Foreign exchange trading attracts traders of different experience levels from around the world. The forex market is the most liquid and active financial market with low trading costs.
In addition to the benefits that forex trading offers, forex brokers today offer their clients some of the most comprehensive deposits bonuses. However, before opting for a deposit bonus, it is important to understand what it is, how it works, and how traders can use it to their advantage.
The simple definition of a forex bonus is a promotional offer to attract new traders. A forex bonus refers to free credit that the trader receives and can use towards trading activities.
Forex bonuses represent a sum of money that the trader receives to meet certain criteria.
In terms of how a forex deposit bonus works, it can be explained through the following simple steps:
- Once the trader chooses their broker, they register a live trading account with the forex broker, which is the most basic criteria that must be fulfilled.
- If the broker offers a welcome, sign-up, or deposit bonus, the trader must deposit the minimum amount of capital required to activate their bonus.
- Once the trader has fulfilled other criteria, such as a certain number of lots traded while using the bonus, they can withdraw their profits.
The benefits of a forex bonus are:
- Traders are provided with more capital than they can use towards trading activities.
- With more capital, retail traders can open better position sizes, allowing them to earn greater profit.
- There is a lower initial investment required.
- A forex broker bonus provides free trading credit that can be used to test the trading platform performance and the broker's trading conditions.
- It allows the trader to get first-hand experience of how the forex broker treats their traders.
While a forex bonus is an advantage, traders must take care and consider some of the following factors:
- They must read and understand the terms and conditions relating to instances where the bonus can be terminated, can the bonus be transferred, and what happens if the trader loses more than their initial deposit amount.
- Traders must understand what is required of them in terms of depositing to activate the bonus, whether account verification is needed before the bonus is credited when the trader is eligible for the bonus (after their initial deposit or after their first trade).
- Traders must compare between two or three bonuses to decide on the best offer.
Why do Forex Brokers offer Forex Deposit Bonus?
Forex brokers offer forex deposit bonuses as promotional offers to help them attract prospective clients. This forex deposit bonus is either a percentage of the initial deposit, or it can be a flat amount.
The forex deposit bonus is typically credited to the forex trader after their live trading account has been verified and after they have made their initial deposit.
A forex deposit bonus can help traders preview live market conditions because real money is traded on live servers. Forex bonuses also motivate traders to complete certain actions that can help them learn to trade currencies.
A forex deposit bonus provides traders with an initial start in the forex market using trading credit before they risk real money. Beginner traders who are learning to trade can use this to their benefit to experiment in live market conditions.
More experienced traders can use this trading credit when they test different trading strategies without risking their funds first.
How does a Forex Deposit Bonus work?
Several different types of bonuses are offered by forex brokers, and a deposit bonus is one of the most common types. The forex deposit bonus is activated after the forex trader deposits the minimum deposit required after accepting the terms and conditions.
Once the account is verified, the bonus will be deposited into the retail investor account as a non-withdrawable trading bonus or credit. Once the trader receives this credit, they can start opening and closing positions.
Once the trader reaches the minimum required trading volume as indicated by the forex broker, they can claim the amount, and the bonus money will be transferred from the broker to the trader, after which these funds can be withdrawn.
Forex deposit bonuses can only be used on the trading platform of the broker that offers the bonus. The forex deposit bonus can only be used in the financial markets indicated applicable by the forex broker.
What is the average amount that a Forex Bonus offers?
Forex Brokers each have their proprietary methods for determining how much trading credit they offer in their forex bonuses. These bonuses can be determined based on the trading volume, market capitalization, and the user count of the broker.
Larger forex brokers will offer more trading credit as they have stronger revenue streams and larger customer bases that ensure their income. In addition, by offering forex bonuses, the forex broker can increase their overall trading volume and revenue because trading activity is increased.
Forex brokers who offer the highest bonuses include:
- XM – 100% up to $5,000
- Instaforex – $1,000
- AvaTrade – 20% from $1,000
- Axiory – 50% up to $5,000
What are the Restrictions applied to Forex Bonuses?
Some of the restrictions that can apply to forex bonuses include:
- Special minimum deposits that are different to the account type minimum deposits.
- Traders must fulfil the trading volume required to become eligible for the bonus, with bonus funds frozen until this is met.
- There may be time limits on the bonus and expiry dates.
- There may be restrictions on the financial instruments that can be traded, especially if the forex broker tries to increase liquidity on some currency pairs.
- There may be restrictions on some nationalities, especially in areas with strict forex trading regulations.
- Traders will be restricted from withdrawing the deposit until certain conditions are met.
What is the Minimum Trade Amount required to Withdraw a Forex Bonus?
To ensure that all conditions are met and that the forex bonus is not misused or abused, forex brokers will impose certain conditions relating to Minimum Trade Amounts.
This means that when forex traders opt for a forex bonus, they will be subject to completing a certain number of trades within a certain period on a certain financial instrument (or set of financial instruments) before they can draw their forex bonus.
