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The competition among real-time digital trading platforms is fierce. Many online platforms have implemented incentives as a method of attracting new users. Some traders underestimate their influence, but they can be an exciting way to get a head start in the internet trading world.
While they are great perks, incentives are also psychological tools. They can have a strong influence on how users think and have the goal of increasing engagement. The idea of incentives is to motivate investors to trade more, ultimately leading to increased profit for the platform. Here’s an extensive critical look into the psychological mechanisms of incentivized trading and its effects and risks.
Psychology Behind Incentivized Trading
To understand the psychology behind incentivized trading, we need to learn several important concepts of behavioral economics. It’s an area that combines economics and psychology, discussing why investors sometimes make irrational financial moves.
Loss Aversion
The idea of this mechanism is that people are inclined toward avoiding losses rather than thinking about getting a profit of the same or a similar amount. Let’s say that a user earns about $100 from a trade worth $1,000. Now, let’s compare that to another trade where the user loses $100 from the same transfer.
The idea of loss aversion is that a stronger emotional response is present when the investor loses money rather than if they win the same amount. Also, the idea of missing out on a specific bonus, rebate, or another incentive provokes a strong emotional response. These things can lead to poor decision-making with the goal of securing an incentive, even if that leads to unnecessary risks.
Reward Bias
Humans react positively to rewards, which is why many platforms implement the incentive system. The rewards don’t have to be too frequent or large — their purpose is to keep users engaged. It’s a similar mechanism that users display when gambling. Payouts might be unpredictable, but they could be better than expected. That mechanism leads to compulsive behavior. If a user is close to achieving the goal and receiving a reward, they might trade more aggressively than usual.
Endowment Effect
The best explanation of the endowment effect is that the user has a feeling that they are entitled to the bonus. That applies even when they haven’t reached the specific bonus wagering requirements. That is why the trader acts to keep the bonus in their hands, which leads to them making risky trades and spending more than planned.
Common Incentives Used by Trading Platforms
From the perspective of a trading platform, it’s not only about attracting users. These services aim to modify investor behavior by offering various benefits. Here’s an overview of the incentives that you can often find at IQCent and similar trading platforms:
- Deposit bonuses. You will find this type of bonus on most platforms, making it the most frequent benefit. A deposit bonus includes extra funds you receive when you deposit money into the website. The percentage varies anywhere from 20% to 200% or more. However, meeting certain wagering requirements is usually necessary to convert the bonus funds into actual money.
- Cashback rewards. The idea of a cashback is to make you feel better after a loss. The platform will issue a small portion of the investment back if you lose a certain sum. The percentage can be anywhere from 1% to 20% and usually depends on the trading volume.
- Trading contests and leaderboards. These are tournaments organized during a certain timeframe, such as a week or a day. They can refer only to certain types of trades or overall website activity. The idea is for the top performers to get some rewards or bonuses. That could be actual cash, boosted bonus deals, or other incentives.
- VIP loyalty programs. The idea is to offer rewards for constant activity on the platform. The benefits you receive include decreased spreads, better cashback and other incentives, and faster withdrawals. The rewards increase as you progress through the levels.
- Free margin or risk-free trades. New users might receive several risk-free trades, which means that investors can place the desired moves without any risk involved. Also, some platforms offer free margins for the first few trades.
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Behavioral Effects of Bonuses and Cashback Offers
Investors act differently as a result of having bonuses and cashback offers available. Some behaviors that investors could exhibit include the following:
- Overtrading. Users might trade more than planned only to achieve the targeted bonuses. That also causes the abandonment of current strategies, often leading to investors suffering unexpected losses in the process.
- Higher leverage usage. Investors use a higher leverage because they might have a false sense of security. The potential profit is higher if you accept higher leverage, but so are the potential losses.
- Excessive risks. If traders are using the bonus funds, they might act riskier than they would with actual money. They could see the bonus sum as money that doesn’t belong to them, which is why they might be less cautious than usual.
- Emotional trading decisions. Traders might become more emotional when pursuing a bonus. The stress of meeting the wagering conditions before the deal expires or the fear of losing the bonus might lead to poor decision-making.
Here are some strategies that users can follow to mitigate risks when accepting bonuses:
- Always read bonus terms carefully. These conditions contain all relevant details of the specific deal.
- Avoid incentives that push unrealistic trading volumes. It’s best to stick only to benefits that fit your trading strategy.
- Focus on profitability and not volume. You want to ensure the platform fits your overall goals, so make profitability your priority.
- Consider declining bonuses that tie up withdrawal rights. If you can’t access the withdrawal of personal funds while the bonus is active, perhaps it’s best to steer clear of those deals.
Incentives Can Be Useful — If You Stay Rational
Not all benefits are harmful, but discipline is crucial to make the most of them. Begin by setting clear rules for yourself and using incentives to boost your strategy. It’s important not to let them drive your trading plans. Instead, focus on securing long-term profitability and look beyond short-term perks. It’s a good rule of thumb to be skeptical and read the rules of each bonus carefully.
Reviewed and edited by Albert Fang.
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Article Title: Incentivized Trading and Behavioral Economics: Bonuses, Cashback, and Consequences
https://fangwallet.com/2025/08/04/incentivized-trading-and-behavioral-economics-bonuses-cashback-and-consequences/The FangWallet Promise
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