Welcome bonus

Let’s look at how you can use lock arbitrage in a situation where your broker is offering you a welcome bonus.
Many brokers offer clients a bonus to attract more customers and grow their business. The so-called welcome bonus can sometimes represent as much as 100% of the client’s deposit. Before you start using lock arbitrage with a broker offering a welcome bonus, you need to understand the terms and conditions attached to the bonus. It is especially important to understand the rules that govern your ability to convert the bonus into real money that can be withdrawn from your account.

Here are the main things to consider when a broker offers you a welcome bonus:

1. The minimum amount of money required to top up the funds in the account in order to receive the bonus.
2. The maximum amount of money required to top up the funds in the account in order to receive the bonus, or the maximum amount of money that can be received as a bonus.
3. The rules that govern the conversion of the bonus into real money. These rules can be numerous, but they come down to the same thing: traded volume. If the broker offers to deposit in your account 20% of the amount that you’ve spent on the commission and swap fees, it is best to focus on your traded volume in order to understand how the broker works and how your calculations should be made.
4. Time limitations. The broker might limit the period of time during which you can convert the virtual bonus into a real one.

Your preliminary calculations should also include your target profits.

As a first step, you should determine the commission fees that you will have to pay.

Let’s assume that your broker’s commission fee is $10 for a round turn of $100,000.

The minimum deposit needed to receive a bonus is $10.

The maximum deposit is $10,000.

The broker offers to pay a bonus that is convertible into cash; the bonus is equal to 20% of the amount you’ve spent on broker fees.

Additionally, the broker stipulates that the bonus has to be converted within 4 months.

For the sake of simplicity, we will exclude swap fees.

Let’s assume that your deposit is $1,000. If the welcome bonus offered by the broker is 100% of the deposit, then the account now has an additional deposit of $1,000. That deposit is a virtual one.

Your target profit is $500 after 3 months of trading.

You open 2 accounts with roughly the same deposit in each account, but the accounts are under different names.

In order to convert your $1,000 virtual deposit into real funds, you need to pay the broker $5,000 in commission fees ($1,000 / 20% yields $5,000).

This means that the traded volume has to be 500 standard lots ($5,000 / 10).

Although we have 4 months to convert the bonus, there might be days with little volatility as well as holidays when the market is closed. You therefore give yourself some margin and reduce the period to 3 months. Let’s figure out the daily traded lot size. The calculation is as follows: 500 / (22 x 3), where “22” represents the number of business days in a month, and “3” represents the total number of months you have. This works out to a daily traded lot size of 7.57.

For a deposit of $2,000 and a leverage of 1:100 (i.e., your deposit of $1,000 + the virtual deposit of $1,000), the lot size across 5 currency pairs should be 0.02 per pair (the total lot size, then, should be 0.1, calculated as 0.02 x 5). You therefore need 75.7 situations (7.57 / 0.1) in order to be able to convert the bonus. In order to obtain this kind of activity, you need to find an optimal value for the difference to open. The value should be small enough to generate a daily minimum of 76 arbitrage situations, yet large enough to ensure that daily losses do not exceed $22.72 [1500 / (22 x 3)]. In that case, during the conversion period (3 months), you will lose $1,500 out of $4,000, while your profit will be $500. This calculation is just an example, but it shows how you can still develop a realistic action plan that makes it possible for you to use arbitrage trading with a broker that offers a welcome bonus - you will still be able to make a profit overall, even if execution times leave room for improvement and your arbitrage trading results in a loss.

Also, bear in mind that we used rather unfavorable terms in our example insofar as profitability and leverage (1:100) assumptions are concerned. The time limitations we chose are also unfavorable (many brokers have no time limitations at all).

Given an increase in the leverage and the deposit (i.e., the deposit as a percentage of traded volume added to the account), it will be easier for you to meet the broker’s deposit conversion requirements, in which case we recommend that you increase the difference-to-open value.

If your broker offers accounts, to implement this strategy you will need Lock Arbitrage Software for accounts or VIP Lock Arbitrage

If broker offers accounts, to implement this strategy you will need VIP Lock Arbitrage for accounts

Revenue share

You can obtain even better results if, instead of a welcome bonus, the broker offers large rebates through an IB program.

Some brokers offer as much as 85% of the company’s income in such rebates. In that situation, though you lose money in both accounts, you can earn profits exceeding 100% if your traded volume is big enough. Initially, it is advisable to enter a few test orders to gauge the size of the IB commission fees that you’ve earned. Once you’ve determined the size of the fees, you can set up the program in such a way that losses in the accounts are smaller than the profits earned from the commission fees. If you do it properly, and assuming that the IB commission fees are in the vicinity of 80%, you can earn some $2,000-2,500 for every $1,000 lost in the accounts.

If your broker offers accounts, to implement this strategy you will need Lock Arbitrage Software for  accounts or VIP Lock Arbitrage

If broker offers accounts, to implement this strategy you will need VIP Lock Arbitrage for accounts