Portfolio Diversification Service
eToro Review – Comprehensive and Detailed Analysis, CopyTrading and CopyPortfolio Features Higlighted, Profit up to 5%/Month.
|Minimum 1st Deposit||$200 (might change in some countries)|
|Bonus||Reliable and well regulated Broker with millions of users | and huge experience in Trading since 2006|
|Free Demo Trading Account||Available|
|Multiple payment methods||Credit Card, Debit Card, Wire Transfer, PayPal, Skrill, Neteller, Yandex, WebMoney, UnionPay, MoneyGram|
|Regulation||Financial Conduct Authority (FCA) of the United Kingdom & Cyprus Securities and Exchange Commission (CySEC). As an EU member state, CySEC’s financial regulations and operations comply with the European MiFID financial harmonization law.|
|Highlighted Services||CopyTrading and CopyPortfolio|
|Number of Assets||+2000 market instruments including cryptocurrencies, Forex, indices, commodities, ETFs, stocks, and more.|
|US Traders Allowed||Yes
|Free Copytrading Accounts||eToro allows Copytrading free fully functional demo account, Allowing you to follow “Popular Investors” using virtual money to evaluate and review their performance in $ gain terms.
What is eToro and how it works
“eToro’s vision is to open the global markets for everyone to trade and invest in a simple and transparent way”, as stated on their official website. eToro is a brokerage platform born in 2006. Since then, its growth has been astonishing. In the beginning, it was based in Tel Aviv, but now it is located in Cyprus. It also has offices in the UK and is regulated by the financial authority in that country also. Is one of the leading brokers worldwide. It introduced an interesting “social trading” approach, that allows users to connect, share, and copy transactions, enriching the investment experience.
The broker is registered as a Cyprus Investment Firm (CIF) and is regulated by the Financial Conduct Authority (FCA) in the United Kingdom. With more than 5 million users in 170 different countries.
eToro: Pros and Cons
- Simple interface
- Integrated social trading network, trade execution interface and broker
- Free, fully functional demo account
- Integrated risk and money management features
- CopyTrading – You can copy most successful traders and make passive income.
- Convenient display of historical performance figures
- Can trade/copy currencies AND major indices AND commodities (oil, gold and silver) AND shares AND ETFs
- very active social network and excellent training materials
- Low slippage
- Most “Popular Investors” you can copy, all display their real and verified full name & photo
- Advanced ‘Popular Investor’ dashboard and large customer base which helps in attracting ‘real professional traders’
- Copyportfolio – i.e. copy a basked of other traders or financial instruments
- eToro allows you to try the trade copying with a free fully functioning demo account with virtual money, but with real results.
- Unable to easily view the full history of all the previous trades by the “Popular Investors”
- Actual account balance of the “Popular Investors” is not shared
- For every good performing trader to choose from, there are still plenty of poor ones (most are also longer-term traders)
- Trader Finder/Discover People functionality can still be improved (though currently much better than what it was)
- eToro has higher spreads than other brokers
- Higher overnight rollover fees than most brokers
- Currently, only able to manage your account in $ USD
How much money can I earn by copy trading? Is it realistic to earn 4-5%/month?
We think it is quite realistic!
We have found very interesting video about this :
How we reviewed eToro
In our review, we focus more on social trading and trade copying features.
What’s clear when using them is the simplicity and ease of use of the eToro social trading platform. This has always been the case, but even more so since “The New eToro” launched on November 5th 2015. The new platform is also fully mobile responsive, giving you the same seamless experience across all devices. Additionally, eToro dived into the cryptocurrency market, and it has an extensive portfolio. With the launch of a seamlessly built-in crypto wallet, eToro innovates in this revolutionary market.
eToro offers its clients a wide range of trading tools, including Copytrading and Copyportfolio. If you are looking for a safer way to enter the trading world, the mentioned previously features of etoro could be a good fit.
