Bonuses and Promotions by Forex Brokers: Don’t Fall for Them
Since the inception of the Internet, the number of brokers offering services to retail traders has increased. The competition between various companies influences them to provide more low spreads, execution speeds, accounts, customer support, and bonuses for attracting market participants.
Several rewards may be useful in a few cases, but they are detrimental in the long run. Novices and even amateurs give in especially to the promotions as there is not a single to guide them.
What types of bonuses and promotions are there?
Let us cover some important one of the services by the brokerages and their potential drawbacks.
It is one of the most famous offerings that each broker has nowadays. The no deposit bonus is no different from increasing leverage on your account. What your brokerage does is multiply your initial equity by one and a half or sometimes two. However, the money is not yours to trade, and it is only there as long as the original balance is positive.
The drawback is that you think the broker is generous enough to offer free money, but it is just an alternative to attract traders to their scheme. You may be able to use big lot sizes, but it increases the overall risk.
No deposit bonus
No deposit bonus is an excellent way to test trading services. You still have to put in money or trade certain lots for extracting cash in the long run. One of the renowned forex brokers, FBS, offers you free $100, but to withdraw the amount, you have to follow their extensive list of terms and conditions, which according to many, are ridiculous. In other words, never accept a bonus from a broker if:
The terms and conditions are not clear and transparent.
There are restrictions on your trading capital.
Your broker is not regulated.
There is a promise of substantial profits.
It allows you to use risky strategies.
Companies organize trading tournaments with rewards in US dollars for the top three traders. These competitions’ reality remains ambiguous as there are no rules for risk management or proper coverage of trader’s executions. You may see ridiculous gains of 5,000% created by the activity of a few days. Many participants use a strategy that involves taking part in several different contests simultaneously and open opposite positions on each. This way, they risk it all on every trade and end up blowing a few accounts but win on a single one.
Brokers are also smart as they require the winners to deposit money and trade certain lots before they withdraw the amount won. Or sometimes it is only available for trading.
Win a car
A big car is up for a single winner who registers more accounts with a broker. There are terms as usual, and instead of focusing on steady growth, it is all about the money you put in. These kinds of promotions last up for more than a year where a winner is determined by unorthodox methods such as matching last quotes of currency with those of a trading account.
No spread and huge leverage
You will see a no-spread option with super low commissions on brokers that are not regulated. As soon as one executes a trade on the desired platform, they will see themselves entering at a different price against their favor. The brokerage does not respect the difference between the bid and ask, shown to be zero on the trading software.
Huge leverage is one of the parts of selling out the get-rich-quick scheme. While only professionals adapt leverage of 1:100, brokers are keen to provide a 1:3000. Such a significant margin helps get profits quickly, but novices and amateurs forget the risk factor. It can only take a few seconds to turn your equity into dust.
Are there any good promotions?
Yes, indeed, there are regulated quality brokers with clients’ best interests in their hearts. We can compile a few promotions that may help a trader:
Cashback and rebates. Cashback and rebates are commissions or profits earned by the broker, which they offer back to their clients. During trading, a trader will conduct many transactions on currency via a brokerage. The costs associated with trading can mount up to a huge number available to view in your trading report. It can be decisive in increasing your gains.
Loyalty programs. These programs are often available with the best quality brokers. Being loyal to a broker may offer your special discounts and low fees on your trades and deposits/withdrawals.
VIP bonuses. Big traders and institutions who bring in a substantial amount of investments also get special promotions and rewards, including ultra-low spreads and executions. Trading mentors and gurus cut a deal with companies to provide them with benefits if they bring over their followers.
Affiliate bonus. Finally, you can earn a bit of income if you bring traders to sign up for a broker. They will have to deposit a certain amount of money and trade for a certain period for you to be eligible.
End of the line
While bonuses and promotions may seem attractive to traders, it is essential not to get over-indulged by them as the most important thing is the security of your funds. Most regulated brokerages do not offer such schemes as they create a stigma between them and their clients. Top-tier check and balance authorities keep a good eye on whether a company is snatching money from the client’s pockets. Make sure that you study the terms and agreement if you want a bonus.