As any seasoned Binary Options trader may know, Binary Option Bonuses have been offered for a number of years as a way to get the trader wedded to the broker.
However, as traders have wised up to this tactic, they have started to inquire about the prospect of taking advantage of a broker’s offer for a no deposit bonus.
This allows the trader to trade with truly free money at the broker on a live account and get the best sense of how the broker operates the business.
Of course, understanding how no deposit binary option bonuses work is crucial to making the most of the agreement.
What is a no Deposit Bonus?
The no deposit bonus is as the name may describe. It is a bonus that is provided by the broker with no deposit being required by the trader.
These are also on a live account which makes them differ from the demo accounts. In the demo account, any money that is made is demo money and the trader can not withdraw.
In the live account, profits made on the no deposit bonus can be paid out to the trader provided certain conditions are met such as an amount of trading volume or trades within a certain time period.
A binary options no deposit bonus may also come in another type or form and does not necessarily have to have that name. For example, risk free trades (which are similar to free bets) may also be offered by the broker and have similar qualities. Unlike traditional risk free trades, they come without requiring a funds to be invested.
No Deposit vs. Traditional Bonus
Although a novel idea originally introduced as a way for the broker to compete with other brokers and attract clients, the Binary Options deposit bonus has morphed into an unfortunate contractual tie up.
There are endless examples of clients who may have elected to take a trading bonus without knowing the requirements involved in actually being able to withdraw these funds.
What traders used to think was free money actually came with very stringent turnover requirements that the trader was unaware of. In some cases, this turnover requirement also tied up the initial deposit which meant that the trader was unable to even withdraw this.
This may have been something that experienced traders would have understood but it was not the case for those traders who were new to the game. Due to the number of newbie traders who were caught up by the bonuses, the regulators decided to take note.
CySec, the regulator that is in charge of brokers which operate in Europe decided to outlaw deposit bonuses and hence protect the trader from himself and the unscrupulous broker.
Beneftis of a Binary Option no Deposit Bonus
Obviously, one of the most important benefits of a no deposit bonus is that the trader does not have to invest any funds in order to take advantage of it. This means that there will indeed be no risk involved in taking the offer by the broker as a new client.
It gives the trader a certain piece of mind in accepting the bonus knowing that they do not really have to parse long winded legal text to spot the small print attached to the bonus.
Indeed, binary option no deposit bonuses tend to be quite small in comparison to the traditional type, this should not deter the trader to make full use of the following advantages:
- Transition. This is what is usually quite helpful from the perspective of the new trader who has been making use of a demo account. It is an easy move for the trader who wants to take the step from trading with demo money to trading with free real money. Even though the trader has not actually invested any money yet, it could take some time getting used to the feel of the live account before they are ready for this commitment. Apart any visual differences that there may be between the two account types, the live account usually has a certain psychological feeling that the trader may need to get used to.
- No High Turnover. Unlike traditional broker bonuses that require large and often unrealistic turnover numbers (between 20 and 30 times) the no deposit bonus is comes with much lower turnover requirements and does not unrealistically set the traders’ expectations on what is actually achievable. This means that the trader actually sees a chance of possible withdrawal of their bonus as well as any profits.
- Bonus Size. Yes, no deposit bonuses are not a large sum of money but that is not a bad thing. It allows the trader to trade more realistic option sizes and employ some of the strategies that he / she will indeed use when they have fully invested. It forces the trader to think in the terms of risk management for small amounts by keeping the bands of upper and lower limits generally quite tight.
- Live Platform Testing. It is no secret that one of the binary option scams that has been used by brokers is when they manipulate the platform to offer high in the money rates when the trader is using the demo account. However, when they switch over to the live account the ITM rate drops quite substantially. This is the broker taking advantage of platform risk settings to the detriment of the client. This is where the no deposit binary option bonus comes in. It allows the trader to observe what risk levels they were getting when using a live account as compared to a demo without risking any deposit funds. Once the trader is comfortable with the levels on the live account they could consider investing their first funds.
In general though, the no deposit binary option bonus could be a good way for the trader to get a feel for how the broker operates and how responsive they will likely be to any client who has progressed onto the stage of a live account.
Terms and Conditions
Although binary option no deposit bonuses are generally way less stringent than traditional deposit bonuses, they still do come with some terms and conditions. This is not entirely unreasonable.
As one may expect, there are also a large number of traders who would love the opportunity to request a no deposit bonus and then immediately hit withdraw and make off with the bonus for nothing.
The incentive for the broker to offer a no deposit binary options bonus is to allow the trader to get a better sense of the platform and trade freely on a live account in a non-threatening way.
It is for this reason that brokers have requirements for the trader to meet before they can actually withdraw the bonus or profits on it.
Turnover requirements are based on total volume of trades winning or losing. So for example, if the broker has a 10x turnover requirement then you will need to trade 10x of the no deposit bonus.
If you got a $100 binary option no deposit bonus this would mean that you would need to place at least 10 trades of $100 in order to meet the conditions. This could also be 100 trades of $10 as well.
This could work out well if most of those 10 trades were in the money. The trader would then be able to withdraw the profit from the account as well as the bonus itself.
Meeting Turnover Requirements
When you have to meet turnover requirements to realise your no deposit binary options bonus then choosing the trades that you place as well as the amount that you would like to place on these trades is crucial.
This all depends on the broker that you are using as they have minimum trade sizes. This determines the amount of trades that you can realistically put on before you deplete your no deposit bonus.
When it comes to general risk management, responsible trade sizes will range from about 1-5% of the capital available in the account. This means that if the minimum trade size is more than 5% larger than the no deposit bonus then it could be risky parameters that you are working with.
Indeed, your trade size does not have to be a fixed number and you can adjust it according to how much capital you already have in the account. A good strategy to start could be to use about 1-2% of the capital size and allow this to compound.
This compounding effect will also increase the account size and hence will allow you to gradually increase the amount that you stake on each trade. This will all work in a linear and gradual fashion.
If the minimum trade size is more than 5% then you have to use a binary options strategy that you are certain can increase your chances of getting high in the money rates.
No Deposit Scams
When it comes to no deposits, you should also try and avoid any scams associated with the bonus. Only use legitimate and regulated brokers before you start an account. FXaxe has a list of trusted brokers that have been reviewed.
On some occasions, no deposit bonuses have been used as an excuse for the trader to hand over money in order to get the winnings freed up by the broker.
At no point should you ever have to pay the broker in order to release a no deposit bonus. Read the terms and conditions and make certain that the bonus does not come with these sorts of strings attached.