There are numerous ways to trade the financial markets. Most people that use high amounts of leverage in their trading lose money. Platforms that allow the use of high leverage generally have very few clients that actually make money over time. Copy trading is an innovation that allows traders to look through the track record of other traders, and emulate traders who have a trading style or trading history that makes sense to them. In practice, this kind of strategy has mixed results. Copy traders who diversify across a few successful traders tend to avoid catastrophic losses and may even make some good money. The copy trading platform at eToro is advanced. eToro has worked to make their copy trading tools fit the needs of both new and experienced traders alike.
Copy Trading at eToro: How it Works
Here is very interesting video about this :
Anyone who joins eToro’s social trading network can become a “Popular Investor”. In order to join eToro’s social trading network, all you have to do is have an eToro account. Once you have successfully opened an eToro account, just opt into the social trading network. If you want to become “verified” on the social trading network, you will have to display your real name and have personal information checked by the eToro staff.
Choosing a Popular Investor and Strategy
eToro allows traders to sift through Popular Investors by using a range of tools like Gain Percentage, Assets Traded, Profitable Weeks, Geographic Location, and others. Your money will be traded by the Popular Investors you choose, on a totally passive basis. Popular Investors are paid $350 per month once they gain at least 50 followers, and also may receive a discount on their brokerage fees. One drawback to the platform is that the account value of Popular Investors isn’t disclosed. If you want to trade with an investor who has a lot of money in their account, there is no way to rank Popular Investors based on the size of their holdings.
There are other metrics that you can use to evaluate Popular Investors. You are given a 1-year risk score table that is based on a formula that eToro created, as well as a graph with the number of eToro copiers over time. You can also find the total amount of trades and profit ratio made by Popular Investors, and their 3 most traded instruments. You will also be able to see their current open trades and portfolio distribution, which can help you decide if you like the markets they trade.
Putting Your Money to Work
Once you decide on a few Popular Investors that you want to copy, it is extremely simple to invest your money alongside them. Just allocate the amount of your holdings you want to copy trade with via the social trading platform, and your money will trade with the Popular Investors of your choice.
There are no special fees to use the eToro social trading platform, but any brokerage fees that would apply to a normal trade will be applied to copy trades. If you want to see how the trader you are interested in copying has performed in a graphic, there is a charting feature that could help.
eToro allows you to chart the past performance of Popular Investors over a range of time periods. You can also compare their performance against major indices and stocks you like. There is a minimum investment of $100 per trader, and you can only dedicate 40% of your holdings to a single trader.
Tips for Using Copy Trading
- Choose Multiple Traders to copy
- Research their trades and strategies
- Diversify Traders – Choose traders in different industries
- Choose traders with long track records
- Reinvest any profits to benefit from the compound effect
Copyportfolios is another eToro innovation. Instead of investing your money by copying a trader directly, eToro Copyportfolios allow you to either invest in a fund, called a ‘Market Copyportfolio’, or a ‘Top Trader Copyportfolio’.
The Market Copyportfolios are something along the lines of an ETF and are created to take advantage of a specific investment thesis. There are numerous Market Copyportfolios to choose from, and it would be a good idea to do some backtesting before jumping into a Market Copyportfolio.
The Top Trader Copyportfolio puts your money to work with the best performing traders on eToro’s social trading platform. This is a good way to spread your money across a range of skilled traders, and reduce the risk of catastrophic losses.
Is Copy Trading Good Fit for You?
Copy trading is an interesting innovation as mentioned earlier and if you use this option at its best it may become another way of your regular income.
Even though it is possible to backtest a trader’s performance, it is still a very good idea to be cautious when investing in leveraged products.
Copy trading could be a good way to add risk to your portfolio, especially as a way to hedge larger, passive equity positions that would likely get caught up in a market sell-off.
Like anything in the world of investments, diversification will help to avoid big losses, so keep that in mind whenever you are allocating your investment capital into the markets. Copy trading at eToro could be a good way to work with leveraged positions, without having to do all the research and trading yourself.
eToro “Popular Investors”
The traders you can follow and/or copy are currently referred to as “Popular Investors”. The amount of them available is large and by joining the eToro social trading network, anyone becomes a potential “Popular Investor”. As such, eToro stays true to their vision to create a completely open network where everyone can share, learn, copy, interact and compete with one another.
