Trading Demo Competitions
Trading demo competitions are a great way to practise financial speculation without any inherent risk but maintain the possibility of financial reward at the end. Many brokers, especially CFD and forex brokers, offer demo accounts that are funded with virtual capital and mimic real-world market data. Trading demo competitions leverage these benefits in a level playing field tournament amongst traders with a particular broker. This 2022 guide breaks down how they work, the kind of prizes available and how to choose the best ones.
What Are Trading Demo Competitions?
Trading demo competitions are a more fun way to earn money trading on the forex, cryptocurrency and commodity markets without staking any real money. Through these tournaments, brokers provide demo accounts to traders who try to make as much profit as possible in a set amount of time. Some brokers may measure performance in different ways, such as profitability/risk ratio. Demo trading applies live market prices and is carried out on genuine trading platforms to mimic real trading as accurately as possible.
Once a competition has begun, traders must do their best to generate profit by trading their demo funds on the financial markets offered by the broker, be they ETFs, CFDs or stock indices. Competitions will often have specific sets of rules to follow, presenting unique challenges to clients by varying leverage limits, automated trading, assets and more.
Brokers offer tournaments with durations that can range from a single trading day to month or year-long contests. The best trading demo competition prizes will often be for the longer periods of competition but there can be good prizes on offer for shorter contests too. Prizes are assigned after competitions close and trading results are finalised based on a leaderboard of the highest scoring traders. Rewards are not only for winners, though, with some of the biggest trading demo competitions paying out across ten leaderboard places.
How Do Trading Demo Competitions Work?
Entering A Demo Competition
Trading demo competitions will often have a window in which traders can sign up to take part, which can often be around a week. Before entering a tournament, potential competitors can look at the rules and terms and conditions of the tournament as well as the offered prize fund. Entrants should read the rules carefully to ensure they are fair and reasonable. Additionally, the biggest trading demo contests will allow competitors to see the size of the field and the historical data from previous competitions.
It is normally a straightforward process to sign up for a competition, though some brokers that run trading demo competitions require entrants to possess a live trading account with them to qualify. Many tournaments will also be locked to a set trading platform to ensure a level playing field, so entrants should make sure they are familiar with the specific software.
Demo Account Is Assigned
Each competition entrant is provided with a fresh demo account shortly before the competition starts supplied with a fixed amount of demo capital to trade with. The account might have limits on available trading leverage in line with competition rules or it may be up to traders to independently ensure that they do not break tournament regulations.
At a set time, the competition will open and traders will have until the competition ends to make as much profit as they can. Trading demo competitions from different brokers will often have their own sets of rules, with some limiting the total number of trades allowed, amount of leverage, the use of EAs and available trading assets.
Once the trading demo competition is underway, entrants will want to know how they are performing and how their gains or losses stack up against others. The biggest tournaments provide leaderboards where traders can measure their performance against their competitors’ trades. Entrants can quickly see if they are in a prize-winning position and how aggressively they need to trade if not. Performance data is often also available from past trading demo competitions to give users an idea of the kind of returns that are required to finish in a winning position at the end of the competition.
At the competition close time, all open trades will automatically be closed and no more trading is allowed. The amount in each demo account at this time is final and will be used to calculate a trader’s leaderboard position and potential prize eligibility.
Final Leaderboard Published & Prizes Allocated
Once all trading has ceased o, profits are finalised for each user. The final rankings of all competition entrants are now decided with prizes awarded to entrants based on these rankings. Rewards are often either in the form of withdrawable cash or trading credit to be used on the broker’s site. The former is often more appealing to entrants but the latter can also be useful and is generally worth more. If a trader is comfortable with the platform and trusts the broker, this credit can be used to generate more profit and then be withdrawn later.
Entrants can be disqualified for breaking competition rules either before the final leaderboard is published or afterwards. Traders that narrowly missed out on prize positions should check back in case someone above them drops out.
