Selecting a reputable forex broker with enticing promotional incentives like a forex deposit bonus is extremely important
when starting to trade forex (FX) online. While traders evaluate numerous features when choosing a broker, they also encounter aggressive marketing from various FX brokers attempting to attract new traders with attractive forex deposit bonuses. This article will explain in detail what a deposit bonus is, how it can be beneficial, and the best approach for selecting an appropriate bonus, as well as the concept of bonus trading.
How Forex Deposit Bonuses Work
Forex brokers offer different types of bonuses to compensate traders for choosing their platform. Once a trader opens an account and begins trading currency pairs, they incur expenses like any other trader. The deposit bonus is a way for the broker to reward the trader's choice by refunding some or all of these expenses once the trader proves themselves active.
There are many bonuses, with some credited after trading and others deposited immediately after funding the account. Rebates are credited after completing a trade, while regular bonuses may require executing a certain number of trades first.
For a deposit bonus, the trader must make a deposit after accepting the terms and conditions and opening a live trading account. Once the account is funded, it may take a few hours or days to receive the bonus. The trader can then start opening and closing positions to meet the required trading volume and claim the bonus as their own. After meeting the requirements, the bonus money is transferred from the broker to the trader to use as desired.
Types of Forex Bonuses
Brokers present promotions in various packages, but most fall into these categories:
No Deposit Bonus: A small bonus (typically $5-$50) given without requiring a deposit, allowing traders to experience live trading conditions risk-free and develop strategies.
Forex Rebate: A commission or portion of the spread is returned to the trader's account after closing a position, either immediately or monthly. The value depends on the broker's trading conditions.
Deposit Bonus: The most common, where a percentage of the deposited amount (e.g., 10%-400%) is added as a bonus. Choosing the right deposit bonus is crucial, considering the terms and conditions.
Trading Gifts: Some brokers offer physical gifts like smartphones or tablets for making a deposit. However, reputable brokers rarely offer these, as providing expensive items upfront is unprofitable.
Choosing a Good Forex Deposit Bonus
Select a Trusted Broker First: Open an account and deposit with a broker you trust, whose platform and conditions you find suitable. A bonus should be a secondary benefit.
Review the Bonus Trading Terms: Choose achievable terms that allow you to trade comfortably without neglecting risk management. Avoid terms that force you to overtrade.
Trade as Usual: Don't employ strategies solely to claim the bonus. Choose a bonus that fits your existing strategy, making it easy to cash out.
Remember, Always Read the Terms and Conditions
Prioritise choosing a reputable broker over just the bonus size. With the right approach, a forex deposit bonus can be a valuable addition to your trading arsenal.
European Traders and Forex Bonuses
Under MiFID II (the legislative framework which regulates markets), retail clients, classified as non-professional investors, are forbidden from receiving any type of forex bonuses from brokers. This measure is designed to protect retail investors from potential conflicts of interest and to ensure fair treatment. Forex bonuses, including welcome bonuses, deposit bonuses, and trading rebates, are viewed as inducements that could sway the trading behaviour of retail clients. Such inducements might lead to excessive risk-taking or ill-advised trading decisions, posing significant risks to retail investors' financial well-being.
For instance, a retail investor might be enticed to trade more frequently or engage in higher-risk trades due to the allure of these bonuses, without fully comprehending the associated risks. MiFID II seeks to mitigate these risks by prohibiting brokers from offering such bonuses to retail clients.
Conversely, MiFID II allows professional clients, who possess a higher level of knowledge, experience, and financial resources, to receive forex bonuses from brokers. Professional clients generally include institutional investors like banks, investment firms, or high-net-worth individuals who meet specific criteria established by MiFID II. These criteria ensure that professional clients have a comprehensive understanding of the risks involved in trading and the potential repercussions of accepting bonuses.
Professional clients are permitted to receive forex bonuses because they are deemed capable of making informed decisions without being unduly influenced by inducements. For example, a high-net-worth individual or a financial institution is likely to have the expertise and resources to evaluate the risks and benefits of accepting a trading bonus, making them less vulnerable to the potential pitfalls that might affect a retail investor.
Frequently Asked Questions (FAQ)
What is a forex deposit bonus?
A forex deposit bonus is a promotional incentive offered by brokers to attract new traders, where a percentage of the deposit amount is credited to the trader’s account.
Are there different types of forex bonuses?
Yes, there are several types, including no deposit bonuses, forex rebates, deposit bonuses, and trading gifts.
How can I choose the best forex deposit bonus?
Choose a bonus from a reputable broker with terms that fit your trading style. Ensure the terms are achievable and do not force you to overtrade.
How do I claim a forex deposit bonus?
After opening an account and making a deposit, you need to accept the bonus terms and conditions. The bonus will be credited to your account after meeting the required trading volume.
Can I withdraw the bonus money immediately?
No, usually you must meet specific trading volume requirements before the bonus money is transferred to your account for withdrawal.
Is it safe to choose a broker based solely on their bonus offer?
No, prioritise choosing a reputable broker with suitable trading conditions. The bonus should be a secondary benefit.
Can European traders receive deposits?
Yes, but only European professional traders can receive bonuses due to MiFID II regulations.