Broker-sponsored incentive plans (bonuses) might look too good to be true. There’s no such thing as a free lunch, as they say. While the adage might be correct, you can still come close, especially when you have a good knowledge of how things work. There are clear advantages in bonus programs that are offered by forex brokers, and you can certainly benefit from them if you come equipped with a workable idea.
Let’s start with a quick overview of the main types of bonus programs typically offered by forex brokers.
The different types of bonus programs offered by forex brokers
A pending bonus is more of a promise: the broker offers you a bonus but, instead of giving it to you right away, the broker waits until you’ve shown some trading volume before handing over the money. As many traders drawn in by the bonus plan lose their deposits before they’re able to meet the minimum volume requirements necessary to receive the bonus, this makes pending bonuses an attractive option for forex brokers and perhaps a bit less attractive for you. You need to have a good idea of how much volume you’ll be able to generate if you’re interested in taking advantage of a pending bonus program.
As the name suggests, an instant bonus is a bonus that is deposited in the trader’s account immediately, which gives the trader an opportunity to use it right away for trading purposes. An instant bonus can be expressed as a percentage. For example, an instant bonus of 30% up to $1,000 indicates that the broker is willing to give you a bonus that represents 30% of your deposit. Unlike with pending bonuses, where the broker expects you to lose your deposit before you can claim the bonus, the idea here is for you to lose both the instant bonus and the deposit – at least, that’s the broker’s idea. Hopefully, you have a different take on things! We consider this type of bonus to be the optimal one.
A no-deposit bonus is more of a gimmick designed to lure you. While advertised as a bonus that you can receive without having to put up any money of your own, this is typically a way to solicit your e-mail address and then send you an invitation to make a deposit.
A reload bonus is usually offered to an existing client. The broker offers the trader another bonus (typically, an instant one) if an additional deposit is put up.
How do you take advantage of a bonus program?
There are two approaches worthy of attention.
- You can use Hedge Arbitrage with the new “allocate profit on this side” add-on. If you’re using two brokers, a fast one (e.g., LMAX) and a slow one, you can use the add-on with the fast broker. When an arbitrage situation arises, the software will then open a buy order with one broker and a sell order with the other. When the order turns into a profitable one (from your vantage point) with the fast broker and a losing one with the slow broker, the positions will be closed. Your bonus and deposit with the slow broker will be lost to that broker, but you will have gained with LMAX – more than you have lost with the slow broker, since you have pocketed the deposit, the bonus, and the profit from the arbitrage trade. You’ve not only made money; you’re also still in the slow broker’s good books, which is important when you work with an arbitrage program.
- You can use Locking Latency Arbitrage Software when you have an account that is eligible for a bonus. In this case, it can also be used for one or two sides.
Where can you find additional information about brokers that offer bonus programs?
For more information about forex brokers’ bonus plans, please visit the following website: http://www.bestforexbonus.com/