Advantages Of Trading Demo Competitions
- Free To Enter – One of the main pulls of trading demo competitions is that they are completely free to enter. Rarely in trading or investment does anything come completely free, so these tournaments are a rare opportunity to gain something for nothing.
- Gain Experience With No Risk – As trading demo competitions are designed to imitate real market trading closely, traders have the chance to gain valid experience with new markets with no risk attached. For emerging trading markets such as cryptocurrencies, this can be very valuable. Experience is important for new or intermediate traders who wish to get a feel for the markets. Tournaments are also a way for veteran traders to gain experience with greater leverage, different software or new currency pairs without risk to their capital.
- Perform Under Pressure – One thing that differentiates demo trading contests from normal demo accounts is the pressure that comes with potential rewards. Competing for the best prizes is a great way to expose traders to the pressure that comes with having a real financial outcome when trading. It is easy to maintain a clear head and watertight strategy when nothing is at stake in a standard demo account, introducing prizes adds similar mental pressures to trading real capital.
- Beginner-Friendly – Trading demo competitions are a great place for new and aspiring traders to start. Gaining a solid amount of practice before staking real capital is crucial to long term success and these tournaments are the perfect place to learn the fundamentals of forex, cryptocurrency and commodity trading. There is no substitute for a hands-on environment for learning and demo competitions allow beginners to test out their knowledge in a realistic trading scenario.
- Prizes – What may appeal most to some traders is the prospect of being rewarded for no-risk trading. The best trading demo competition prizes can be thousands of dollars, with leaderboard places paid out up to the top ten traders. Competition prizes are either paid out in the form of withdrawable cash or trading capital.
- A Chance To Test EAs – Trading demo competitions will have different rules on the use of expert advisors or EAs. Those that allow enhanced trading provide a great opportunity to test algorithms on real market conditions, seeing how effectively they function and whether there are any bugs in their software. Ironing out errors and optimising performance during a trading demo competition means that, when capital is at stake, traders can trust their expert advisor software.
Drawbacks Of Trading Demo Competitions
Here are a couple of reasons why traders may be put off trading demo competitions:
- Limited Prize Positions – If traders are competing in trading demo competitions purely with winning prizes in mind, then this can be a frustrating affair. The biggest demo trading competitions have many thousands of entrants and only a handful are rewarded for their efforts.
- Payouts Can Be In Trading Credit – Many traders will want to be rewarded in cash if they finish in a prize-winning position but some prizes are paid in trading credit. This means that competition prizes have to be traded live before they can be withdrawn, which adds both risk and hassle to being paid out.
- Unrealistic Trading Required To Win – In a demo trading competition, there is nothing to lose and everything to gain from aggressive trading. For the vast majority of traders, the amount of leverage and risk required to compete for a prize position in the biggest trading demo competitions will be an unrealistic strategy when using real funds.
What To Look For In Brokers That Offer Trading Demo Competitions
If you decide that trading demo competitions are something you’d like to try, then many brokers offer monthly, weekly or even daily tournaments. Here are some things to look for when selecting a broker to compete in demo tournaments:
Authenticity & Reliability
When signing up with any broker for a trading demo competition or otherwise, you should first ensure that the broker is trustworthy and reliable. This is especially important for firms who pay their prizes in trading credit because traders will have to use their platform to wager their rewards.
Prospective clients should research brokers, looking at user reviews from external sources as well as recommendations or warnings from trusted websites. The biggest brokers that run trading demo competitions will often be regulated by an independent governing body, so look out for such certification as an indicator of authenticity.
Important aspects of a broker include the reliability of deposits and withdrawals, safe holding of client funds and stability of the platform.
Prizes & Structure
Naturally, traders will be drawn towards the biggest trading demo competition prizes when browsing brokers. The largest tournaments can offer prize funds worth thousands of dollars, which is an appealing prospect for entrants.
