Understanding forex contests and how to win them
A forex contest is a competition between different foreign exchange (forex) brokers in which the winner is the one that amasses the highest return by the end of the contest.
Large cash prizes can be won in these contests, which are organized by brokers as a promotional tool. The promise of a substantial reward attracts contestants, who may then sign up with the broker as long-term traders. As such, even if the contest is free to enter, the prize money pays for itself.
Forex contests may be played with either real or virtual money. In the former case, they are known as forex live contests, and are principally aimed at experienced traders. Demo contests, where no real money is involved, are aimed at novice traders and are a way to learn the ropes, practice your skills and strategies, and gain confidence before you graduate on to trading with actual currency.
Choose the right contest
Before you begin, the first step is to choose a forex contest run by a reputable broker where you know that the promised prizes will actually be delivered. FXTM is a forex broker known for its regular forex contest, and this FXTM review on leading independent review site We Compare Brokers is the sort of thing you should look for in deciding whether a contest is legitimate.
Before the contest opens, study the market and brush up on your trading knowledge. Although demo contests are aimed at beginners, inexperienced entrants rarely win as more experienced traders often enter in order to scoop up the prizes. Nevertheless, good groundwork will increase your chances, and you can still use the contest to test out different strategies and improve your confidence in a low-risk, controlled environment.
Go all in
With a demo contest, a simple, if risky, strategy for winning is to use far more of your total capital per trade than you would do if you were trading for real. Under actual trading conditions, you should manage your risks and never put more than a tiny fraction of your funds on a single trade. However, in a contest, you need to look for short-term gains (i.e. over the length of the contest), rather than your long-term prospects.
If no real money is involved, then the only aim is to be in the top three out of potentially hundreds of traders, so a strategy of all or nothing makes sense. Making a small profit is no better than going bust – only large returns count. If you lose everything, you’ve actually only lost the time you spent playing, so just dust yourself down and enter another contest as soon as possible.
Take it slowly
The disadvantage of this method is that it teaches you nothing about how to trade in the real world. You can win big by breaking all the rules, but this is ultimately gambling rather than trading. An alternative strategy is to play it very safe at the start while most of those following the all-in strategy go bust.
Make frequent, low-volume trades – say one every five minutes. By following trends rather than volatility and staying focused, you can incrementally increase your return. This is also a far better strategy for live contests.
Whichever strategy you adopt, be aware that winning isn’t everything. Learning how to trade and apply your skills and knowledge is also important. For professional traders, contests are a fun distraction and the day-to-day markets are what really matter.