Hello.
Here’s an easier way to understand it all:
“No deposit bonus” (or “promotion” or “prize” if you will):
You don’t have deposit any of your own money. The broker gives you capital to trade with normally for a fixed period of time after which the bonus amount is withdrawn from your trading account but you’re free to withdraw your profits at any time. Think of it as ME lending YOU, for example, €1 000 and saying to you “right: I’m lending you €1 000 for three months to trade with. Any profit that you make you may keep but after three months I want my €1 000 back. But if you lose the money then it’s my problem and my loss”.
“Percentage of deposit bonus”:
The broker will give you certain percentage e.g. 20% of your initial deposit as additional capital to trade with. But this amount is also only available for you to use for a certain period of time after which time the amount is withdrawn from your account by the broker but you’re free to withdraw your profits at any time. This is like ME saying to YOU “alright: you put up, say, €1 000 of YOUR OWN money and I’ll lend you an extra €200 to use as margin for a period of three months. Any profits you make you keep but after three months I want my €200 back and, well, if you lose the account then I’ve lost my €200 as well”.
Those are trading bonuses in their “purest” form.
But here’s what I was warning about it my post on FPA:
You HAVE to check the terms and conditions VERY carefully. Sometimes there are so many “strings attached” that it’s just not worth the trouble. Also: be very careful of the bonuses offered where a certain amount of the bonus is available for withdrawal after you have traded a certain volume. THESE bonuses CAN (and usually do) encourage the trader to over trade their account because they want to be able to “free up” the bonus for withdrawal. This normally results a) in tears and b) learning VERY bad habits.
Any even with the trading bonuses in their “purest” form you ALSO need to remember carefully on which day the bonus amount is going to be withdrawn from your account and allow for that. In other words: you have to always be saying to yourself “if my bonus is withdrawn from my account TODAY am I still going to have enough margin available to avoid a margin call”. Most often people don’t think of this and, well, the moment the bonus amount is withdrawn from their account they’re close to a margin call (and usually do get margin called). If the client has NOT deposited any of their own money to supplement the bonus amount then, well, I guess, no problem because it’s only the broker’s money that’s gone. But if the client HAS deposited some of their OWN money to supplement the bonus amount then they could very well lose not only the bonus amount but also all of their OWN money that they’ve deposited in the case of a margin call.
I hope that makes it clear now.
Regards,
Dale.