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XM no deposit bonus as an alternative to a funded trading account

XM no deposit bonus as an alternative to a funded trading account

Written by

Justin Cox

Written on

Mar, 2024

Updated on

Mar, 2024

Table of content

Obtaining a funded trading account from a proprietary trading firm can be quite a challenge. With drawdown restrictions and profit targets, you may find yourself in a difficult situation where you pay for a funded account but are unable to deliver the desired returns.

For this reason, you may be looking for an alternative to a funded trading account – with more favorable terms and no restrictions on how you trade.

XM is a popular FX and CFD brokerage that offers a “No Deposit Bonus” to first-time clients on its platforms.

The bonus amount is $30 (or equivalent in other currencies) and any profit generated from using the bonus in trading can be withdrawn, while the principal bonus itself cannot.

However, is this enough to supplement the fees and increased buying power of a funded trading account? – Let’s find out.

How do funded trading accounts work?

Funded trading accounts are provided by proprietary trading firms in exchange for a one-time or monthly fee. These accounts are divided into funding levels and may range from $5,000 to as high as $1 million and beyond – each with varying fees.

These funded accounts come with a set of requirements and limitations, such as:

  • A profit requirement as a percentage of the account balance
  • A drawdown limitation as a percentage of the account balance
  • A minimum number of trades that must be executed within a 30-day period
  • A profit split for every profitable trade (typically 90/10 or 80/20 in favor of the trader)

These limitations serve to keep the prop trading firm solvent and generate revenue. When signing up with a firm, all traders must first pass the evaluation stage, which tests their ability to trade within the set restrictions and requirements.

Certain withdrawal restrictions may also apply on when and how much the trader can withdraw in a single request.

The base funded balance cannot be withdrawn. Traders can only take out their cut of the profits generated from trading using the funds.

How does the XM no deposit bonus work?

The XM ‘No Deposit Bonus’ is a welcome bonus for new Xm clients that sign up for a brokerage account. The bonus does not require any deposits and is not withdrawable.

However, any profits generated using the bonus are withdrawable without any difficulties.

While XM offers a very generous degree of leverage (up to 1:1000), $30 is not a sufficient amount for you to boost your buying power to such a degree, as margin requirements will restrict the amount of leverage you can take advantage of.

Regardless, this does not mean that leverage is completely inaccessible to you. Perhaps you can get leverage of 1:10 or 1:20 and dividing your $30 bonus can also give you the necessary funds to cover for the margin requirement.

For instance, leveraging $15 of the bonus to 1:20 gives you a buying power of $300, while the other $15 acts as collateral. Margin requirements for small balances are typically very low, which allows you to increase your balance enough to generate the bonus amount equivalent per trade.

However, it must be noted that such a strategy can be time consuming and withdrawals also cancel out the proportional bonus amount as well.

For example, suppose you have managed to generate $50 in profits using the $30 no deposit bonus and you choose to withdraw 50% of the profits ($25) from your account. This will reduce your bonus by 50% as well, leaving you with a $15 bonus.

The no deposit bonus is only available for first-time XM clients and can only be used once, when signing up with the broker.

Important differences between funded accounts and the XM no deposit bonus

To understand whether the XM no deposit bonus can be a viable alternative to a funded trading account, it is important to consider the key differences between the two, as well as their practical applications.

The XM no deposit bonus is only for first-time XM clients and provides $30 in starting bonus that cannot be withdrawn. While this removes the evaluation stages and does not require any recurring charges, it also provides very little capital and is unlikely to deliver substantial returns in the long run, regardless of how profitable your strategy may be.

Restrictions

As already mentioned in prior sections, prop trading firms fund traders in exchange for a few terms in favor of the firm:

  • The trader must be profitable and reach the profit target set by the firm
  • The trader must stay within the drawdown limitations and not undertake excessive risk that could put the account at risk, which would result in disqualification
  • Maximum funding ceiling and scaling limitations are in place to ensure the financial stability of the prop firm

Such restrictions are not applicable to XM no deposit bonus holders, which gives them complete freedom over how they manage their funds. However, the no deposit bonus cannot be withdrawn and only the profits generated using the bonus are available for withdrawal.

Prop trading firms also come with fees that need to be paid every time the trader fails the evaluation stage, which can add up to substantial amounts over time.

On the other hand, the no deposit bonus offered by XM does not charge anything and actually gifts $30 to the account holder.

A silver lining between the two is the lack of restrictions regarding the trading strategy chosen to deliver results, as long as it complies with the prop firm’s requirements.

The XM no deposit bonus is not designed to compete with prop firms and serves as an incentive to reward first-time XM clients to stay loyal to the firm.

To better understand the difference between the two, let’s consider a trade scenario where the trader is going long on EURUSD.

If we assume that the trader only uses the no deposit bonus at XM, they have $30 in buying power and the option to use some leverage. There are no restrictions regarding how they structure the trade or on how much the trade can theoretically win or lose.

On the other hand, a prop trader may have $10,000 in capital under their management, but a 8% drawdown limitation and a 10% profit target, which puts more pressure on the trader to perform, otherwise they risk losing their account.

Buying power

The second key factor that differentiates the XM no deposit from a funded trading account is buying power.

Nominally, XM only gives $30 in buying power as a no deposit bonus for first-time clients, while most prop firms offer funding in the hundreds of thousands in exchange for a fee.

While XM offers a maximum leverage limit of 1000:1, this is less feasible for traders that have only $30 on their accounts. When the leverage is exceedingly high, margin requirements amount to higher dollar values, which is not feasible for a trader with $30.

On the other hand, while having $10,000 and more in buying power is great, this comes at a cost and also adds stress to perform.

In terms of buying power alone, the XM no deposit bonus is not a viable alternative to a funded trading account.

Fees

The XM no deposit bonus is completely free of charges and the only fees that apply are the spreads charged by XM on the various instruments it offers.

On the other hand, funded trading accounts are not free of charges and prop firms generate revenues through fixed or recurring monthly fees, as well as from a cut of the profits generated by their traders.

While this difference is unlikely to dissuade traders from their chosen path, it is nonetheless an important factor that differentiates the no deposit bonuses offered by XM and other brokerage firms from the fees charged by proprietary trading companies.

Conclusion

The XM no deposit bonus and funded trading accounts are considerably different from each other and are unlikely to serve as complementary options.

The XM no deposit bonus gives $30 to first-time clients that they can use for trading. However, the bonus amount cannot be withdrawn and every profit withdrawal also depletes the bonus to an equal proportion as the withdrawal amount is to the account balance.

On the other hand, funded trading accounts give traders the opportunity to increase buying power in exchange for a one-time or monthly fee and compliance with drawdown limitations and profit requirements. Noncompliance with which results in the loss of the account.

Both of these products serve different purposes on the market – the bonus exists to reward new clients and funded accounts are the primary source of income and business model of prop firms.

FAQ on XM no deposit bonus VS funded trading account

Can I withdraw the XM no deposit bonus?

What are the drawbacks of funded trading accounts?

Is XM no deposit bonus better than funded accounts?

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