With the growing competitions in the Forex brokerage industry, it is not uncommon to see brokers offering deals such as “no deposit bonus”, or “xx% bonus on all deposits” in order to attract new customers. However, does it sounds too good to be true?
First question to ask yourself is, how do brokers make money?
In general, most brokers make money in 2 ways:
Charging clients spreads/commission on trades they made
Trading against their clients
In other words, the more trades their clients made, the more profit the broker made. So, brokers are not here to help you (the trader) to become rich; they are here to be rich themselves. They will use all sort of tricks to convince traders, no matter newbies or experienced, to place as many trades as possible to keep their business growing.
In my opinion, all these bonus offers out there is a ‘bucket shop’ marketing strategy. The idea is to put down some “free” money in your account at the very beginning. Once you have money sitting there, it’s very likely that you will start trading (or gambling), because it’s considered as risk-free money with no pain to lose. If you are “lucky” enough to win the first few trades, you will start loading more cash into the trading account, and start trading with higher risk, making a snowball. That’s where lots of people who come into the market end up blowing out their trading accounts, because they enter the market without knowing what they are doing in the first place. In other words, yes, YOU NEED A TRADING PLAN from day one.
Should I Take The Bonus Offer?
I am not against taking any of these bonus offers. There is nothing wrong with the promotion offer itself, it will actually help you to grow your account much faster if you know how to take advantage out of it. What I am trying to bring up is, as a well-educated trader, you need to know what you are doing before taking any deals. I have highlighted a few steps that you can do to protect yourself from unscrupulous brokers.
Read reviews of the brokers, as many as you can. Find out if it is regulated, and if there is any outstanding legal action against the broker. However, stay neutral when you read, it is not uncommon to see new traders not understanding how the market works and then blaming the broker for their losses. Thus, when you do your research, it’s important to use some logic and common sense to judge if the broker is considered to be genuine and reliable, as a whole.
Read through all the fine prints of the PDS before signing any documents. Contact the broker if you need any further clarifications. If you miss something on the document you sign, you may have only yourself to blame, no one else.
Make sure you understand the policy in regards to fund withdrawals. A lot of brokers do not allow their clients to withdraw the bonus. For example, the trader deposit $2000 and was given $1000 as a bonus when he first open the trading account. The broker may not allow him to withdraw any funds until a minimum of $1000 has been lost in trades.
Open a demo account to familiar yourself with the spreads they offer for each individual pairs.
If you are satisfied with all the above, open a live account and start putting a few trades with a small capital. Then, attempt a few withdrawals to make sure everything is working in the expected way.
If you are a rookie trader, always start on demo trading with a well-defined tested strategy or trading plan, switch to live trading only when you become constantly profitable on demo. Don’t put you hard earn money at risk unless you have a well-established trading plan. Traders need to have the correct mindset and discipline before you can make real money. Once your foundation has been built, you can look for better deals/offers from different brokers out there.
Please bear in mind before you take any bonus offer, you need to do thorough research on brokers before opening any live trading account with them. Being professional traders, we need to take 100% responsibility of our capital and do whatever we can to protect it. If the broker looks good after all the detailed research, deposit a small capital to start with, followed by a few trades and a few withdrawal. Never load your trading account in full with a new broker without testing it thoroughly, no matter how good the deal is.