Written by: Sophie May
Many binary options brokers offer sign-up bonuses enticing you to deposit. These can certainly give you a helpful boost, but you should be aware of the terms and conditions before accepting one.
If the bonus is 50% for example, and you deposit $5,000, the broker will add another $2,500 to your account and you will enjoy a balance of $7,500 to start trading with. In exchange, you will have to agree to a certain trading turnover before withdrawing. This can leave new traders with a difficult decision to make before they even have a chance to test the waters. Consider your options carefully.
Advantages of a Bonus
The obvious attraction is that you immediately have more money in your account to trade with. Some brokers offer bonuses up to 100%, in effect doubling your money in an instant. This is highly tempting and a great tool if you know how to use the extra trading leverage to your advantage. If you are a serious trader, you will be confident of reaching the required turnover and will enjoy the extra funds.
In addition, accepting a bonus forces traders to see binary options as a long-term investment. You are therefore more likely to take time to learn the assets and develop a sensible trading strategy. This will leave you better placed to grow your capital over a period of time.
Disadvantages of a Bonus
The disadvantage is that you cannot withdraw your funds until the turnover is met. Why is this? If withdrawals were immediate even after taking a bonus, everyone would keep depositing a certain amount and withdrawing more - you could multiply your money without trading and the brokerage would be bankrupt overnight! Brokers earn as you trade, so they are only provide free bonus money to serious, long-term investors.
It is best to refrain from trading with money you cannot afford to lose because there is always an element of risk. This becomes even more imperative if you accept a bonus. If there is even a slight chance that you will need to withdraw your fund before reaching the required turnover, simply decline the bonus.
How quickly will you reach the turnover?
Many new traders are keen to benefit from the bonus but are not sure how much they will be trading. Firstly, calculate the required turnover in advance. As an example, if you need to trade a volume of 20 times the deposit and bonus, should you deposit $5,000 and receive a 50% bonus, you must trade 20 x $7,500, which is $150,000. It is the amount you invest on a trade, regardless of the outcome, that contributes to this turnover.
Secondly, ask your broker how long the offer is available. Some firms require an immediate decision while others are more flexible. If your broker allows you a week after depositing to decide whether to accept the bonus, use this. Trade on a demo account to gain a feel for how quickly you will meet the turnover.