Why bonuses can sometimes do more harm than good.
The biggest issue with bonuses is the fact that they always come with wagering or trading volume requirements. These requirements are always specified in the brokers’ terms and conditions (which sadly traders rarely read).
A trading requirement can look like this: “You are required to invest your deposit and bonus amount 30 times in order to be permitted a withdrawal”.
What does this mean? It means that if you deposited $200 and got $200 in bonus money, you will have to generate a trading volume of $12,000 before any withdrawal is permitted.
Now, this sum seems to be very high but remember that trading volume means money invested in total. You do not actually have to have an account balance of $12,000 for a withdrawal to be allowed.
For example, if you invested $100 and then won, and then invested $100 again and you lost, your account balance is close to as it was before the initial investment of $100. However, you still generated a turnover with your two investments of $100.
Nevertheless, the existence of trading volume requirements can cause a lot of problems for beginners or for traders who only deposit the minimum allowed amount. This is because for these types of traders reading the trading volume requirements still represents a difficulty.
Trading volume requirements inadvertently trap beginners and minimum deposit traders in and result in them not being able to withdraw their deposits in case they change their minds and want to cash out.
Why do bonus volume requirements exist?
There is a very good reason why these volume requirements exist. They exist in order to prevent bonus fraud. Bonus fraud is when someone makes a deposit, receives the bonus, and then requests a withdrawal. You can obviously see that this is basically abuse and amounts to stealing brokers’ money.
So, while the existence of these bonus withdrawal limitations make perfect sense, they still cause a lot of problems for certain types of traders by preventing them to withdraw their deposits whenever they want.
What is there to do if you are a minimum deposit trader or a beginner?
It’s actually very simple. If you are someone who just wants to make the minimum deposit (usually $200), then no matter how enticing the bonus the broker offers you is, you should decline to accept it.
The prospects of making your $200 deposit into a $400 for free is very enticing, but then if you aren’t able to generate $12,000 in trading volume you will not be able to get a withdrawal.
In other words, in your case accepting the bonus is actually a bad thing rather than something that benefits you.
There are two ways of how not to accept a bonus. First, you do not have to request it in he first place. Most brokers only give out bonuses when you specifically ask them to do so. If you are a minimum deposit trader then don’t ask for a bonus.
Sometimes an account manager will offer you a bonus in order to get you to lock your deposit in. Make it politely clear that you are not interested in the bonus. No matter what you are being offered, you should refuse it.
Second, if the bonus is automatically added into your account, then contact an account manager and get them to remove it. The account manager might attempt to convince you to keep the bonus but you should politely refuse.
CySEC regulated brokers and bonuses
Binary options brokers that are regulated by CySEC (Cyprus Securities and Exchange Commission) are bound by law not to lock your deposits in in case you have accepted a bonus.
According to CySEC regulations bonuses are being treated the following way:
If you accept a bonus, then the trading volume requirements can only be valid on the bonus money itself. You will be permitted to withdraw your deposit at any moment, provided you have enough money in your account that was generated from profits you earned.
Imagine the following scenario:
– You deposited $200 and got $200 bonus
– Volume requirements require a turnover of 30x the bonus
– You generated $1,000 in profits
You can now withdraw your $200 deposit unconditionally whenever you want. You will NOT be able to withdraw your bonus money and the remainder of your profits because you did not reach your volume requirements yet, which are 30 x $200, which is $6,000.
As you can see, this scenario isn’t 100% perfect either but at least in this case you are able to get your deposit back. This almost makes the bonus to be attractive for beginners as well.
Reaching a volume of $6,000 is not that difficult even for a beginner. Likewise, you will be able to withdraw your deposit at any time. So, it makes lot of sense to trade at regulated brokers. Keep in mind that unregulated brokers do not have to follow this rule and instead they will lock your deposit in as well.
Who should accept bonuses?
Provided that you register and trade at regulated brokers it’s safe for mostly anyone to accept a binary options bonus. Complete newcomers and beginners should perhaps still not accept any bonuses no matter what, because the restrictions and limitations imposed by the bonuses’ terms and conditions outweigh any of the benefits.
If, however, you are an experienced trader then getting a bonus is a bargain. You will almost always be able to match the trading volume requirements, and accepting the bonus essentially means for you the doubling of the funds that you can use for trading purposes.