Bonuses and the withdrawal trap

[Shadow Trader]

Deposit bonuses are a common marketing tool: deposit 1,000 and receive a 30 percent credit. The credit boosts the account's margin and appears as equity. It looks like free money.

The conditions are in the fine print. Withdrawals may be blocked until a trading volume target is hit, often tens or hundreds of lots. Profits earned using the bonus can be forfeited if the bonus is removed. Some brokers cancel the bonus and any profit if the client withdraws any funds within a certain period.

For a scalper, the volume requirement may not look hard since high turnover is natural. But the cost of reaching the target, in spreads and commissions, must be weighed against the bonus. If the trading cost of meeting the target is 400 and the bonus is 300, the net is negative.

Bonuses also change how the broker treats the account. A bonus account can be subject to extra restrictions on strategy types, with scalping and hedging sometimes banned for bonus funds.

The simplest approach is to treat the bonus as a loan with strings attached, and to read the withdrawal clause first. Many serious scalpers decline bonuses entirely, to keep the account clean and the rules simple.

A worked example: a 1,000 deposit receives a 300 bonus. The terms require 30 standard lots traded before withdrawal. On a raw account with a round-turn cost of about 1 pip, or 10 dollars per lot, the cost of trading 30 lots is 300 dollars. The bonus is cancelled out exactly by the cost of earning it.

If the strategy makes 1.5 pips per lot net of costs, the volume produces 450 dollars of profit and the bonus is a modest plus. If it makes 0.5 pips, the same volume produces a loss on top of the cost.

That shows why the answer depends on the strategy. The question isn't whether the bonus is good in general, it's whether the strategy can clear the volume at an acceptable cost.

Another trap is the removal clause. Some bonuses are deducted from the balance at withdrawal, together with the profits attributed to them, and the attribution rule can be generous to the broker. Reading that clause carefully, and asking for an example calculation in writing, is worth the effort.

Has a bonus ever complicated a withdrawal, and how did it end?