This ensures that all forex traders follow the rules and that trading is fair, secure, and transparent. It also ensures that all participating traders have an equal chance of earning the bonus.
What are the Types of Forex Bonuses?
The main types of forex bonuses are:
1. Forex No-Deposit Bonuses
2. Forex Deposit Bonuses
3. Forex Welcome Bonuses
1. Forex No-Deposit Bonuses: A forex No-Deposit bonus is offered to new retail forex traders who register a live account with a forex broker for the first time. The no-deposit forex bonus is not as high as other bonuses, typically ranging from between $10 up to $200.
These no-deposit forex bonuses introduce new traders to the broker's offering and live market conditions where the real money is at risk. The no-deposit bonus is not intended to be used during profit-seeking trading activities.
The no-deposit bonus can be considered as a practice account that has real money in which the forex trader holds the profits and where they cannot lose real money.
Forex traders can get a no-deposit forex bonus when they register a real account with a forex broker that offers the bonus. The steps involved with getting the no-deposit forex bonus include:
- Registering a live account
- Completing the account verification and the “Know Your Client” (KYC) process
In terms of using the no-deposit bonus, the trader does not need to perform any special functions and can merely start trading.
The difference between the no-deposit forex bonus and other forex bonuses is that traders are not subject to making a minimum deposit to get the bonus.
2. Forex Deposit Bonuses: A forex deposit bonus is a common promotional tool that forex brokers use to attract new customers. This type of bonus applies to both new and existing clients who fund their trading accounts with capital.
To get the forex deposit bonus, the trader must perform two actions:
- New clients must register a live trading account that must be verified
- Funds must be paid into the trading account
Forex brokers offer deposit bonuses from as little as 5% up to 200%, depending on the discretion of the forex broker who offers the bonus.
Forex traders can use the deposit bonus to familiarize themselves with live market conditions and different exchange rates in the forex market. The deposit bonus offers additional capital to forex traders, allowing them to open larger positions that could earn them more profits.
The difference between deposit bonuses and others is that the bonus is for both new and existing clients, it provides a much larger amount, and the terms are much less strict.
3. Forex Welcome Bonuses: A Forex Welcome Bonus, as the name suggests, is like a deposit bonus, but it is only offered to new traders who have never had a live account with a specific broker.
A welcome bonus is also known as a sign-up bonus because of its requirements. To get this bonus, traders must sign up for a live account with the forex broker, make the minimum deposit, and trade the minimum amount indicated before they can receive their bonus.
The forex welcome bonus is not a large amount, but it is considered reasonable. It is typically from 30% and up to $200.
The difference between the welcome bonus and others is that the funds cannot be withdrawn, and the bonus is only offered to new traders after they make an initial deposit.
What are the Pros of Forex Bonuses?
The benefits of forex bonuses are:
1. Larger equity or trading capital
2. Access to more leverage/margin
3. Lower initial deposit
4. The ability to test the platform before committing
5. Verification of the broker's overall services
1. Larger equity or trading capital: When forex traders fund their account with a certain amount, and they receive a bonus, they will increase their overall capital. Traders can then open larger positions without imposing more risk.
If the trader has a winning trade, they will earn more profit than they would have on their initial investment. If the trader experiences a losing trade, their loss will be reduced as well.
2. Access to more leverage/margin: When forex traders have more capital available, they can trade better position sizes, allowing them to earn more profits. The deposit is an additional part of the equity that allows the trader to leverage their position.
3. Lower initial deposit: Some Forex brokers require small minimum deposits and provide traders with adequate bonus amounts. A bonus doubles up as additional trading credit, allowing traders to open larger positions.
4. The ability to test the platform before committing: Traders who only want to explore the trading platform of the broker or their trading conditions can use a forex bonus. This provides them enough capital to explore.
5. Verification of the broker's overall services: Traders need to be careful with the terms and conditions that are associated with forex bonuses. A forex bonus provides a trader with the opportunity to see how the broker treats their clients and how they handle withdrawals.
What are the Cons of Forex Bonuses?
The disadvantages of forex bonuses are:
1. Issues with Withdrawals
2. The bonus is not worth it
3. The bonus works to draw in new or minimal volume traders
4. Most bonuses are offered by scam brokers to trick traders
5. The terms and conditions are too stringent
1. Issues with Withdrawals: Brokers who are not well-regulated tend to stall when it comes to withdrawals, especially brokers who require high minimum deposits to offer lower bonuses.
These brokers always have an excuse or some technical or legal reasons why they cannot pay out the deposit amount or provide the trader's money back.
2. The bonus is not worth it: Brokers can charge high minimum deposits only to give traders low bonuses, for instance, a $10 forex bonus on a $500 minimum deposit, which is not worth it.
This does not help the trader, and it only attempts to draw in more unsuspecting clients.