Verified investors to copy
It’s also worth noting that eToro introduced a “verified” status icon for “Popular Investors”. They can obtain this by displaying their real name and photo in their profile (as verified by eToro customer services). This obviously adds some level of trust that you’re following real people and not computer robots. In addition, all traders on eToro risk their own money as well. This is obviously good, though the actual balance is unfortunately not shared and can range from $200 to many thousands.
When “Popular Traders” get copied they get awarded, and eToro made a notable improvement in relation to the reward structure last year. Before traders with live copiers used to get rewarded with “eToro bonuses” which they could only partially convert to real money, while the rest had to be used for trading purposes (leading many to use this to offset large drawdowns, which was not good for copiers who obviously didn’t have those bonuses).
Now the structure is more straightforward. Depending on the number of copies they have, they get fixed monthly commission payments, while the top “elite” traders get 2% annually of the funds under their management plus commission free trading (i.e. no spreads).
In July 2016 eToro also revamped the ‘Popular Investor Dashboard’ which now includes a customer relationship management (CRM) system that enables greater interactions between the Popular Investors and their copiers. This, together with the fact the there are now over 5 million users on the network, only helps in attracting more professional traders wanting to make some extra money from their trading skills. Many now manage over $300K in funds on the eToro platform giving them some great earnings potential.
Find Traders That Suit Your Goals and Control Your Risk Level
The tools to help you find the traders you want to follow and copy have also evolved over time. The old ‘People Rankings’ used to rank by default the best performing traders by win ratio, meaning traders with 100% winning trades (i.e. high risk because they never close a losing trade) would be near the top. In March 2014, eToro released the ‘Discover People’ tool which allows you to filter through their traders using a wider range of parameters, such as Gain Percentage, Profitable Weeks, Country, assets traded and many more. This tool is a significant improvement to the search capability on offer before, though room for improvement. E.g. some of the parameters are not clearly explained and indicators like maximum open trades or average gain per trade would be useful additions.
The information made available about the past performance of the traders you may consider following and/or copying is also kept basic, making it easy for novice investors to use, though lacking the depth more serious investors may look for. Since February 2015, eToro displays past performance as gains/losses per calendar month and year. Before that time eToro was using the modified Dietz formula to calculate historic gains. This formula was complex and confusing, meaning it was impossible to replicate and verify the gains figures. The current formula is very simple and takes into account monthly deposits and withdrawals by the traders too, in addition to the monthly differential of their account balance.
It’s not piece of cake: Analyse the stats on eToro!
In addition, you can view a proprietary 1-year risk score table, a graph with the number of eToro copiers over time, total amount of trades and profit ratio, as well as the 3 most traded instruments. You also have access to the current open trades and portfolio distribution of the trader. I.e. how much % of their balance they’ve got invested in each instrument.
Hence changing the formula and display has been a positive move from eToro, making it much easier for investors to review past performance. The full trader’s trade history is now available too, in theory at least, because it’s pretty difficult to retrieve it if the trader made many trades before (and you cannot download it for off-line analysis). This is a small negative point in our view because it means you can only verify recent P&L figure. You therefore also cannot evaluate all previous trades to get a better understanding of the trader’s strategy and trading behaviour at some critical past trading cycles. E.g. if I notice a trader who posted a large loss in a past month, I like to look at the actual trades to check if they used a rational trading strategy.
A useful recent addition to the eToro platform is the Trader Charts. These help you visualise the past performance of the traders and let you perform simulations. E.g. “what if I started copying Trader ABC with $10,000 6 months ago?”. You can also compare the trader’s performance on the chart with other traders or with other investment instruments (because copying a trader is, in essence, the same as buying a stock). E.g. “how did this trader compare against the performance of GOOG Alphabet or the GER30 index over the past year.
Once you’ve decided on the traders you want to copy on eToro you have to select how much to invest and risk. You can invest up to 40% of your realized equity in a single trader with a minimum of $100 (i.e. you cannot risk everything in 1 trader). You can also limit your risk by entering a “stop loss”, i.e. the maximum loss before you automatically stop copying this trader. While basic (i.e. you cannot specify to only copy a certain asset class per trader), the eToro money and risk management features are straightforward and easy to comprehend for novices. Your trades are also copied proportionally, meaning that if the trader risks $1,000 of their $10,000 account (1%) on a trade, only $1 will be risked in your account if you allocated $100.
