A lot of traders wonder how they stack up against others of similar ability. One of the more exciting ways to see where you land amongst other traders is by entering contests. These come in a variety of shapes and sizes, but they are all geared toward helping not just show off your trading skills, but to refine them as well.
Trading Contests are Popular
Trading contests can be found in any type of asset or market. They are very popular for Forex traders, but you can also find contests that revolve around solely stocks, or even contests that let you trade anything you want through a binary options broker. The contests are often conducted through a demo account where there is no money risked on actual trades, but you can find real money contests as well. Some have entry fees, some do not. Some are run directly through brokers, while others go through third party organizations. This is a whole lot of information to take in at once, so we will try to help by breaking down what each type of contest looks like so you can better see what is right for you, and what to stay away from.
Demo Account Contests
Trading contests conducted from demo accounts can be used in pretty much any marketplace, as long as the sponsor of the contest has a software platform to support it. These are often done through larger sites, and because demo trading contests are allowable under SEC regulations, you can even trade stocks in these for cash prizes. Typically, these work under a strict set of guidelines, and they will vary slightly from contest to contest. The basic rules will remain the same, though. You have a given amount of time to make as much money as possible. Because this is fake money, you will often see people make very high risk trades in these with the hopes that they will have amazing returns. And if they don’t, well, they didn’t lose real money so it’s not a big deal. There is a lot of strategy involved in contests of any sort, and this randomness is something that needs to be addressed in your demo contests if you want to have a shot of winning.
Real Money Contests
Real money contests are often sponsored through a broker because this makes trades easier to track, and they are often a binary options broker because of the legal restrictions and regulations that go along with this. And oftentimes, you will find that the goal of the contest isn’t exactly the same. While traditional demo account contests focus on the amount earned, real money contests can’t always promote that aspect because of legal restrictions. Some binary options brokers have shifted the focus to number of trades made over a certain period of time instead. For example, if you execute 400 trades in a week, and the next person behind you only has 375, then you win. These kinds of contests can be very dangerous if you aren’t paying attention to profit rates and they can encourage indiscriminate trades, or trading for the sake of having more trades. Unfortunately, these types of contests can be counterproductive for you.
With that said, it is possible to find real money contests in other marketplaces that focus on a more traditional model. These are typically much smaller in scope and they sometimes require you to take screenshots of your account pages so that you can prove that you made a certain trade at a certain time and made or lost a certain amount.
Real money contests typically require you to report percentages earned rather than dollar amounts earned. Unless all contestants were to begin with the same amount of cash in their accounts, this is the best way to handle this. If someone had $1,000 in their account and someone had $50,000, it would be much easier for the $50K trader to make $100 than the $1K. This levels the playing field and helps keep everyone competitive regardless of their account size.
Benefits of Trading Contests
The biggest benefit of entering a trading contest is that it forces you to think about your trading in a new light. Now, you are not just making trades for the sake of profit, but to compete against others. Competition in any area can spur you on to new levels of success, and that is how you should treat binary options trading contests.
For the most part, demo trading contests tend to be much better places to start out for your first few contests. These are a great place for new techniques to be tested anyway, but demo contests are also the best place to get your feet wet with anything new, rather than risking too much money. If you’ve never traded in a contest before, don’t do it for the first time with real money.
There are some negatives when it comes to trading contests, as well. As long as you are aware of these, they can be easily addressed and compensated for.