In a conversation with my friend, I talked to him the other day that disturbed me. He was having some problem with his broker related to a deposit bonus that he had received. Honestly, I am not a fan of the bonus structure and I gave him some advice to that effect. If you have no awareness, commonly, deposit bonuses are a feature of binary options brokers (Grand Option) nowadays. The brokers use them to attract new traders to create and fund accounts and they work. As we all know that who wouldn’t want some free money, but there is still a question, is it completely free? In fact, there are several reasons to show why bonuses are not as free as they seem to be and why you may not want to agree one.
Firstly, we will talk about trade minimums. You should know that every bonus comes with a trade minimum. This is a dollar amount that you must reach before the bonus monies can be withdrawn from your account. The minimum, it is based on your original deposit and the bonus, thus if you deposit the amount $2000 and get a 50% bonus, the minimum will be based on $3000. With an average, the trading minimum will be between 20 and 30 times the whole value of the account. I have seen some as low as 15 times and also some as high as 40 or 50 times the whole value of the account. It means an account with a whole value of $3000 will have to make trades totaling $45,000 before the bonus becomes yours. So, I like to trade 1% of my account at a time to make sure that no one trade can cause damage to my account. A $3,000 account, it means that you have to make trades of $30 at a time; $45K divided by $30 is 1500 trades. Well, of course, you can make bigger trades to clear the minimum quicker; still it can also cause the catastrophic losses.
Secondly, I would like to mention about the Time Limits. There are some, but not all, deposit bonuses having a time limit. It refers something such as 30, 60 or 90 days. It has a meaning that you have to reach the trade minimum before the time limit is up before you have an ability to make a withdrawal. I have no intention to imply that any of you cannot turn $3,000 into $45,000 but I would like you to think about your chances to do that within 30 days. To me, I trade a lot, however, I never like being obliged to make a trade or trade more than my system permits. The time limit looks like another reason in order to shoot for the stars. By this way, it can lead you to trade more often or with larger amounts than you ordinarily would and also add risk to your portfolio.
Thirdly, I would like to share with you about withdrawals. Within bonuses, it is just difficult for you to withdraw money from your account. Some brokers, for instance, the shadier ones, will not allow you to withdraw any money until you meet their requirement of the minimum trade limit. These brokers will not allow you to withdraw any part of the bonus or profits based on the bonus. With any withdrawal request prior to meeting the withdrawal requirements, in either case clauses in the terms will usually lead to you to forfeit the whole bonus and all profits. I don’t know about you but if I trade my $3,000 account up to $10,000 or $15,000, I am completely going to want to take some out. There is not a lot but it is enough to me so that I can enjoy the fruits of my labors if you get what I mean.
Free Sign Up Bonus is the last one that I want to tell you. Actually, I have been seeing the free $50 sign up bonus more and more. It is a “free” bonus that you get when you sign up to an account and no deposit requirement. Except that it does. It has the only way to get this bonus that is to deposit money and then meet the bonus requirement. Also, you may get an additional deposit bonus on top of the sign up bonus and it means that the bonus requirements could be fairly high.
Bonuses are usually applied to accounts automatically by the broker once they are funded. Thus, be wary of this! To opt out you, the trader, are responsible for contacting their account representatives. Several brokers will also offer other bonuses from time to time. So, make sure that you read the terms and conditions before accepting them.