In addition, eToro allows you to try the trade copying with a free fully functioning demo account too. This allows you to follow “Popular Investors” using virtual money to evaluate and review their performance in $ gain terms. This will give you a realistic view of what you can expect.
In November 2016 eToro introduced copyportfolio, their next generation investment product. There are 2 types of funds you can now invest in:
“Market copyportfolio” which bundle together a range of financial instrument based on a certain strategy or theme. While some of them are similar to normal exchange-traded funds (e.g. invest in tech stocks) some such as “PanicMode” are more unique since they combine buying commodities (gold & silver) with selling indices.
“Top Trader copyportfolio” comprised of the best performing traders on eToro. These will obviously be appealing to investors who’re too busy (or lazy) to do their own research. E.g. instead of building your own portfolio, you just pick a fund with the traders who performed best over the past quarter.
I still prefer to do my own research when building my portfolio of traders to copy. However the Index fund of traders I invested in with another social trading service is currently outperforming my own portfolio of traders with them. This obviously shows the potential of this and as a concept we really like it and it’s a nice additional investment option for eToro clients.
Costs & Fees
eToro is still free to join and use (no annual fees or commissions). The only costs you incur are the broker spreads and overnight rollover fees. The eToro spreads on each trade are arguably slightly higher than with most brokers (e.g. 3 pips for EURUSD).
The overnight rollover fees charged by eToro are arguably also a bit higher than with most brokers. This should be taken into consideration since most of the traders you can copy have a tendency to keep positions open for weeks or months, meaning over time these rollover fees can add up if open trades aren’t managed carefully. But eToro clearly displays the display the rollover fees on their site and before you execute a trade yourself. You also have to consider that accounts can only be opened in $ USD, so if that’s not your normal base currency you also have to take into account the USD currency fluctuation risk (unless you hedge).
If you’re a novice trader there’s a wide range of training materials available to get you up to speed (targeted at any level). There are also weekly webcasts, reviews and daily news to keep you informed on current events. eToro’s social network is also very active and any questions you might have are normally answered very quickly by your fellow investors.
Can you be profitable with eToro?
The simple answer is yes, but it’s not easy. Obviously, all will depend on your risk level and targets. If you expect to double your account in 1 week, then you have to accept the risk of losing all your equity in that period as well. Our personal preference is to find low risk but profitable “Popular Investors” to copy. Over the past 4 years in our opinion, the average level of their top-ranked traders has certainly improved. No doubt this has been aided by the improvements to the platform, as well as the increased popularity of eToro and exposure of social trading in general.
More than just trade copying
And here we come to our final review point and that is that eToro is actually more than just a social trade copying service. They want to create an environment where traders share ideas, learn from each other, trade themselves AND copy others. You can create WatchLists of the instruments and/or People you’re interested in. Your personalised News Feed includes real-time market data as well as comments and trade execution notices from other people on everything you’re interested in. And trades can be executed easily from pretty much any screen.
eToro also offers the widest diversity of instruments for you to trade on compared to other social trading platforms. In addition to the usual currencies and commodities, you can also trade major indices, stocks, ETFs, and cryptos. The benefit of this is the potential diversification of your portfolio.
How you want to use eToro (copy others or trade yourself or both) is not for us to decide. But especially since their latest platform release, eToro makes it pretty easy and simple whichever option you want to try.
Conclusion: Is eToro the best broker available?
eToro is one of the most reliable and versatile brokers out there. Not hundreds but millions of investors use eToro all over the world. Its platforms and services have improved drastically over the course of the years. Therefore, eToro is one of the best choices in the financial market. Not to mention that eToro is one of the best-regulated brokers, with licenses to operate in almost every country. Its social trading features are very friendly. Overall, eToro is one of the most solid alternatives to invest securely.
Disclaimer: This review is for informational/educational purposes only and not for any form of investment. Whatever you do with this information is your discretion and Prices.org will not be held accountable in any way. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.