How do binary option Bonuses work?
In 2006, most forex brokers started using trading bonuses due to the fierce competition they were suffering from. Companies arose one after the other and whilst upon start bonuses were not given, suddenly the whole forex market was fighting over traders and thus, adding bonuses as a so called “call to action”.
It was simply intended to gain more traders as a broker and resulted in brokers giving a 100- to even in some cases even higher bonuses. Free vacations, iphones, ipads and more gadgets are now used to bring in traders.
Nowadays, it’s actually rare to find a broker providing no bonuses at all. Recently I stumbled upon one providing 15% and that’s the lowest I have seen in times.
The whole concept works although and is a powerful incentive when a potential trader is having doubts regarding the investment he is going to make. Advertising budgets of brokers also exceed 100 of thousands of dollars and are loaded with messages of which the majority is simply “to good to be true”.
Let’s take a look now at how the whole bonus concept works and why it’s so successful.
How does a trading bonus works?
Basically, a bonus is just used as a tool to create trust between broker (salesperson) and client. You will be directed in the creation of a win-win situation for both sides. The broker gains more clients by giving more and higher bonuses and your mindset will be: “wow, I’m really profiting here!”
The broker although profits on more than one way. Because a broker earns on every position you open it is easy for them to increase the number of trades you are going to make.
Is there a catch when it comes to trading bonuses? Yes! Of course there is a catch….and not a little one. As nothing in life comes for free, there are certain conditions when it comes to trading bonuses. Most brokers set these rules to prevent abuse and thus, protect their selves.
You can’t withdraw your bonus.
Initially, your trading bonus cannot be withdrawn and taken home as a nice present. First, you will be obligated to make a specific number of trades or simply trade a certain volume. Please note, these terms and conditions don’t have to be mentioned by the broker (sales agent) when you’re opening your account. Therefore, always check the terms and conditions link at the bottom of the homepage of your broker. Some brokers also edit this information in their men
Your turn first!
Before you even get a bonus, you will be obligated to make a FTD (first time deposit) to be eligible to receive the trading bonus in your account. The height or percentage is mostly determined upon the height of your investment although nowadays, it’s almost standard to provide 100% bonus.
Pay attention: Also bonuses awarded to you as a prize for winning for example a trading contest are mostly not something you can simply withdraw. First that specific amount awarded to you first needs to meet a trading volume before you can withdraw it.
When it comes to bonuses we could say they are good for both trader and broker. As mentioned, they are used as a powerful marketing instrument for the broker. They bring in huge amounts of additional traders.
Traders on their side can increase deal size and find their selves with an increased capital which, if used with care, can provide additional income.
These days, almost every broker provides bonuses as the “trend” first started in the forex industry for the same reasons as above. Bonuses vary in their heights and in type and so, let’s look at what bonuses really are.
Always note that bonuses can be given as NON-cash or as Cash bonuses.
CASH bonuses are given to the trader to increase capital and should be deposited in your trading account. Cash bonuses could be further sub divided into deposit or no-deposit bonuses.
There are few brokers which actually also provide non deposit cash bonuses. It could be, if you registered through a media channel the company is managing, you will receive a small amount of real money in your account before even making a deposit. (Some brokers offer $50 real accounts) You could also receive a cash prize as a result of winning some trading contest but then again, mostly these prizes are deposited in your account and require a specific trading volume before being able to withdraw.
NON cash bonuses are mostly used as an incentive to refund your account. In the past we have seen brokers offering vacations, IPads, IPhones or even jewelry for adding volume to your trading account.
Advantages and Disadvantages
|Advantage of a Bonus||Disadvantage of a bonus|
|The possibility to trade more and open bigger positions||High trading volume required before withdrawal is possible|
|Non cash bonuses are always fun to recieve||High trading volume required before withdrawal is possible( If traded responsibly, can proof to be profitable|
So, a binary broker bonus could definitely work in your favor if traded with responsible and free bees are nice but….stay careful!