it is not allowed to withdraw. The trader has to make profits over and above the bonus and then he is allowed to withdraw the profits alone. Or the trader is expected to make X number of trades or trade X number of lots before he can withdraw and this X would be such an impossible number that the trader is more likely to lose all the funds by trading rather than make a profit and withdraw it.
Such offers are generally lapped up by new traders who do not understand the mechanics and they invariably lose all their funds before they are in a position to withdraw anything at all. Not only that, now that they have made their first few trades, they get hooked to the platform and the trading and they begin to deposit their own funds in the hope of being able to generate some profits and this way, the broker makes back the bonus that he had given for free. So now, it becomes a double boost for the broker as he gets a new customer and he also gets a customer who is hooked to the platform.
Does the Forex Broker Exercise Control Over How I Trade the Bonus?
The short answer is yes. The brokers do exercise a lot of control over the way that the trader trades the bonus amount that has been given to them. Many of the brokers do not allow the traders to trade on specific instruments, they give them instruments with large spreads and so all such restrictive activities which make it very difficult for any trader to make any money from the bonus that was given to them, leave alone a beginner.
If anyone does manage to make some profits out of the bonus, then again many rules need to be followed while making the withdrawal. The broker might insist that only certain types of trades and the profits made from them would be considered for withdrawal, some of the profits may be taken out due to what they construe as fraudulent trading, only the amount over and beyond what was given as the bonus would be allowed to withdraw, the trader would need to make a specific number of lots for him to be able to withdraw and so many other restrictions would be placed by the broker. It is always better that the trader reads through the terms and conditions before they decide on whether they want the bonus or not.
Even some experienced traders might likely get caught in this trap and we have also seen times when experienced traders take this no deposit bonus and then add their own funds on top of it and then discover that according to the conditions that they agreed, they would not even be able to withdraw their own funds as well unless they satisfied some specific trading conditions. This is why the traders need to read through the terms before agreeing to take up the bonus.
Factors to Consider Before Accepting the Forex Bonus?
There are many factors that the trader has to consider before he decides whether he can accept the trading bonus or not and it varies from trader to trader. The first thing that he needs to do is see the terms and conditions for the forex deposit bonus. See if there is any lock-in period. See the conditions that would be given for making a withdrawal if he makes a profit. The bonus that is given with the least number of conditions is likely to be the best one as it would have no strings attached.
The trader must be as free as possible when trading the bonus. The bonus amount might look like free money for forex trading but on the other hand, even that small amount may be very important for a learning experience as far as the trader is concerned for which he needs to fully utilize the forex free trading bonus. So, the trader must be able to focus on his trading and not on anything else as trading in itself is supposed to be a very difficult job and the last thing that a trader needs to worry about is being restricted in his lot sizes or his instruments or being made to worry about how he is going to withdraw the profits that he will be making. So, go through the terms slowly and very carefully and choose to go with the right broker for the deposit bonus. Many times, the trader might find that he would be better off trading his own funds with full freedom rather than trading the funds given by the broker as part of the no deposit bonus.
What Happens if I Lose the Forex Bonus Allocated to Me?
If you do lose your forex no deposit bonus, well then, nothing happens. No more funds would be there in your account and you would need to top up your account with your own funds before you can restart trading on that account. But one point to note is that you need to inform your broker that you have lost your bonus and so are going to top up with your own funds and trade.
The reason is that the accounts with no deposit bonus are likely to be tracked by automatic programs and they may not know that you have topped up with your own funds and hence it might continue to apply the restrictions that it was applying as if you were forex trading the bonus amount. So you either need to inform the broker or maybe, if you can, it is better that you open a separate account so that there is no confusion in this issue.
But if you do lose your no deposit bonus, make sure that you learn the important lesson of why you lost the bonus. Most of the time, the forex trading with no deposit bonus, for a trader, is more important as a learning tool for future trading rather than worry about whether you make profits or not. So, use this as a lesson for your trading and find out what went wrong. This is very important as it means that if you can lose your entire no deposit bonus, then you can lose the funds that you are going to deposit as well unless you mend your trading ways. So try and find out what went wrong and see how you can fix that. Check whether your money management was wrong or your trading strategy itself was wrong or whether it was your emotions that got the better of you. Find the root cause of the problem, take your time, and make sure that the next time that you start trading with your own funds, it better work well for you. If you can achieve this, then you can be proud of yourself that you have made full use of the free forex trading bonus without the deposit that was given to you. This of course requires a lot of work and skills that need to be developed and you need to make sure that you do that.
When you create an account with many brokers, you get a signup bonus for forex trading. It may not be true for all brokers but many brokers continue to give this even today. The amount of free funds that they give out is likely to be very tempting but the trader needs to make sure whether he really needs the forex trading bonus offers or whether he is well off not taking these free funds but trading with his own funds instead. That is the decision which the trader has to make based on various factors.
Many experienced traders choose not to take such bonuses as the bonus is pretty small when compared to the normal funds that they are used to trading with. Also, they know that there would be a lot of restrictions that would be placed both for trading and also for withdrawing the bonus and the profits earned from it and they very well know that all this effort would really not be worth it considering the stage of trading that they are in.
But if you are a new trader who is still trying to learn the ropes of trading and want to check whether your new trading strategy would work in the real markets when real money is on the line for you, then the forex trading welcome bonus might be a good option for you. The trader would be able to find how good his trading skills are when faced with real account trading situations and also see for himself whether he can continue to make some good profits which he may have achieved while trading on demo accounts. The free real money to trade forex is likely to be useful only under such scenarios that are specific to traders and for every other situation, we believe that it may not be useful.