The History of Bonuses and promotions in the Forex market
Bonuses offered by Forex brokers are almost becoming universal to the point when you might be surprised if a broker does not offer you a bonus or promotion to sign up with them. This is of course not true of all brokers as some brokers prefer to offer better trading conditions in place of a bonus, which might be preferred by some traders. Nevertheless, the majority of brokers became very aggressive in their marketing tactics and are now competing with each other on who offers the biggest bonus. This article will introduce the history behind the bonuses and promotions on offer any why they became such as necessity to so many brokers.
In the early days when online forex trading emerged there were only a handful of Forex Brokers spread across the globe. The restrictions were very limited and so was the knowledge of forex traders. If you used to trade physically the forex market you would have done this directly with the banks. So the spread was not really an important factor of your trading decision. Initially Forex brokers offered spreads in the range of 10 pips on majors, which was much better than the banks but by today’s broker standards is awful and the size of the spread can affect a trader using a margined trading account much more than it would at the physical exchange. Traders could easily get into a position that had a spread, which could cost them a considerable percentage of their initial deposit with the leverage available.
But as in any market the demand has fuelled supply and we have experienced an incredible boom in the online Forex trading industry. More and more Brokers emerged and they started slowly but steadily improving their trading conditions to attract more traders. Today, we now have Brokers offering spreads from 0 pips or from fractions of a pip regardless of the deposited amount. The leverage was also improved dramatically comparing to the traditional Brokers and now many brokers offer leverage of 500:1 and you can easily find Brokers offering more. So how can a new Broker emerge as a successful Broker in this industry? Well, they have to offer something new and unique. The spread cannot go lower taking into account the expenses from the bridge, the LP agreements and so on so brokers started looking at other differentiators.
I still remember the day that one of the new Brokers advertised the opportunity to win a supercar in Bloomberg. I think that this was the turning point. This specific Broker became extremely successful in the following years and many other Brokers followed suit in their approach. Brokers offering now include deposit bonuses, no deposit bonuses, free signals, free EAs and much more. I wouldn’t be surprised if I have not listed all the bonuses and this is simply because there are too many.
The competition in the Forex market is what has really pushed Brokers to offer better trading conditions for their clients. If we looked back 6 years ago no one thought of receiving spreads as low as they offer now. At the very end every market participant has benefited from this aggressive approach by the Brokers. Bonuses and promotions became the new trend and quite often it is advantageous to sign up with multiple brokers to take advantage of what is on the market. Despite these bonuses we should not lose sight that the most important thing is finding the best execution quality and the right trading conditions. Getting that wrong could lose us more than a simple bonus.