Is a Binary Options Bonus Right For You?

bonus“Invest now and get $500 free!”

“You qualify for a $1,000 bonus! Deposit now and claim your free money today!”

“$10,000 welcome bonus available for traders!”

“200% bonus just for depositing!”

These are the kinds of ads that draw traders into the world of binary options. The promise of easy money is hard to resist, particularly in an economy where the minimum wage is $8.00 an hour, and doesn’t cover the cost of living. We are all looking for ways to make more money faster, and the easier it is, the better. Nonetheless, you have to take a moment to really think about that. Take a deep breath. When was the last time anyone gave you money for free, particularly a stranger? Has that ever actually happened?

I didn’t think so.

Welcome bonuses are popular with new traders, but are they really for everyone? Many traders do not understand exactly what a match bonus is, how it works, or what its implications are. Match bonuses are intended more for some types of traders than others. And some traders may want to seriously consider claiming them, while others should refuse and sign up without one.

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  90% $10 $1
 
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  80% - 90% $250 $5
 
  85% $250 $5  
 
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90% $10 $1
 
200% $50 $10
 
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85% $200 $20
 
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80% - 90% $250 $5
 
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90% $10 $1
 
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  85% $50 $1
 
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  90% $10 $1
 
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  90% $10 $1
 
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  90% $10 $1
 
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  90% $10 $1
 
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  90% $10 $1
 
  85% $10 $1
 
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90% $10 $1
 
85% $200 $20
 
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95% $250 $1
 
80% - 90% $250 $5
 
85% $250 $5  
 
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  90% $10 $1
 
  85% $100 $5
 
  85% $50 $1
 
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  90% $10 $1
 
  200% $50 $10
 
  85% $250 $10
 
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  95% $250 $1
 
  85% $10 $1
 
  80% - 90% $250 $5
 
  80% $250 $25
 
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200% $50 $10
 
95% $250 $1
 
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  200% $50 $10
 
  85% $250 $10
 
  85% $200 $20
 
  95% $250 $1
 
  85% $10 $1
 
  80% - 90% $250 $5
 
  85% $250 $5  
 
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  85% $50 $1
 
  200% $50 $10
 
  85% $200 $20
 
  95% $250 $1
 
  85% $100 $5
 
  85% $10 $1
 
  80% - 90% $250 $5
 
  80% $250 $25
 
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95% $250 $1
 
85% $10 $1
 
80% - 90% $250 $5
 
85% $50 $1
 

 

How Match Bonuses Work: Leverage

Do you know what leverage is? Leverage is defined generally as “the exertion of force by means of a lever.” That definition applies to physics, and it is pretty vague, but it does cover the general concept. Picture that as a metaphor for what a match bonus offers you in your trading. When you use a lever, you need less force to achieve a given outcome. Likewise, when you use a match bonus (taking the role of the lever), you need less force (investment capital) to achieve a given outcome (higher winnings).

Another definition for leverage is “the use of credit or borrowed capital to increase the earning potential of an investment.” That is probably the closest definition that applies here directly. The key word in this definition is borrowed. That is essentially what you are doing when you accept a welcome bonus. You are borrowing the amount of the bonus. Eventually the bonus can become yours, and you can withdraw it as cash from your account, but only after you achieve a certain trade turnover. You have to execute that volume in trades before you can actually say you own that money. In the meantime, it is yours to use, but not yours to own.

Are you trading on leverage? Find out here.

What is the Effect of Leverage?

Having more money in your account than you actually own allows you to control larger investments than you should theoretically be able to using only your own money. Say you invested $500, and you agreed to accept a match bonus of 100%. You have $1,000 in your account. If you invest 3% of that amount on each of your trades, you are actually investing the equivalent of 6% of your real balance. Why?

If you win your trades, you are winning double the amount of money you would if you were only investing 3% of $500, and not $1,000. And if you lose your trades, you are losing double the amount of money. So you can win twice as fast, and lose twice as fast. And this is why leverage is a double-edged sword. One side can serve you, but the other edge can cut you down just as quickly.

Are Bonuses Optional?

Your next question might be, “Do I have to accept a bonus if I do not want to?” The answer depends on the broker. (TradeRush allows you to decline a bonus)Some brokers will allow you to choose. Others will force you to accept the bonus. You need to call and ask customer service whether the match bonus is optional or not if the website does not clearly answer the question. If the bonus is not optional, you may either want to find another broker or simply ignore its presence in your account and trade as if it did not exist. Eventually the money may belong to you, but in the meantime, at least it is not going to mess up your money management plan.

Withdrawal Complications

Another issue traders sometimes report with bonuses is complications involving withdrawals. This is typically a problem at less trustworthy brokers, but the complexities of having a bonus connected to your account may cause you to experience some lag when you want to withdraw funds. So that is another reason that some traders choose to ignore bonuses.

Who Are Bonuses Intended For?

Ultimately, what should determine whether or not you should accept a bonus offer from a binary options broker?

The answer is you.

Why are you trading? Are you trading for fun, or for serious profit? Are you trying to build a business around investing, or do you enjoy the thrill of trading? There are three types of binary options traders, and you need to figure out which one you are before you can decide whether or not a bonus is right for you.

#1: Gamblers

If you are trading for fun, you are a gambler. Binary options doubles as a form of entertainment as well as a type of investment. A lot of traders are interested in binary options as an alternative to trading at an online casino. Match bonuses at binary options brokers are based on the concept of match bonuses offered at online casinos. If you are a gambler who wants to trade binary options for fun, match bonuses are specifically directed at you. If you would accept a similar welcome bonus at an online casino, you can look at the match bonus offered by a broker the exact same way. It’s free money to play with, but you only get to keep it if you are lucky—and if you are unlucky, you will burn through your bankroll a lot faster. If this adds thrill to the game for you, then a match bonus is something that can provide you with a factor of entertainment. If you would prefer to stretch your bankroll, you may still want to say no to a bonus. Also be wary of companies that will not let you withdraw your investment until you have completed the bonus turnover requirement.

#2: Serious Traders

On the whole, match bonuses are not directed at you, and you almost certainly want to steer clear of them. Are there serious traders who have profited using leverage? They are out there, but they are rare. The vast majority of traders who are able to make a living with their trading activities are investing small percentages of their accounts, and do not expect to get something for nothing. A match bonus in your account will only complicate your money management plan and may also make it harder to withdraw your money. So if you are serious about investing for profit, I suggest you avoid bonuses altogether.

#3: Traders Who Don’t Know

Sadly, there is a huge swath of traders who fall into a third category, which is ignorance as to their own reasons for trading. These traders lack self-awareness, and may believe that they are serious about trading, while making random and arbitrary trading decisions which actually classify them as gamblers. These traders not only should avoid bonuses, but should also avoid trading altogether until they can figure out why trading interests them. Also sad to say, but match bonuses are directed toward these customers as well. Customers who do not know their own motivations will lose more money and make brokers richer faster than either self-acknowledged gamblers or serious traders.

The bottom line is to figure out who you are, and why you are trading. Once you have done that, you will know what to do about bonuses. Read the fine print before you accept any bonus offer, even if you are trading just for fun!

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