While bonuses and incentives offered by brokers have become a common practice, it is a fact that not all bonus programs are created equal. Trading bonuses can often be difficult to understand for a new trader or even experienced traders.
It is crucial to review any bonus program or promotion before entering into one. Each bonus program offered by a particular broker should have terms and conditions that clearly indicate the way the bonus or incentive structure will work.
The most important thing that a trader must do when deciding to participate in a bonus program is to evaluate the terms and conditions of the offering. Only then can a trader make an informed decision on whether the bonus structure and amount is suitable for him.
The terms of the offering should present to the trader the scenarios in which a bonus will be granted and in what way the bonus will be given to the customer. This may include a cash deposit into the customers’ trading account, a reduced spread to trade on, or a physical gift that can be mailed to the customer.
Keep in mind that the scenario should give a clear example of how the bonus can be achieved. Make sure to check the start and end date of a bonus promotion to make sure that you can participate or complete any trade requirements in the allotted time.
Likewise, if the promotion includes a trading requirement, you should evaluate your costs of achieving that trade requirement with your trading goals. It may turn out that your trading costs, including spread paid ultimately is higher than the bonus amount you earned.
Often times, high bonus amounts are not eligible for withdrawal by the customer. In such cases, you can receive the bonus on your account, but you can only use these funds for trading and cannot return them to your bank or card account. Again, the terms and conditions should always give you a description of how the bonus can be used.
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Derivatives and margin trading involve a high degree risk level. You should not trade Forex and CFD unless you fully understand how it functions, what your benefits can be, what your risk is, and what you may lose. Please, note that the losses can be practically unlimited and that the initial deposit will not permanently limit the risk. You have to fully realize your financial status and make sure that trading in derivatives hides the risk of losing the entire amount invested. Invest only the amounts that you are able to lose.