3. The bonus works to draw in new or minimal volume traders: Most forex bonuses are aimed at new traders or those who cannot afford higher minimum deposit amounts. Even when traders use high leverage ratios, it will take them very long to be able to trade large positions.
When traders manage their risk efficiently, they should not risk more than 1% of their account balance on a single trade. When traders have an account balance of $100 ($120 with the bonus worked in), they can only risk $1.2 per trade.
When trading mini lots, it means that traders must take the risk of 1.2 pips (or less), and they would have to make at least 200 trades to claim the bonus amount.
This makes the forex bonuses redundant for high frequency or more professional traders.
4. Most bonuses are offered by scam brokers to trick traders: Forex bonuses sound like a good way to start trading, but it receives a lot of criticism. Not all brokers who offer forex bonuses are scam brokers, but there are malicious entities who offer bonuses that sound like it could be too good to be true.
Legitimate brokers do not offer outrageous bonus amounts. Instead, they offer better trading conditions that help traders save money on their trades.
5. The terms and conditions are too stringent: The bonuses that forex brokers offer can contain a lot of fine print and grey areas. Some forex brokers also have ridiculous expectations where terms and conditions are concerned that defeats the purpose of the bonus.
If the broker can retract the bonus that they provide at any time, it means that the forex trader can be at risk when they sit with trades too large for the capital that they have in their trading account.
How to Get Forex Bonus from Forex Brokers
To get forex bonuses from forex brokers, traders can:
- Evaluate their unique trading needs and objectives
- Understand their financial situation and whether they need to use a forex bonus to kickstart their trading.
- Identify a trusted broker that offers a reasonable bonus with fair terms and conditions.
- Register a live account with the broker and follow their requirements to obtain the bonus (validating the trading account, depositing funds, fulfilling the criteria, and so on.)
- Once the terms and conditions are fulfilled, the forex trader can submit the request to withdraw their bonus.
Some care that traders must take when they use the services of forex brokers who offer bonuses include:
- Checking online reviews to see if anyone else has issues with the broker
- Enquire about any hidden costs or fine print
- Read and understand the terms and conditions of the bonus.
- Make sure that it is a valid broker with the necessary regulation and authorisation.
- Explore the broker platform and test their trading conditions to ensure that they offer a fair, safe, and transparent trading environment.
What should be considered when choosing a Forex Bonus?
Traders must consider the following:
- Commission per trade
- Size of the spreads
- Quality and reliability of the broker
Forex traders must ensure that they practice caution when they deal with forex brokers. The top indicators that the forex broker is a scam include:
- The broker is not regulated by any known market regulators
- The website of the broker is not informative, or it is incomplete
- The forex broker offers guaranteed returns
- Several reports indicate the broker is a scam broker
- The customer support is lacking. There are slow responses or no response at all.
What are the Best Brokers that offer Forex Bonuses?
The best brokers that offer forex bonuses are:
1. FBS – No Deposit Bonus ($140): The FBS No-Deposit bonus can be obtained by:
- Registering a MetaTrader 5 trading account and requesting the bonus.
- The bonus can be withdrawn after trading 5 lots per day for 30 days.
2. XM – Welcome Bonus (100% up to $5,000): To get this bonus, traders can:
- Register a live account
- Deposit a minimum of $5
- Trade at least 1 lot to earn $10 and more lots to earn higher amounts
3. Instaforex – No-Deposit Bonus up to $1,000: To get the No-deposit bonus, traders can register a real account using the promotional form on the official website. Traders must verify their account, and the deposit bonus will be credited to their trading account.
The bonus cannot be withdrawn, but traders can withdraw profits after they have fulfilled the trading conditions.
4. AvaTrade – Welcome bonus of 20% from $1,000:Traders from non-EU regions can qualify for this bonus when they:
- Register a live trading account
- Deposit $1,000
5. Tickmill – No-deposit bonus of $30: To get this bonus, traders must:
- Register a real account with Tickmill
- After account verification, the bonus will be credited to the account
Traders who use the bonus are not allowed to use Expert Advisors or auto trading. The bonus is only valid for 90 days, and a minimum profit of $30 and a maximum of $100 can be transferred.
Which Forex Deposit Bonuses or Forex Broker Offers should you avoid?
Traders must avoid the following bonuses or offers:
- Offers that guarantee profits
- Offers that require that the trader pay receive their bonus
- Offers that have unreasonable trading requirements and criteria
- Offers from unregulated forex brokers
The reason why forex traders must avoid such offers relate to the fact that no profits will ever be guaranteed. This is a way that scam brokers lure unsuspecting victims into investing their capital.
Traders must avoid offers that require payment for the release of funds, as this is a classic sign of a scam. In addition, when brokers have complicated trading terms and conditions, it is often a sign that the broker cannot be trusted and that traders will lose their investment.
Lastly, traders must avoid dealing with unregulated brokers, even when they offer bonuses and promotions. There are no guarantees that traders will receive the bonus, and their investment may be at risk.