As we all know there is no such thing as a free lunch and Forex Brokers need to make sure people don’t take advantage of their generosity when awarding bonuses.
In the above example two, you can’t just deposit $5,000, get a free $5,000 and then immediately withdraw $10,000 to your bank account. If that was the case you could retire in a couple of weeks and put a lot of companies out of business.
To prevent instant ruin, brokers put in place terms and conditions and we typically see two types of conditions and these are, “Bonus Amount Not Withdrawable”and “Bonus Amount Withdrawable”
Bonus Amount Not Withdrawable
With this type of condition, it means only the profits from a bonus are withdrawable, but not the bonus amount itself.
- You Deposit $5,000
- Broker matches your deposit (100%) and credits you a $5,000 Bonus
- You now have a Trading Balance of $10,000
- You begin trading and make a profit of $2,000
- Your balance is now $12,000 (balance+profit)
- Amount you can withdraw: $6,000 (balance/2)
- You Deposit $250
- Broker matches your deposit (100%) and credits you a $250 Bonus
- You now have a Trading Balance of $500
- You begin trading and make a loss of $100
- Your balance is now $400 (balance+profit)
- Amount you can withdraw: $200 (balance/2)
As you can see as 50% of your beginning trading balance is bonus funds, you are entitled to withdraw 50% of the closing balance. This seems fair as the broker has provided 50% of the trading funds that you started with.
Bonus Amount Withdrawable
In this type of bonus, the bonus amount (and profits) are withdrawable, however, trading requirements need to be met. Typically you need to trade a certain amount of “Lots” per $10 dollar of bonus money credited.
If the terms of the bonus requires you trade to one “Lot” of a currency pair per $100 dollars of bonus credited. If you were awarded $500 bonus, you would have to trade at least 5 “Lots” in order for the bonus funds to become eligible for withdrawal.
A “Lot” is forex jargon for $100,000 trade size, which translates into plus or minus $10 per Pip movement. HOWEVER, don’t stress if these seem like big numbers, you can also trade much smaller amount at any one time for example a “Mini-Lot” which is $1 per pip or even a “Micro-Lot” which is $0.10 per pip! These smaller trades all count towards the minimum trading requirement and will help you manage your trading balance in a prudent way!