How Bonuses Work in Binary Options Trading
How Bonuses Work in Binary Options TradingAugust 3, 2012
So you decided you want to start trading binaries, what now? Well, assuming you have some experience in trading you should know what type of trader you are and what type of financial vehicle is right for you. This is crucial because you need to select your broker based on your trading strategy.
For example, if you are a technical trader, the bonus strategy and promotions may play a less significant role in your decision making process, however the charting and analytics mean everything. If your a scalper you will most likely be interested in the number of positions you are able to keep open without the risk manager shutting you down, and so on.
In any case and regardless of how you trade, if you want to make real money you need to invest and risk real money. When people start talking to me about free trades or offers that are too good to be true I start to get nervous, because life has taught me that there is no such thing as a free lunch, especially when it comes to investing.
That being said, forex binary options are are not only a great way to make make money. It’s also a proven way to generate residual and passive income if you understand how the system works and how to manipulate it in your favor to improve your odds and cash out or withdraw your winnings after you make a quick profit.
Now, there are various way to look at this, but at all times you have to remember that Cyprus binary options brokers operate differently. There is no SEC or FINRA regulation here, and the trading rules are different.
In many ways these guys have re-written the rules and created a unique trading vehicle. But how does it work?
Let’s assume for all intents and purposes that you have conducted the proper research by checking and comparing the reviews. You have looked for the best rebate broker and have shopped around for the most discounts. You read everything about free trades, no deposit bonuses, and even received first person recommendations for the best rebate brokers available online. After that you got all your charts and financial analysis tools ready, and you have made the decision that now you are ready to open an account with a recommended broker.
Now let’s say you decided to deposit $1,000, and the current advertised promotion offers a bonus of 50% so according to simple math you have $1,000 (the original investment) + $500 (the bonus prize) which adds up to a net total of $1,500 in your account balance.
|Bonus Tip#1: If you don’t like the bonus you receive, ask for a better one. Ask to lower the trading volume and increase or decrease the bonus amount to get the maximum out of it.
Now here is the catch, in order to withdraw your original deposit as well as the bonus you would need to trade on average between 15-25 times the value of the bonus, or the value of the actual deposit. The trading criteria for withdrawals varies from one broker to another. To demonstrate, 500*20 is the is the amount of trading volume you need to make before getting paid ( this includes losses as well as gains).
In other words, a total trading volume of USD 10,000 is required in order to cash out the original deposit including the profits and the bonuses. In case you want to withdraw your winnings without meeting these requirements, the difference is usually deducted from the account balance or in some other cases the broker will not approve payments and will cite a violation of the terms and conditions as the cause of the declined withdrawal.
|Bonus Tip #2: If you don’t meet the required trading volume at first, don’t be afraid to deposit and try again. Eventually you will learn how to optimize the bonus/deposit ratio to get achieve higher profits, trade value and get the most out of your investment.
Now, traders must understand that the bonus terms and conditions don’t suggest fraud activity; they common industry practices for all bonuses and promotions credited by the brokers to trading accounts.
Bonus Tip#3: There is always a bonus cap or “up to” amount when receiving a bonus by the binary options platform. Sometimes traders miss this stipulation and then complain on blogs about a binary options scam being perpetrated by the options broker.
What is the purpose of this bonus scheme?
First, obviously to act as an incentive and entice you to deposit and start trading. Secondly, once you accept the bonus a kind of counter starts working and actually locks you in. You have to complete the trade requirements to cash out the original deposit, as well as bonus + winnings.
Broker Side: The broker will always say that the trading criteria is as policy directed against bonus abusers trying to manipulate the odds in their favor.
Trader Side: The trader can always choose to deposit without taking the bonus, (AKA educational allowance, financial bonus, cash back bonus, prizes, bonus match ups). Alternatively you can opt to take a smaller bonus, hence increasing your balance but not creating too much trading volume requirements.
To sum up, a bonus is always great when you start out, but it still has to be the right amount so you can leverage it to the maximum. In other words, if it’s too big you will never be able to reach the required trading volume, and if its too small it won’t be significant enough to give you the trading edge.