Much like online sports betting and casinos, the role a bonus plays is to get more and more people signing up. Brokers are aware of the lure this “free money” can have on new traders looking to try their hands at day trading. At a time when competition between brokerages is so high, offering an attractive bonus can help those offering it to capitalize on floating customers.
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When comparing the best binary options brokers, many traders will be drawn to a welcome bonus or deposit bonus. This can help a broker stand out from those who reject this mode of operating. At first glance, it can appear that a broker is essentially providing you with an opportunity to double your capital. When we read through the terms and conditions, however, things tend to take on a completely different scenario.
Types of Bonuses
Typically, there are two main types of bonuses which a broker will offer. These are:
First deposit bonus: A broker will promise to double your first deposit. Say you fund your account by $100, then the broker will provide you with $100 on top, effectively bringing your capital up to $200.
Welcome bonus: This type of bonus is applied to your account despite the amount you deposit. For example, whether you deposit $100 or $10,000 you will receive a flat amount of $50 on top.
How They Generally Work
The bad news is that these bonuses are almost never “free money” but they are not necessarily a scam. There are a number of terms and conditions applied to bonuses which can affect not just your ability to turn your bonus into real cash, but prevent you from withdrawing your own cash. This can be disheartening to a trader who doesn’t read the terms and conditions attached to the bonus itself, which, ones again, highlights the importance of reading before you sign up.
A standard feature of many of these bonuses is a “wagering requirement”. The way these work is that there is a requirement to invest both a deposit and bonus amount a certain number of times before any withdrawal can be made. This can make it very difficult to really see any value in the bonus itself, especially for those with nothing less than an obsessive attitude to trading.
For example, terms and conditions may dictate that a bonus of $100 in addition to your cash deposit of $100 must be invested 30 times before any of the cash can be withdrawn. This is calculated as such:
$100+$100 = $200 x 30 = $6,000
Before an investor can withdraw any funds, they must first hit over the $6,000 mark.
Are Bonuses Worth It?
The answer is subjective. While bonus restrictions can seriously impede a novice’s ability to justify the value of it, it can be very beneficial for seasoned traders. In both cases, reading the terms and conditions should give an idea of what to expect. If this sum (bonus+ deposit+ wagering requirement) is conceived as achievable, then there should be an incentive to take the bonus from a broker.
As bonuses are almost always optional, there is no requirement whatsoever to take it, in most cases.