Trading competitions are excellent opportunities for traders to hone their skills, but it also means that they must pick up new strategies to find success.
- Trading competitions force participants to adopt new strategies to be successful.
- Due to time constraints, traders must pile on more risk than normal to come out on top.
- Depending on the competition, strategies can be delegated among a team of traders for best results.
The cryptocurrency industry offers seemingly endless new ways for people to profit. From mining to yield farming, as the number of innovations increases, so do the ways to leverage these for personal gain. What’s more, you can start earning from these opportunities today.
One of the most popular ways to turn a profit in crypto is through lucrative trading competitions on spot and derivative exchanges. These events offer traders a way to put their skills to the test and see how they measure up against their peers.
Of course, the satisfaction of performing well isn’t the only reward. For the winners, there’s real money up for grabs.
Take the Phemex Trader’s Arena (#PTArena), for example. This BTCUSD contract trading competition boasts a max prize pool of up to 100BTC (~$120,000,000). Also, all participants will automatically receive multiple perks just for signing up. These include a $10 trading bonus, 10% off trading fees, and eligibility for daily $1,000 lucky-draw giveaways.
This means that everyone walks away a little richer, even if they don’t take home the grand prize.
But for those that have their eye on the bigger prize, remember, trading competitions are much different than day trading. This means participants need a new set of tips and tricks to scoop up all of that Bitcoin.
The following is a list of strategies that all traders should keep in mind when participating in a trading competition like the Phemex Trader’s Arena (#PTAreana).
Time and Market Conditions
The two most important considerations when trading in a competition is that of time management and market conditions.
Given that competitions only run for a short time, participants must maximize their trading activity during that period. This is in stark contrast to standard strategies that limit trading activities based on market conditions.
For example, many traders employ highly effective strategies in times of high volatility or when clear trends are present. When these characteristics are not available, however, most simply stay out of the market and wait. Unfortunately, this approach is useless if a competition occurs when the market is trading sideways and volatility is at its lowest.
To counter this, a trader must be ready to lance multiple strategies that yield the most profits, no matter the market’s condition.
In general, given the limited nature of a competition, it is best to join them with multiple strategies and trade in lower time frames. To counter the smaller returns earned from scalping small moves, traders must also increase their leverage and risk to be successful.
And just as a reminder, this strategy is only recommended in the context of a trading competition. Never should traders take on more risk than they’re comfortable with on the open market.
Risk and Leverage
A good trader will always try to maintain long-term sustainable growth. As such, risk management and position sizing techniques are applied to ensure minimal losses.
In a competition, this all changes.
If the goal is to win or attain the highest possible return on investment (ROI) within a short time, traders will have to take on more risk. In fact, it is common for a competitor to risk losing everything or getting liquidated for the chance to win the entire event.
To achieve this, traders should restructure their strategies to incorporate more leverage. Luckily, participants are not meant to trade with their entire portfolios. Instead, they allocate a specified amount of funds, enough to meet the competition requirements, but not enough to significantly affect the trader’s portfolio even if the entire amount is lost.
For most competitions, the goal is not to make the largest sum of money but rather to achieve the highest ROI.
If this is the case, it’s best to start with the minimum amount allowed.
Mental and Emotional Game
Do not let your emotions or rankings control the way you trade. Often traders that do very well at the beginning of a competition are nowhere to be seen on the leaderboards by the end of it. As they notice other competitors climb up the ranks and approach their position, many traders begin taking on even larger risks to secure their lead. This is often a mistake.
A better approach would be to remain calm and continue to apply the same successful strategy that has already been working. This may also be the point in the competition when traders should slow down and take safer positions. Everyone, including the most experienced traders, is susceptible to the psychological components of a trading competition. But only the most successful traders remain cool, calm, and focused.
Though many competitions pit individual traders against each other, some, including the #PTArena, let competitors trade in teams.
In this team environment, groups of traders have the ability to delegate different strategies to different members of the team. For example, although we recommend traders to be more aggressive and take on more risk, some team members could hold safer, more long-term positions as a method of hedging. This strategy may change based on the team’s overall position. If the team’s ROI ranking is already quite high, for instance, opting for an incredibly risky trade that could jeopardize the entire team is likely to be a mistake.
As long as teammates communicate clearly, many strategies can be devised and implemented to increase a team’s chances of winning.
Competition Strategies Should Not Apply to Daily Trading
Finally, although this advice isn’t for competition trading, it is perhaps the most important lesson of all.
Regardless of your success in a competitive environment, do not carry over the same strategies into your normal daily crypto trading. These strategies are only for short-term periods while risking minimal amounts. No matter how tempting it may seem to repeat the techniques that yielded you a very high ROI, applying them to your entire portfolio is a recipe for disaster.
Be mentally prepared and make sure you can fully separate competition trading from responsible trading once the event ends.