Oddly, knocking out your own teammates may count toward your requirement to advance. The rest of the tiers require you to knock out two people each time. To advance past the 1st tier you only need to defeat one person. Unlike melee fights, losing will not automatically end the tournament, if you have proven yourself worthy enough, you may continue on to the next round anyway. Your weapons will be decided for you and you won't have access to your inventory, but you can pick up weapons from fallen opponents who are knocked unconscious during the battle. Each team can have anywhere from 1-8 contestants during each round causing fights to range from a 1 on 1 to a 32-man brawl. Note: you can still give your teammates orders (F1, F2, F3, etc.) as you would your regular troops. There will be 2-4 teams total in the arena and you will be on one of those teams. If the randomly selected town already has a running tournament, its remaining days will be reset. If there are less than three, every 24 hours, it will pick a random town to receive a 30% chance of hosting a tournament.
The game will try to have up to three active tournaments at a time.
Tournaments are often held in a town which also has an ongoing feast in the castle, but you cannot enter the castle due to the feast, unless you have high renown, are a lord of a faction that isn't at war with the faction owning the town, or if you win the tournament (you will be invited to the feast if you win the tournament). To find the locations of these tournaments, you can ask the Tournament Master in any Arena. Larger tournaments are sponsored by a town, and are one of the best ways to make money in the game. You get the best rewards if you manage to be the champion, the last one standing. The amount of money and experience you get when you're knocked out depends on the amount of enemies you defeated during the fight. Melee fights are generally a poor source of income, but it can be good for new players to level up their proficiencies without wasting points or risk losing a real battle. You can hang back and let them fight each other for an easier win. When around 10 contestants are left from your kill count in the top left corner, they all spawn in quick succession. Other than the fighters that spawn initially, combatants only spawn one at a time, giving the player a good chance. At the end of the fight, you will receive a certain amount of money, depending on how many opponents you knocked out. The only aim is to survive and knock out as many opponents as possible. All contestants start with no armor and a randomly generated practice weapon which may include a sword and shield, two-handed sword, staff, or a bow and arrows. There aren't really any rules though, and there are no teams it is essentially just a brawl. If you talk to the Tournament Master, he can tell you the rules, as well as put you into a fight. Every town holds melee fights all day long, every day.