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Written by: PaxForex analytics dept - Tuesday, 10 October 2017 0 comments
A forex bonus is offered by the majority of brokers to their clients. There are different bonuses available, from a no deposit bonus where a new traders will receive a certain amount of money to start trading without making a deposit to the very common deposit bonuses which will give each trader a boost to their capital. There are plenty of brokers who offer a bonus on each deposit which can make a big difference for traders who are seeking to grow their capital base over time. Therefore it is very important to understand the bonus offered in order to take full advantage of it.
One can compare the bonus received to popular retirement plans like the 401(K) in the US. Employees contribute to their retirement plan directly from their salary and then make investment decisions with that money. The money placed in those accounts and the investment return achieved is what individuals have to live with once they retire as old fashioned government pensions are being phased out in the majority of the developed world. This makes the retirement account the only means of income and a very crucial tool for many people.
This approach helps to tackle the shortfall in government retirement funds as well as pension shortfalls to a certain degree, but one of the biggest problems is that employees don’t contribute enough from their salaries into their 401(K) plans. They ignore long-term planing and a refocused on short-term benefits, just like many forex traders focus on weekly profits rather on building a supportive forex account. This is a very dangerous trade-off and overall does more damage than good. A well designed retirement plan is similar to a well designed forex trading strategy.
In order to encourage individuals to contribute more to their retirement plans, employers offer a 100% match to their contributions, up to a certain level. Here is one example: Let’s say John has a salary of $2,000 per month and his employer offers a 100% match for the up to 3% of contributions to the retirement plan. This means that if John places 3% of his $2,000 salary into his 401(K) or $60, his employer will also put $60 into his account so that John has $160. This is repeated every month and the portfolio can grow with steady monthly deposits which increase the average gains. John enjoys a 100% bonus on each deposit from his employer.
A forex broker who offers a deposit bonus operates in a very similar way. A lot of forex traders make a very big mistake by making only one deposit and thinking it is enough to
operate a forex account successfully. This is similar to employees not making contributions to their retirement plans. A smart forex trader will implement the correct plan which requires two main pillars for growth. The first one is a proper trading strategy and many are focused on creating one which works for them. The second one, and the one often ignored, is a serious of monthly deposits together with the forex bonus offered by the broker.
A steady flow of monthly deposits serves several purposes. Most importantly it boosts the earnings power of the account. The more money a trader has in the account, the easier it is to diversify the trades and investments which also increases the security of the portfolio while it reduces risk. Not every trade works out in the same fashion, so the more trades are taken across currency pairs and asset classes, the better the overall cash-flow will be which continues to add to the investment strength. It is one nice cycle which feeds off of each other and in order to maintain the cycle and especially in order to get it going, the smart approach is required.
The deposit bonuses offered by brokers have the same effect as John’s employer matching his retirement plan contributions. John received $60 from his employer, in our above example, for each $60 he deposited. Forex broker’s who offer a bonus on each deposit do the same so John would get $60 from the broker for every $60 deposited. A trader who makes a first deposit of $250 to get the account stared and then follow on deposits of $50 every month together with all the bonuses is on a great path to build the core of the portfolio.
As the cash balance increases in the account, the earnings per trade will increase as well and after a certain time period a trader may decide to no longer add to it as the account has grown in size to the point where it generates the monthly profits needed for the forex trader to sustain the desired life style. This requires time, but with the proper approach, discipline and patience it is definitely a goal which can be achieved. Traders need to be smart and take full advantage of all the tools offered to them. Success in forex doesn’t come overnight and as with any other highly regarded profession, it does take time to build a career as a trader. The benefits for the hard work can’t be described and need to be experienced.