As well as the size of a prize fund, it is also worth checking out the reward structure of each competition. More leaderboard places being paid means a higher chance of winning but also a smaller share of the fund for each winner. You should choose carefully between these factors, depending on your priorities.
Depth Of Field
Another key aspect when choosing whether to enter a specific trading demo competition is the depth of field. While larger prize pools are attractive to individual traders, this will likely increase the number of competitors for a prize. Theoretically, traders will have a better chance at winning with a smaller field, so each entrant has to find a balance between the prize pool and the depth of field.
Information on the number of entrants may be available during the sign-up phase to a competition. Alternatively, most competitions will display past leaderboards showing how many entrants there have been in each contest historically.
How Winnings Are Paid Out
An important factor for traders to consider when looking for brokers that offer trading demo competitions is how the prizes are paid out. Some firms will pay prizes in cash or withdrawable funds while others will pay out in trading credit on their platform. Such funds will need to be traded before being withdrawn. You need to decide whether you are willing to jump through these extra hoops before withdrawing your funds.
Available Trading Platforms
To ensure fairness or to promote a particular trading software, trading demo competitions are often locked into a specific platform. Some of these will be platforms experienced traders are familiar with, such as MetaTrader 4 or MetaTrader 5. Others may be unfamiliar or bespoke to brokers. You should ensure that you are familiar with the trading platforms that contests use or are willing to learn quickly during the competition.
Other Aspects To Consider
Now that you are familiar with the intricacies of trading demo competitions, as well as informed with what to look out for in brokers, you are ready to compete. Here are a few additional things to keep in mind:
- Region Locked Brokers – Some brokers that run demo trading competitions may only be open to entrants from specified jurisdictions. Before entering a tournament, make sure that your region is allowed to participate.
- Taxation – The rules around taxation on trading demo competition prizes are murky, so it is best to check out the regulations in your country. Some countries may consider winnings as gambling rewards and therefore tax-exempt, while others may require traders to pay tax if their winnings exceed a certain amount.
- Claiming Prizes – Some brokers require prize winners to claim their prizes manually, so do not expect every reward to be credited automatically. Often, this is through email or other forms of contact, so make sure you are on the ball and claim before the end of any eligibility periods.
Final Word On Trading Demo Competitions
Trading demo competitions draw many people in with their offer of risk-free trading experience and tantalising prizes. Such tournaments are available for almost all forms of financial instruments, from forex and CFDs to cryptocurrency forwards and binary options, providing a little something for everyone. The best trading demo competitions have prize pools worth thousands or tens of thousands of dollars, comprised of pure cash, trading credit or physical items. For experienced traders, the largest tournaments offer a chance to compete with the best around, while beginners can benefit from its risk-free provision of experience.
Which Assets Can Be Used In Trading Demo Competitions?
Trading demo contests mainly take place on the forex markets but can also cover cryptocurrency, commodities, CFDs and shares trading. Specific contests may impose limitations on the instruments and assets you are allowed to use, removing some currency pairs, for example, or even whole asset classes.
Can You Make Money From Trading Demo Competitions?
The best trading demo competitions feature monetary prizes ranging from hundreds to thousands of dollars for those who score highly on the leaderboards. It is very possible to make money from tournaments, with up to the top ten leaderboard positions usually taking home a share of the prize pool.
Are Trading Demo Competitions Free?
There is no cost to enter trading demo competitions but some brokers may require entrants to have registered a real money trading account with them first.
Can I Use EAs To Help Me In Trading Demo Competitions?
Whether entrants are allowed to use EAs in trading demo competitions depends on each broker’s specific rules for their contests. There is a good range of brokers that allow EA assisted trading as well as plenty that prohibit it.
How Many People Enter Trading Demo Competitions?
The biggest trading demo competitions often have thousands, if not tens of thousands of competitors. Entrants are drawn in by large prize funds, so look for smaller rewards if you wish to compete against fewer traders.