Trading Tournament

Understanding Trading Tournaments

Trading tournaments are events organized by spot and derivative crypto exchanges that allow traders to profit from their cryptocurrency holdings. These tournaments provide a unique opportunity for traders to test their knowledge of the cryptocurrency market and be rewarded for their skills.

Due to the highly competitive nature of the crypto industry, trading platforms host these tournaments to attract new users and incentivize them to trade.

Each trading tournament has specific requirements and formats that aim to enhance users’ skills and contribute to the development of new trading techniques and tactics. Generally, participants in trading tournaments speculate on the price movements of selected cryptocurrencies and engage in buying and selling the underlying coins through authorized exchanges or CFD (contract for difference) trading accounts.

While the rules and rewards may vary, crypto trading tournaments typically reward traders with the highest trading volume of a specific coin/token during the tournament duration.

Common Terminologies in Trading Tournaments

Here are some frequently used terminologies in trading tournaments:

• Spread: The spread refers to the difference between the highest bid and lowest offer for a specific cryptocurrency. For example, if you bid $100 for a coin and the seller declines, stating that they believe prices will rise and are willing to sell the coin for $120, the difference between your bid ($100) and the seller’s ask price ($120) is the spread.
• Lot: A lot refers to the standardized size of trading batches of crypto tokens. Due to the high volatility of cryptocurrencies, these lots are typically very small and consist of the smallest units of the base coin.
• Leverage: Leverage allows traders to increase the value of their portfolio by borrowing against the equity in their accounts. It provides users with the opportunity to gain greater exposure to cryptocurrencies without paying the full value of the trade upfront. Instead, exchanges require a small deposit, known as margin, instead of the entire trade cost. While leverage can amplify capital and profits, it can also lead to significant losses.
• Margin: Margin refers to the initial deposit or investment required to open and maintain a leveraged position. For example, an exchange may ask for a 15% margin for a coin valued at $3000. Instead of depositing the full amount, you would only need to deposit a margin of $450.
• Pip: A pip is a unit of measurement traditionally used in foreign exchange trading, representing 1/100th of 1% in price movement. In the context of cryptocurrencies, it often denotes single-digit price fluctuations. For a token traded at the dollar level, a price change from $1 to $2 would be considered a single pip.
• Trading Volume: Trading volume refers to the number of times a cryptocurrency has been transacted and changed hands within a specified period of time.

Ben Zhou is the co-founder and CEO of Bybit, a global cryptocurrency derivatives exchange. With eight years of forex experience as the General Manager for the Greater China region at forex brokers XM, Ben developed a keen interest in crypto in 2016. In 2017, he launched a YouTube channel to educate users about the benefits of investing in cryptocurrency. Combining the best aspects of traditional finance and crypto, Ben founded Bybit in 2018, which is now one of the top three derivatives exchanges worldwide. Connect with Ben directly on Twitter.