One of the greatest advantages of forex trading is the sheer variety of online brokers competing for your business. As a trader, this is a very good thing because it means you can carefully pick and choose the right platform for you. Many forex brokers will try to sell you on low spreads, execution speeds and a wide variety of trading instruments, but even more are promising lucrative bonuses just by opening an account.
Forex bonuses may be a great way to test out a broker, but if not used correctly, may cost you more than you bargained for. The following should provide you some clarity in deciding which forex bonus offers you may consider to accept.
Never choose a broker solely because of their bonus.
We all know bonuses are attractive, but they shouldn’t be the sole (or major) reason behind your decision to join a broker. You must also consider the broker’s reputation, regulatory structure and overall trading platform before you even consider accepting their bonus. What’s the point of getting a bonus if the broker is no good?
Understand the difference between bonus programs.
Not every forex bonus is the same. By understanding the differences, you can better choose the program most suitable for you. For example, an instant bonus is tradeable money that is added to your account after sign up. The amount that is added is often a percentage of your initial deposit. So if a broker offers you a 50% instant deposit bonus up to $1,000, you will receive an extra 50% on top of your initial deposit. Other bonus programs include drawdown bonus, no deposit bonus and reload bonus. Remember, not every type of bonus works like an instant bonus.
Understand the withdrawal guidelines.
Just because you receive an instant bonus or no deposit bonus, it doesn’t mean you can automatically withdraw the funds from your account. If that were the case, forex brokers would go belly up in a matter of days from traders depositing money for the sole purpose of withdrawing the bonus. Rather, most bonuses are added to your total trading capital, which means you can trade with the extra funds and withdraw the profits. In the case of a no deposit bonus, you may have to complete a certain number of trades before you are able to withdraw the bonus.
Actually read the terms and conditions.
Forex bonuses are geared toward minimal capital traders.
Most forex bonuses are geared toward people trading $5,000 or less. This limits the amount of bonus you can receive. If you’re heading into a bonus program expecting to increase your trading capital from $10,000 to $15,000 (in the case of a 50% instant deposit bonus), think again. Remember that most of these programs are aimed at new traders or people wanting to test out new trading platforms. Don’t expect to get rich from a forex bonus, even if you trade successfully.
A forex bonus is a great way to get your feet wet as a new forex trader. It can also be a great tool for experienced traders to test out new brokers. However, a forex bonus will not increase your chances of beating the market; at best, it will provide you with a little more trading capital or a little more cushion in which to absorb losses.
Remember, if it sounds too good to be true, it probably is. The same rule applies to forex bonuses.
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