Trading Tournaments

Trading tournaments are becoming increasingly popular among traders as a way to test their skills and win prizes. These tournaments involve entrants competing using demo accounts to see who can make the most profit, often with free funds deposited into a live trading account. Many brokers promote their platforms with elaborate and costly tournaments, with some of the biggest prizes worth over one million USD. In this article, we will explore how trading tournaments work, their advantages, and key factors to consider.

How Trading Tournaments Work

A trading tournament is a competition among traders to see who can make the most money through demo trading. Online platforms and brokers organize tournaments to attract new customers and retain old ones. Typically, competitors are given an equal amount of virtual credit (such as $10,000) to invest as they see fit, with the most profitable trader after a set period declared the winner.

Tournament lengths can range from one day up to one month. Some platforms, such as FXOpen or the World Cup Trading Championships, offer cash prizes to the most profitable trader in a calendar year. The tournament organizer decides which assets can be traded, with binary options being among the most common. Trading tournaments for Forex and crypto are also quite popular.

Some trading tournament platforms operate a “league” system, where traders compete against others with similar experience levels and abilities.

These types of tournaments are ideal for novice traders and those looking to improve their skills as they are more accessible. Other competitions allow players to participate as part of a team, providing entrants with another opportunity to develop their trading skills.

Trading tournaments are usually free to join, although some may require a fee. Some tournaments are known as ‘real cash competitions’ where contestants trade with their own money. There are also free competitions which use paper trading accounts to ensure a level playing field, although these typically offer smaller prize pools. Both free and paid tournaments usually offer a ‘rebuy’ option, which allows traders to reload their account balance by depositing the original amount again.

Pros of Trading Tournaments

Chance to Win Prizes

Trading tournament winners receive a share of the prize pool. Other highly placed entrants typically receive some of the winnings as well (for example, the top 10 entrants). Paid tournaments, which may only cost a few dollars to enter, can have very large prize pools. Often, these contain more than just cash as trading platforms compete for attention. For example, in early 2021, FBS set a record for the largest trading tournament prize with a prize pool worth $1.2 million, featuring a Mercedes-Benz, 1kg bar of gold, and $300,000 in cash. The size of the potential winnings is generally linked to the initial stake and the number of entrants.

Free trading tournaments may reward winners with non-withdrawable trading capital, though some have (smaller) cash prizes.

Many sites run daily trading tournaments with smaller prize pools in addition to high-stakes competitions. For example, the popular binary options site IQ Option runs daily trading competitions with prizes as large as $1,000, as well as big competitions with prizes of up to $100,000.

As a precaution, it is well worth checking the terms and conditions of each trading tournament to see exactly how the prize money is distributed. For instance, winnings may need to be held in an account for a set amount of time before they can be withdrawn. Sometimes, the prize money takes the form of account credit, which can be re-invested but not cashed out.

Practise

Trading tournaments offer both beginners and experienced traders a chance to refine their trading skills. Participants usually have access to a large amount of virtual cash, allowing traders to invest more capital than they ordinarily would. Tournaments also allow entrants to experiment with riskier trades, which can often be a recipe for success. This high-risk style of trading can also be a good way to get a feel for the market. The relatively low entry fees of many tournaments make them a low-stakes environment for performing risky trades.

Platforms that offer a league-based structure, such as OlympTrade, are good for helping traders of all abilities to improve.

When players are divided into leagues, beginner traders have a greater chance of being successful. This allows them to build confidence and learn strategies in a less competitive environment. Experienced traders, on the other hand, can stretch themselves by competing against similarly skilled opponents.

Connecting With Other Traders

Trading tournaments can be a chance to learn from other traders. Studying the strategies of winning competitors is a great way to improve your skills. Many clients also relish the opportunity to connect and discuss tactics. Team tournaments also encourage collaborative trading, which can help to develop trading acumen.

What To Look For In Platforms That Offer Trading Tournaments

Prize Value

Trading tournaments have a diverse range of winnings, from daily competitions with prize pools of around $1,000 to million-dollar one-off events. Daily competitions are usually cheaper to enter, costing only a few dollars. Large competitions, on the other hand, may require a deposit of up $100. They are also likely to feature far more competitors.

Some platforms offer in-house benefits to winning competitors. For instance, successful entrants may win trading capital that can be re-invested but not withdrawn. On some sites, like Pocket Option, traders can unlock achievements by participating in tournaments, which are used to buy trading advantages in the market.

Fees

Trading tournaments can be divided into free and paid competitions.

The entry fees for paid tournaments vary, often linked to the prize pool available and the duration of the tournament.

As a general rule of thumb, daily tournaments with winnings of a few thousand USD usually have low entry fees.

Large, longer-running tournaments often require entry fees in the tens of dollars but will likely feature bigger prizes.

On the other hand, some tournaments are free to enter, though these may require you to make a minimum deposit into an account with the platform to take part, so check the terms and conditions first.

Many trading tournaments come with a ‘rebuy’ option, allowing entrants to reset their account balance for a fee.

Traders should exercise caution when using rebuys and take care not to invest more than they can afford.

Format & Assets

Trading tournaments can take many different forms.

One factor to consider is the length of the tournament, which can last from a day up to a year.

Longer contests, lasting for more than a month, may require entrants to invest significantly more cash.

In addition, some trading platforms organise competitors into leagues comprising traders of similar abilities.

Other platforms run team competitions, allowing groups of traders to work collaboratively.

Many trading tournaments provide entrants with an equal amount of virtual capital to invest.

This format is more common in daily tournaments.

Alternatively, some sites simply distribute prizes to the most profitable traders on their platform in a given period (usually longer than a month).

These types of tournaments are usually run as a promotion and the prizes on offer can be huge.

The range of assets available to trade varies from tournament to tournament. Some of the most popular formats include forex, binary options (like the popular IQ Option) and cryptocurrency trading tournaments. Many competitions allow you to trade in the full range of assets available on the platform, which may include traditional instruments like stocks, futures, commodities and shares.

Regulatory Status

All prospective trading tournament participants should be cautious when signing up for trading tournaments with a new platform. To protect your money, always choose a reputable broker or tournament organiser. It is important to check where the company is registered and how long it has been operating. Firms that have been trading for less than a year or two may require more research. In addition, if a firm is registered offshore, it may be subject to lightweight regulation, meaning that you might not be covered legally if something goes wrong. Finally, it is worth reading online reviews of the company to weed out potential scams.

Final Word On Trading Tournaments

Trading tournaments can be a good opportunity for both budding and veteran traders to develop their skills, meet other investors and trial new tactics, assets and brokers.

There are both free and paid competitions run regularly, though the latter will usually offer larger prize pools, sometimes exceeding £1 million.

As always, you should be careful not to spend more than you can afford during trading tournaments, especially on rebuys.

Nonetheless, trading tournaments can be a fun and rewarding way to trade.

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