Trading Tournaments
Some online brokers offer trading tournaments where aspiring investors can compete for prizes. Contests can be free to enter or cost a small sign-up fee and usually involve trading a specific asset like forex, with the biggest winners picking up cash prizes or luxury gifts. This guide explains how trading tournaments work, alongside tips for comparing contests.
Top Brokers With Trading Tournaments for United States
Investing Tournaments Explained
Trading tournaments are limited-time events that pit investors against each other in a bid to win prizes. Contests are usually held on demo accounts with participants given a fixed amount of virtual money to trade with. Those that earn the biggest returns are crowned winners and can pick up their prizes.
Tournaments can centre around any instrument and asset. Forex, crypto and binary options contests are particularly popular, though some brokers also offer stocks and commodities trading competitions. Importantly, they provide a way to hone your skills in a virtual environment while also earning cash rewards and luxury items. Some investors also use tournaments as a way to meet like-minded traders and to get tips on winning strategies.
Note, some tournaments are run by brokers while others are run by third-party groups and agencies. It’s also worth bearing in mind that tournaments that cost to enter usually have the biggest prize pools.
How Trading Tournaments Work
Most trading tournaments follow a similar format. An investor signs up for a contest, either for free or by paying a fee. They are then usually taken to a demo account where the competition will take place. At the start of the tournament, all participants are given the same amount of virtual credit, for example, $5,000. The tournament then begins and entrants are free to invest this money in a bid to generate the most profit.
Of course, parameters and rules may vary between providers. For example, forex tournaments may dictate that you can only trade major FX pairs. The length of contests can also vary. Some last a single day while others run for months. FXOpen even hosts a demo trading tournament that runs for an entire year.
It’s also worth pointing out that some contests are a free-for-all, where everyone competes against each other, while others group traders of similar ability and experience. The latter usually operate in a league system, where if you are consistently successful, you can progress to the top of the leaderboard. There are even some tournaments that allow traders to enter and compete as teams.
At the end of the competition, prize money is credited to the winner’s live account. And whilst the overall winner may receive the biggest pot, most brokers distribute some winnings to those that come in second and third place. Some brands also offer smaller rewards for the top 10 or 20 traders.
Types of Trading Tournaments
Trading tournaments tend to fall into different categories depending on the conditions:
- Local or global: In some contests, entries will be limited to investors located within a local area or country, such as Germany or France. In many cases, these tournaments are timed to line up with a day of significance in the region or country. Global tournaments, on the other hand, can be entered by anyone regardless of their location. They also tend to have more participants and bigger prize pools.
- Free or paid: As outlined above, trading tournaments can be categorized depending on whether they are free or paid. Anyone can enter a free tournament and compete for the prize. Normally these contests also provide an option of paying a fee to re-enter the tournament if you lose your virtual funds. Paid tournaments require each participant to pay a fee to take part. In return, the prizes and rewards are usually bigger.
- Trading assets: Another way to categorize tournaments is based on the assets or instruments you can trade. Some competitions are designed for specific assets like forex, stocks or cryptos. Equally, you can also enter tournaments that focus on a specific instrument, such as binary options or CFDs.
Benefits
Trading tournaments offer an exciting proposition for several reasons:
- Learning – If you are new to trading, tournaments are a great place to learn the basics. They usually take place on demo accounts meaning you don’t risk real capital, but trades are still executed under real-time trading conditions. This means you can practise with live data and analysis tools while implementing strategies in a low-risk environment.
- Competitive – Traders are normally pitted against those of equal experience and skill, helping new investors to build confidence and learn while competing. Equally, experienced traders get to test their knowledge and strategies against those of a similar level.
- Real prizes – The winners of tournaments receive a share of the prize funds. Free contests tend to reward winners with non-withdrawable trading funds. Paid tournaments, on the other hand, can have large prize pools. Check the terms and conditions to see how prize money is distributed. Note, IQ Option regularly runs daily binary options tournaments with prizes of up to $1,000. FBS also set a record in 2021 with a prize pool topping $1.2 million.
- Community – If you are not a regular user of forums or discussion pages, trading tournaments may be your first experience interacting with other investors. Team contests also encourage traders to work together.
Drawbacks
There are also some downsides to trading contests:
- Emotion – If you are just starting trading, one of the downsides of tournaments is that you don’t experience the emotion of putting real money on the line. When the stakes are real, people make different decisions as the pressure takes its toll. The virtual nature of most contests removes this and may lead to traders being overwhelmed when they invest real cash.
- Risk-taking – Trading tournaments naturally encourage risk-taking. You normally have to earn the most profit to win, encouraging bold trading decisions. Unsurprisingly, this can lead to developing bad risk management habits which could cost you further down the line.
Comparing Trading Tournaments
If you want to start entering investing tournaments but you’re unsure which to go for, consider these factors:
Fees
An obvious point to compare is the fees charged for each tournament. Some trading tournaments are free, while others require an upfront payment. Just remember that paid tournaments usually have larger prize pools than free alternatives. Importantly, only enter contests that you can afford and be careful when using rebuys.
Assets
Some tournaments focus on forex, some binary options, some crypto and so on. Aim to enter contests with assets that you feel comfortable trading. You could also enter tournaments revolving around markets that you wish to improve your understanding of.
Prizes
This is an obvious point to compare. Daily trading tournaments may have prizes up to $1,000, while larger monthly competitions can offer $100,000. Be careful though, the larger the prize pool, the higher the fee and the greater the competition.
Regulation
Check where the broker or company is registered and how long they have been operating. Ideally, they should be regulated by a top-tier authority like the CySEC, ASIC or FCA. Entering a contest with an unregulated provider could result in you losing your fee or not receiving the cash prize when the tournament finishes.
Bottom Line on Trading Tournaments
Investing tournaments add a competitive edge to financial markets. Participants can enter free or paid competitions with hefty cash prizes up for grabs. They are also a great place to test trading strategies in a relatively risk-free environment. Use our guide above to find a suitable contest.
FAQ
Are There Free Trading Tournaments?
Yes, several brokers run free to enter trading competitions in 2024. These include FBS and Pocket Option.
Do I Have To Invest Real Money In Trading Tournaments?
Most trading contests are hosted on demo accounts using virtual funds. This means there is no requirement to deposit real funds.
Can I Enter Forex Tournaments?
Most investors should be able to find a suitable forex trading contest in their region. Just remember to check the terms and conditions before signing up.
Where Can I Find Binary Options Trading Tournaments?
Binary options trading contests are offered by several top brokers. IQ Option, for example, runs daily tournaments, as well as larger, less frequent competitions.
How Long Do Trading Tournaments Last?
The length of investing tournaments varies. Some contests last a day, while others can run for many months and even up to a year. Generally speaking, the longer the tournament the bigger the prize pool.