Different Types of Forex Bonuses

Almost all forex brokers offer incentives to encourage traders to start and continue trading with them. The most common type of incentive offered is a forex bonus.

As forex brokers make money through commissions and spreads, they use bonuses to encourage trading activity, ultimately increasing trading volume and revenue. Hence why they offer bonuses to influence traders to place large trades or trade more often. Due to the high level of competition among forex brokers, different types of FX bonuses are used to lure inexperienced traders.

Some traders prefer brokers offering numerous incentives because it gives them a chance to trade without investing much of their own money.

To get your FX bonus, all you need to do is sign up for the website, and the bonus will be credited to your account. Many brokers also provide selective offers to those who have already registered. Before choosing a forex broker, always research the bonus offers to make sure you’re getting the best deal.

Bonuses can come in different forms. The most common type of forex bonuses are:

• Deposit bonus
• No deposit bonuses
• Convertible bonus
• Loyalty bonus

Deposit bonus

When you make a real money deposit in your trading account, the broker gives you a deposit bonus, which is usually a fixed amount or percentage of your deposit value.

Most forex brokers maintain multiple tiers to encourage traders to deposit more to receive larger bonuses. Some forex brokers only provide a deposit bonus for the first deposit, while others provide a bonus every time you deposit money.

While you can’t withdraw the bonus back to your bank account or payment method, you can use it for trading and opening larger positions. Whatever the conditions of the bonus, you should always be able to withdraw your profits.

In some cases, if the bonus is just a small amount, like $30, it might be possible to withdraw it after placing one or two trades.

No deposit bonus

Many forex brokers offer a no deposit bonus to new customers registering for the first time. No deposit bonuses are sometimes called welcome bonuses and are normally only available for new customers.

As the name suggests, a no deposit bonus is offered without having to make a deposit. Typically you cannot withdraw the bonus, but you can keep any profit you make. Therefore, if you lose, you don’t lose any of your own capital.

No deposit bonuses are great for testing a new broker without risking a penny of your money. Unlike a demo account, you can use this bonus to trade on a live account and have the chance to earn a profit.

Convertible bonus

When a broker offers either a deposit bonus or a no deposit bonus, it may also be considered a convertible bonus. Normally bonuses cannot be withdrawn. However, a convertible bonus means you can convert the bonus amount into your trading account balance that you can withdraw.

For example, the bonus conversion could be if you trade one lot, you can convert $1 of the bonus into $1 of balance. Meaning your bonus is decreased by $1, but your account balance is increased by $1.

Convertible bonuses encourage you to trade so you can withdraw the awarded bonus.

Loyalty bonus

Apart from attracting new customers, forex brokers are also interested in retaining their loyal clients. If you’re a frequent trader, you may expect a loyalty bonus from your broker, which may be advertised as a VIP account, cash back or a rebate.

VIP accounts offering loyalty bonuses are usually only available for frequent traders. They are profitable for traders who trade regularly but can be harmful if the incentive pushes you to trade simply to earn a bonus rather than profit from the market.

How much you are rewarded can depend on your trading volume or how much you deposit to your account in a given period.

Are Forex Bonuses Risky?

While a Forex bonus may be attractive, you should not choose a broker based on the FX bonus offered alone. Unregulated brokers often use the temptation of unusually high bonuses to lure traders to their company.

Most of the bonuses come with numerous terms and conditions, which can be confusing. Misunderstanding the rules can lead to your account being frozen and profits deducted. Brokers are very cautious about people manipulating their offers and can arbitrarily punish you.

Forex bonuses can mislead you to think you have more funds than you really have. In some cases, applying a bonus to your trading account can lead to more risk, causing you to lose your initial capital faster.

However, if you are willing to put in the time and effort, you can effectively use the bonus schemes offered by many forex brokers to your advantage to reduce risk and grow profits.