Why are Forex and CFDs bonuses so popular?
Do we ever read the Term and Conditions?
Even if we read them, why do we think we can overcome those conditions?
Do we think the brokers will make things easier for us to win?
I suppose that perhaps the majority of people think they can get the bonuses but the other people cannot.
Almost everybody has self-confidence, especially when it comes to betting, which is what trading is, after all.
The thing is that this seems easy, or at least it is designed in a way that makes us believe that it is so.
Sometimes the adverts of the brokers promoting this kind of bonuses come next to nice girls in bikini, holidays or nice cars. Everything a man wants in life.
Well, the truth is that the majority of customers do not get these bonuses.
The main characteristic of the bonuses is that they carry some Terms and conditions, which normally means that to be able to get the money you have to trade a certain volume,
To attain this volume you will have to trade a lot and in a short time.
Let us say these bonuses are not made for long term investors.
Make a deposit and receive between 10 and 100% of the deposit.
At first sight it seems something very good and easy, but if we read the “small ink” in many of these “offers” we realize that they are only valid for trading with no margin
You will have to trade a lot in a short time since most of these deposits have a certain duration.
Open an account and receive a small euros or dollars account.
No need to mention that if you start calculating the total amount of commissions and spread of all operations, it will be much more than the bonus, therefore if you want to be lucky to cash te bonus at the end of the period it will most probably mean that you already lost most of your account.
These are a kind of bonus in which the broker gives us some money back after trading a certain volume every period.
This in reality is more a spread or commission reduction than a bonus itself.
Loss to cover losses
In some cases the broker gives the customer some percentage of his account, for instance a 20%.
This case is used when the trader has done very badly and is close to finish the margin disposable for trading.
This type of bonus is not bad in itself since it can work for a recovery after a bad streak.
The problem is that the vast majority of accounts have not had this kind of draw downs due to “bad luck” but due to the fact that they are using bad and over optimized strategies.
No need to mention that despite this bonus, most of the customers will eventually lose all of it plus the original account.
Trading is tough my friends.
Deposit bonus to withdraw by volume
With this one, we can get, for example, 25% of the deposit, but we are not able to withdraw the money until having traded commissions or spread 3, 4 or 5 times bigger than the bonus.
If I buy a lot with a spread of 1 pip, I will receive 25% of that spread, which in a round turn transaction would be 5 USD.
Once that quantity reaches the bonus amount, we will be able to withdraw.
Although this seems somehow easy, it is very difficult to achieve, since the great majority of traders will be able to receive 100 once they have traded 400 units in commissions. The problem is that customers accounts will be very small in most cases by the time they recover the “bonus”.
There are more kind of bonuses but this is a good resume of some of the most popular.
I do not say that you should or not open accounts using bonuses but I can tell you that it should be the main reason to get one broker or another.
If we are going to open an account it should be because the broker has good conditions, commissions, graphs, etcetera, not because it has a “nice bonus”.
If the broker happens to have bonus, ok nothing to worry about.
If we do some sort of swing or trend trading it is likely that you will never get the bonus since it is impossible that you do the necessary volume using those kind of strategies.
The bonuses are made for day trading, obviously.
It is so self-evident that the brokers dare to offer such a good products because they know the great majority of “wanna be” day traders will finish going belly up.
There is no such a thing as a free lunch in the stock market, after all.
Do not let yourself think that you can win in trading if you can get a USD 100 bonus.