The Binary Options bonus has been offered by a large number of brokers in the past and is often seen in two lights. It is either viewed as a nice chunk of free money that the trader can make use of or it is viewed as a way for the broker to tie the trader down and restrict withdrawals.
This also usually comes down to the knowledge that the trader has of the bonus being offered. Traders who take the time to read the Terms & Conditions and understand what they are accepting tend not to get caught up.
At the trading club, we know the ins and outs of broker bonus offers and have had to help a number of members who have been caught up in bonus disputes. Our overview below contains most of the information that we were able to gather on binary options bonuses.
What is a Binary Options Bonus?
A Binary Options trading bonus is generally an offer from the broker to give you free money to trade with. This can vary according to a number of factors including the size, form and terms. The bonus is usually added to your trading account after a deposit and is sometimes seen as a nice buffer for the trader.
These bonuses are of course something that the brokers often compete on as they try to earn more clients. Indeed, it can be quite an effective way to get a new client over a competitor when your deposit bonus is larger than theirs.
However, Binary Option Bonuses have taken a lot of criticism in recent months due to the factors that the client sometimes does not know. These include restrictions on trading volume, withdrawals and payment forms.
Indeed, this has raised the suspicion of a number of regulators as well as they have taken a deeper dive into the operations of some brokers and how they manipulate the bonus system. Like so much else in the industry, if the broker is dishonest and unregulated then the client is susceptible. Yet, when used responsibly by clients, a binary broker bonus can be advantageous.
Bonus Terms and Conditions
As mentioned, where the bonus usually loses some of its allure is when you are made aware of the terms and conditions that are attached to them. As with most things in life, reading the fine print can be one of the most effective ways to avoid being tripped up.
These terms and conditions usually have a few restrictions in some form that they apply. As you can see, broker terms can be quite restrictive and it is a good idea to read them thoroughly before you decide to invest money and take the bonus. Below is a sample of some bonus terms from the T&Cs of a binary options broker. We have highlighted the important sections which give information on the bonuses.
These binary bonus conditions usually come in the form withdrawal restrictions and time limits. In the latter case, the broker requires the trader to meet the trading conditions within a certain time frame in order to even have the benefit of the bonus. In the former case, the funds cannot be withdrawn unless turnover conditions are met.
With this bonus restriction, clients are unable to withdraw the bonus or profits associated with it unless a certain minimum trading volume has been met. This is usually based on a volume requirement and is a multiple of either the bonus or the bonus plus the deposit.
In other words, if there was a 25 time turnover requirement on the bonus, you would have to trade 25 times the bonus in total volume before you could consider withdrawing. For example, if you deposited $250 and got a $250 bonus, you would need to hit trading volume of $6,250 before you were eligible to withdraw it. Of course if the terms stated that the turnover was on the initial deposit plus the bonus it would be based on the $500 which would mean a turnover of $12,500.
This trading volume number varies quite a bit and can be lenient with only 10x or something quite high being as much as 40 times. Although bonus terms may seem quite harsh at first, one needs to also consider that the trading volume includes winning and losing trades. Hence, if the trader is indeed doing well on the bonus money then this counts toward the turnover number.
Although less rare than trade volume restrictions, some brokers have time limits (or a combination of both). These usually require the trader to make a certain number of trades within a certain period of time. This could range from one month to three.
Although some traders may find that the time requirement is less stringent than the turnover one, this is sometimes misleading. This is because the time requirement forces the trader to place a certain amount of trades in a limited period of time. It forces them to change their trading strategy and this is not always the best outcome.
At least with the turnover requirement, the trader is not forced to complete these trades within a defined time period. The trader will only be trading in market conditions which they are certain will result in a more profitable outcome.
These are usually some of the most unreliable proposals that we have seen. It is usually also this type of restriction which trips up new traders and leaves them feeling scammed. With a deposit lockup, not only are you not allowed to withdraw the bonus and the winnings, but you are also not allowed to withdraw the initial deposit.
This means that until you have met your turnover requirement, you are not even allowed to withdraw the deposit. We have not found too many brokers who will do this but the less honest ones are sure to apply this type of bonus. This is because a deposit lockup bonus is for all intense and purposes, an opportunity for the broker to take the client’s initial deposit.
Why Are There Bonus Restrictions?
Bonus terms really are an unfortunate by-product of receiving so called “free money”. Although traders can view them as a way in which the broker can tie them down to some degree, one can understand a brokers need for some degree of restrictions. Without them, there is no way for the broker to stop traders who request a bonus and then immediately withdrawing.
However, it is no secret that very strict requirements are a way in which the broker is able to ensure that the client will never meet the requirement. The client will keep trading for as long as they can to meet the requirement. If the broker is indeed dishonest, they will adjust this risk such that the client will eventually lose their entire deposit. We have covered this and a number of other Binary Option Scams previously.
Binary Options Bonus Regulations
Even though a trader should take responsibility for their own decisions when it comes to accepting a broker bonus, the regulatory agencies are of the view that the more novice traders require some sort of protection from broker bonuses. It is for this reason that CySec decided in 2016 that they would like to eliminate broker bonus offerings for those that they regulate.
CySec is the Cyprus Securities and Exchange Commission which regulates a number of the Binary Options brokers who operate in Europe. We have covered CySec Binary Options regulation before but this was a relatively new directive which was aimed at curtailing the practice of unrealistic bonuses.
This was also done in a conjunction with a directive to limit leverage on CFD accounts to 50:1. Although this means that brokers who are regulated by CySec cannot legally offer these bonuses anymore, there are no such restrictions in place for those brokers who are regulated by other bodies or even those that are unregulated.
Should you Take a Broker Bonus?
This is usually quite a contentious point. Although “free” trading funds is always a good thing to consider, it should only be taken if the trader is 100% certain of the requirements involved and is also confident that they will meet those requirements.
The trader should not be blinded by the prospect of a giveaway and should make the decision based purely from an analytical perspective. Only traders who have traded before and know the volume that they can realistically trade together with the time in which this can be done should take a binary option bonus.
Moreover, if you are a trader that is considering taking a binary options broker bonus, you should discuss the terms of the bonus with the broker on email. You should confirm on the record with the broker that these are the terms to which you both agree. It would also be prudent to take a copy of the terms and conditions on the website and save it as part of your own due diligence.
Indeed, there are other options that you could consider should you really want to take advantage of broker giveaways. One of the most common that most traders take advantage of is no strings attached free demo accounts. These entitle the Binary Options trader to trade with the demo funds.
Unfortunately, demo funds and the profits associated with them cannot be withdrawn. However, this is a good opportunity for the trader to practice their trading skills before they actually consider investing any of funds with the broker.
Of course, the benefit of the demo account is that it is free. This means that the broker should not ask the trader to deposit any funds before they are given the benefit of using the demo account. If the broker asks you to do this then you should consider this a red flag.
Once you have honed your trading skills, you could consider moving onto a binary options no deposit bonus. This is a nice transition between the demo account and the live account. There will be considerably less pressure on the trader when they are trading on a broker bonus compared to trading funds actually invested.