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How not to get caught in the bonus trap of brokers

15 / January / 20 Bunsi Shakiramal Visitors: 232 Rating: ★★★★★

How not to get caught in the bonus trap of brokers

Nikolay Isayev is a leading operating director of the independent Russian mediator of the Financial Commission. He is in charge of external dispute resolution for global brokerage companies and their users. We will talk to him about the dangers of using bonuses from brokers.

While bonuses and other promotions distributed by brokers have become a common thing, we pay special attention to the fact that not all bonus programs are similar. Trading bonuses can become difficult for beginners and professional players to perceive. Therefore, all clients are advised to carefully study all parameters and norms of the proposed bonus program or promotion before agreeing to them.

All bonus programs offered by an individual broker must comply with certain rules of use, which unambiguously describe all parameters of work with this program and the parameters of its provision. Based on many years of experience in the industry, below are the most important categories to consider when choosing a bonus program.

Principles of the bonus program usage
The most important thing a trader should pay attention to when agreeing on a bonus program is to understand the rules of its provision. Only then the trader is able to make a balanced decision whether such a bonus program and its parameters are acceptable for him.

The rules of granting and using bonuses from the broker should give the trader clear examples of what the bonus is, in what situations and on what principles the bonus can be used. This may include a cash deposit to a consumer trading account, a reduced spread for trading, or a material gift that can be sent to the trader by mail.

At the same time, it should be understood that these rules should contain clear examples of how the bonus can be received. Be sure to take a look at the start and end dates of the bonus program. In order to make sure that you are able to participate in it or to execute all trading rules at a certain time. Similarly, when a program consists of some kind of trading conditions, you need to understand all the costs involved in achieving such requirements and compare them with your trading objectives. It may also happen that your trading costs, including spreads, will eventually exceed the bonus you will receive.

Bonus amount
It often happens that brokers offer users very large bonuses in the form of cash, or interest on the amount of the account. Often, the bonus is structured around the first deposit made by the user to the broker. In such situations, it is recommended that clients carefully review the conditions and rules of granting bonuses before making a decision concerning acceptance of bonuses. In certain situations, high bonus amounts, in particular those that reach 100% of the client's first deposit, will consist of restrictions. These restrictions will not allow a client to withdraw money from his deposit until a certain volume of trading operations has been completed. In this case, the highest possible principles to the size of performed trades will be mainly prescribed. So, traders who use these bonus programs often deal with the fact that they or do not have the necessary amount of money (including bonus) to meet the requirements for the volume of trades performed. Or, in an attempt to meet these requirements, they incur serious losses. And they must deposit more money into their deposit. These types of aggressive bonus projects are likely to generate losses for the user, not income.

You should also take into account that a large bonus placed on your deposit is likely to increase the amount of money you will need to earn. Especially when trading with leverage. In this case, you have more money to trade with. You can open more serious trades, but you should always consider the risks of trading with leverage. It is quite possible that moving the market against your trade will eliminate it rather than if you entered a smaller trade and used the necessary risk/profit strategy.

Such a bonus program, but with higher risks, may consist in increasing "purchasing power". These types of offers will allow you to generate a bonus on your deposit solely for the purpose of increasing the largest trade you are able to open by increasing your own deposit volume. At the same time, the volume of the bonus will not be taken into account when calculating the margin for this transaction. Therefore, it is possible to open a more serious trade, but it is impossible to fulfill special margin requirement in case of powerful value fluctuations. Trading with this type of bonus significantly increases the risk of losses for traders.

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