Broker Handouts – How can Investors Use Them
Starting to trade on Forex (FX) is an exciting endeavor. Selecting a broker is an important part of it though. While looking for one the researcher will come across a lot of aggressive advertisements from various FX brokers, a lot of these will also try to lure you in with an attractive Forex deposit bonus. Here we will talk about how you can utilize these bonuses to get a better outcome in the end.
First of all, it is important to mention that these bonuses are nothing new in the business world. They have been utilized by not only brokers but online casinos as well with casino deposit bonus codes and other interesting offers. This is one of the ways to start out in a more favorable position. In more general terms, a bonus is simply a reward for choosing this or that specific broker or the service. If put to good use it can be used to gain a monetary reward without actually investing your own money into the trading.
How Does a Broker Bonus Work?
There are many different bonuses offered by the brokers. This usually varies from broker to broker. Some help their registered users post-trading, and other times you will receive them as soon as you complete your first deposit. Bonuses that one receives after completing a trade are called rebates. Other regular bonuses require certain steps to be taken including a number of trades before they are deposited to your account. So how do they work?
Bonus with No Deposit
This type of Forex trading bonus is given out by the broker without requesting any deposit from the user. Usually, these bonuses are small in the amount ranging from $5 to $100. This is done to motivate the new trader to more actively participate in trading and learn how to efficiently trade.
These bonuses are usually used to develop trading strategies. They aren't common at all, however, if you end up finding one make sure that the broker is trusted as it may turn out to be a huge waste of time. No deposit bonuses are extremely useful for experienced traders to try a new method of trading. This is due to the simple fact that the trader is not really losing anything if this money ends up being wasted. It is a risk-free method of trading. Usually, these bonuses are wasted away by the new and relatively inexperienced traders who end up not learning much from their mistakes as the option to analyze the strategy and its flaws usually comes down to the knowledge of the subject.
A better way to familiarize yourself with the market is through a demo trading account instead of a no deposit bonus. The reason being that the latter bonuses can actually be used to gain a market advantage and some monetary benefits. Since there are no emotions involved with the no deposit bonus it is highly likely that the money will be wasted due to improper risk management habits.
Forex rebates are a marketing strategy from the brokers where they put a part of the spread back into the trader's account once the position has been closed. As to the time it takes for this to become a reality for the trader – it really depends on the broker. A lot of times rebates are given out monthly, however, some brokerages are much faster and make transactions on individual cases instead of in batches to everyone at the same time.
The trading conditions of the broker are your main way to determine if the rebates are favorable. For example, if the broker has the spread on a popular currency pair of three pips and promises a rebate from somewhere between $10 to $20, the offer is going to be considered more or less favorable to the trader. However, you may be worse off just finding a broker that provides less spread (on average 1 pip per side) and no rebates ultimately it's going to end up being much less profitable, and thus it's not recommended to open an account with such a broker.
Forex rebates can be profitable since the trader is getting compensated for every single trade and there is usually no minimal condition from the broker. Try to find some kind of a third-party website, which is much more likely to offer rebates as it tends to be more popular on that side of the market.
Generally, it is considered that most of the time FX rebates are just not worth it since the compensation is usually on the lower side as traders end up getting a proportional compensation meaning that they only save only a small chunk of their funds.
Bonus on Deposit
This is the best option a trader should aspire to. These can range anywhere from 10% to 400% and are very easy to come by. However, you should always pay attention to the reputation of the broker since the bigger number doesn't always mean good. A lot of fraudulent brokerages offer huge bonuses but start to be problematic when the trader is trying to take out the money they earned. The most common mistake from the beginners is to just search the broker with the highest bonus and be done with it. As a rule of thumb, it may be better to trade with the broker, which gives a lower percent bonus but is reliable and trustworthy with timely payments.
Forex Trading Gifts
Often some of the brokers offer some kind of a gift to new customers like smartphones, tablets, or something of that kind. However, it is not beneficial for the broker to give out expensive gifts to people who have just opened the account. Such brokers are usually fraudulent and do not care about reviews so they change their campaign or change the terms and thus send much cheaper value items taking the negative review since they do not care about reputation.