In most cases, credit bonus is kind of like a money that broker lend it to trader for their trading.
This credit bonus increases account equity, free margin and leverage, but cannot be used to fund trading losses and cannot be withdrawn as cash (unless certain trading criteria is met).
By increasing free margin, the actual margin call and stop-out levels are reduced to almost 0% above the account balance, meaning that open losses can almost equal the account balance before stop-out will occur.
In summary, broker have zero or minimum risk of losing more than that the trade have made.
In another words, broker will be also more than happy to allow you to utilise the credit for winning position. You will be able to enter more orders.
ReplyDeleteBenefits of Credit Bonus:
ReplyDelete1. Can be used as increased Leverage
2. Effectively makes the stop out level on original balance as zero
3. Allow traders to have more margin for trading
Example:
No Bonus Example:
A Client deposits 10,000 USD in his account and elects not to take the Credit Bonus. The account leverage is set at 1:100.
Therefore the maximum position size the client can open is 10 Standard Lots (1,000,000 / 100 = 10,000 in used margin).
20% Credit Bonus Example:
A client deposits 10,000 USD in his account and chooses to take the 20% Credit Bonus. The account leverage is set at 1:100. The client now has in his account 10,000 USD cash plus 10,000 USD in Credit Bonus.
Therefore the maximum position size the client can open is 12 Standard Lots (1,200,000 / 100 = 12,000 in used margin).
Summary: By choosing to take the Credit Bonus, the client can use it as higher leverage. Please note that higher leverage also means higher risk.