Forex

Trading contests are run by small firms or individuals. Contestants pay organizers
to monitor their results and publicize the names of winners. Trading
contests have two flaws -one mild, and another possibly criminal. This is a
scandal waiting to be explored by investigative journalists.
All contests hide information about losers and tell you only about winners.
Each dog has its day in the sun, and most losers have at least one good
quarter. If you keep entering contests and taking wild chances, eventually
you will have a winning quarter, reap the publicity, and attract money management
clients.
Many advisors enter trading contests with a small stake, which they chalk
off to marketing expense. If they get lucky they receive valuable publicity,
while their losses are hidden. Nobody hears about a contestant who destroys
his account. I know several traders who are so bad they could not trade
candy with a child. They are chronic losers - but all of them appeared on the
list of winners of a major contest, with great percentage gains. That publicity
allowed them to raise money from the public- which they proceeded to lose.
If trading contests disclosed the names and results of all participants, that
would promptly kill the enterprise. A more malignant flaw of trading contests is the
financial collusion between some organizers and contestants. Many organizers have a
direct financial incentive to rig the results and help their co-conspirators obtain
publicity as winners. They use it to raise money from the public.
The proprietor of one of the contests told me that he was raising money
for his star winner.
How objective can a judge be if he has a business relationship
with one of his contestants? It appeared that the amount he could
raise depended on how well his "star" performed in his contest. That highly
touted star promptly lost money put under his management.
The worst abuses can occur in contests run by brokerage firms. A firm
can set up contest rules, attract participants, have them trade through the
firm, judge them, publicize their results, and then go for the jugular- raising
money from the public for winners to manage, thereby generating fees and
commissions. It would be easy for such a firm to create a star. All it would
have to do is open several accounts for the designated "winner." At the end
of each day it could put the best trades into a contest account and the rest of
the trades into other accounts, creating a great "track record." Trading contests
can be an attractive tool for fleecing the public.