While reading currency analysis and economic indicators about China’s newest boon (or is it a bust), you notice something blinking and calling to you in the sidebar or below the article. It is an enticing call to action — come try this new Forex brokerage and earn a bonus! Brokerages may offer a superior spread or the latest technology, but currency traders care most about one thing — cash.
Many brokerages reward traders who pass a certain threshold of volume by tossing back between 20 to 80 percent of commission and spreads. But, that’s for a longer-term loyalty.
Forex bonuses pay off in the shorter term, in theory. Such bonuses are everywhere these days. It’s the bonus money that is thrown into your account for opening an account with this brokerage or that. Brokers are competing for your loyalty, business, and money. They are so hungry for new clients they will toss money your way to entice you to make your trades with their brokerage.
On the plus side, such bonuses actually work. It entices traders to open an account. The free money is like a return on an investment without doing any work. It may translate into more buying power that leads to the threshold faster while increasing potential profits. It turns out most brokers know currency traders well. They provide a solid investment upfront, say by giving back nearly one-quarter of a thousand-dollar initial investment. An increase in capital provides the investor with more financial power.
Read The Conditions First
Some Forex bonuses are less useful because the conditions to earn them are stifling. For one, there may be strict restrictions on when the bonus money can be withdrawn. It might take reaching a volume threshold that removes the advantage of the bonus funds.
For traders who need greater leverage, such bonus funds could increase leverage and can set a margin call to 0 percent. It is not sounding like a reward any longer.
Taking Advantage Of Forex Bonuses
The first rule is to only choose a brokerage that does not limit withdrawals or stipulate many rules to withdraw the bonus money. While bonuses and promotions are potentially useful, they are not the sole reason anyone should open an account. For one, they may be too restrictive. In addition, the brokerage may not serve your needs.
For instance, maybe they discourage day trading, and well, what use do you have for a brokerage that will not pay out and does not allow your trades to take place? Find a brokerage that provides the account capabilities and trading activities that serve you beest.
In all likelihood, the brokerages you look at that serve your needs will actually offer bonuses. The key is to choose the brokerage that allows you to withdraw the money. The rule of thumb is to check out the volume requirement divided by the count of days remaining until the brokerage’s volume-completion deadline.
If you need to complete 25 lots in 20 weeks, how many lots per week would you have to complete? At a rate of 1.25 lots every week, or one-quarter lots per day is falling short. Look for an average daily turnover of 0.32 lots, or one-quarter greater.
This will let you withdraw the bonus. Consider the bonus as a bonus, not as a primary way of making money. The trading performance still is of primary importance.
While you can make money from Forex bonuses, it is short-sighted and oftentimes limited by the small print. In other words, make sure you can withdraw the bonus within reasonable limits and time periods. Otherwise, it may be a waste of time.