eToro is a well-known company for its social trading platform. One of their main offerings is stock investing in a sophisticated way. Is it worth checking out? How to invest in stocks with eToro?
Many traders are interested in participating in the financial market after reading or looking at professional traders' successful stories. Money just seems to roll into their bank account at a steady pace and many people would wish to be in their shoes, so they want to try trading themselves.
But in reality, to actually start trading for the first time can be a hustle because you should put several things into consideration such as which broker to use, which is the best trading platform, how to reduce the trading cost, etc.
Moreover, not all brokers are suitable for beginners. Some require a high capital to begin with, and others only provide premium services that are either too complicated or pricey. During their trading journey, it is common for traders to experience a few trials and errors that could lead them to loss of money or conflicted issues with the broker.
Luckily, you don't necessarily have to experience that because we are about to discuss the secrets in making some money online from the comfort of your home with one of the top companies in the industry, eToro broker. Here we will cover the complete guideline on how to profit from the stock market with eToro.
- Introduction to eToro
- The Benefits of Using eToro
- How to Register an Account in eToro?
- A Complete Guide on Stock Copy Trading with eToro
- Trading with eToro
- Reducing the Trading Cost
- The Bottom Line
Introduction to eToro
eToro is a brokerage and trading platform company that primarily deals with trading in CFDs, forex, but also includes ETFs, cryptocurrencies, and real stocks. The broker was first founded in 2007 as a Fintech start-up in Israel. They grew more extensive in the next few years until it became one of the most popular social trading sites in the UK and has grown to be the world's largest investment network with more than 4.5 million users worldwide.
eToro established in early 2007, with a mission to make trading accessible to anyone, anywhere, and reduce dependency on traditional financial institutions. The company has head offices in the United Kingdom, Cyprus, USA, and Australia.
eToro (Europe) Ltd operates as a Financial Services Company authorized and regulated by the Cyprus Securities Exchange Commission (CySEC) under license no. #109/10. Meanwhile, eToro (UK) Ltd is authorized and regulated by the Financial Conduct Authority (FCA) under the license FRN 583263.
As for eToro AUS Capital Pty Ltd, the legal standing is acknowledged by the Australian Securities and Investments Commission (ASIC) to provide financial services under Australian Financial Services License 491139.
A broker that belongs to the 4-digit type, eToro offers both short-term options for day traders and long-term options for investors, such as their innovative CopyPortfoliosTM, a fully managed thematic portfolio.
Since 2007, eToro has been at the forefront of the Fintech revolution. The most recent was launched in 2017, which is CopyPortfolios powered by Machine learning Al. Beyond developing CopyPortfolios, the company integrated Microsoft's machine learning technology into Momentum DD.
The new CopyPortfolio investment strategy uses artificial intelligence to find the steadiest traders who are most likely to generate a double-digit return and bundle traders into one fully-managed portfolio. eToro has hundreds of financial assets for trading across several categories including stocks, commodities, crypto assets, currencies, indices, and ETFs. Each asset class has characteristics and can be traded using a variety of investment strategies.
Some positions on eToro involve ownership of underlying assets, such as non-leveraged positions on stocks and cryptos. Employing CFDs will enable a variety of options, such as leveraged trades, short (sell) positions, fractional ownership, and more. For example, traders can invest as little as USD100 in gold, even if a single unit of gold cost USD1,000. Some of eToro's most popular CFD commodities include gold, oil, natural gas, silver, and platinum.
Currencies are traded on eToro only as CFDs. Also, CFDs enable Sell (short) positions and leveraged trade, even for assets that don't offer the option in traditional trading. Some of the popular currencies include EUR/USD, GBP/USD, AUD/USD, USD/JPY, and USD/CAD.
Furthermore, An Exchange-Traded Fund (ETF) is a financial instrument comprising several assets grouped to serve as one tradable fund. After opening an account in eToro, traders can invest as little as USD250 in an ETF that costs USD500. Some of the popular ETFs on eToro include SPY, VXXB, TLT, and HMMJ.
However, eToro also offers additional functions using CFD trading. All leveraged ETF positions in the UK are under FCA regulations. Meanwhile, all CFD positions executed by eToro Australia are under ASIC regulations.
The company has other advantages. In all financial assets that can be traded, eToro does not charge any deposit or trading frees other than spreads.
eToro charges a USD25 fee for withdrawals and the minimum withdrawal amount is USD50. Long (Buy), non-leveraged crypto, stock, and ETF positions are not executed as CFDs and do not incur any fees. eToro does charge overnight or weekend fees for CFDs positions, such as leveraged positions and short (sell) orders.
Fee updates always apply to open positions. Fees are subject to change at any given time and could change daily, without prior notice, depending on market conditions.
As a beginner, trader can use CopyTrading eToro. Different from the features of other brokers, traders can copy the strategies of professional traders without fee or profit-sharing. Therefore, 100% profit is fully owned by traders. For example, while trader A who is copied by trader B, produces a profit of 10% this month, then trader B also gets a profit of 10%.
The company is the world's leading social trading network. Since eToro operates in complete transparency, each trader has valuable information on their eToro profiles, so other traders that are interested to copy their trades can have assistance in creating their best portfolios.
Another feature that is unique to eToro is the personalized, social News Feed. Just like on any social media, traders can post their updates on feed, comment on other's posts, and gradually create a feed that is tailor-fitted to trader's trading and investing interests. On eToro social trading platform, traders will also get notifications when a trader writes a new post and many other important updates.
Currently, eToro has registered offices in several countries, namely Cyprus, Israel, the UK, and Australia. In terms of regulation, the company maintains its integrity by being under the Financial Conduct Authority (FCA) regulation in the UK and the Australian Securities and Investment Commission (ASIC). As for the global customers, eToro broker has acquired a license from the Cyprus Securities and Exchange Commission (CySEC). Those authorities are often called the top-tier regulators in the trading industry, so eToro is considered reasonably safe.
Initially, eToro started as a forex company with a focus on currency pairs trading under the name of RetailFX. But in 2010, the company first introduced the idea of "copy trading" which allows traders to copy the exact trades of more experienced traders. The platform would essentially let you sort through other users and see all of their track records, including how much they have made or lost in every trade.
If you find someone you deem profitable, you can allocate your funds and copy their trade. This program has quickly become popular among traders. Since then, eToro has raised over $150 million in funding, enabling them to expand and offer their services for traders from all around the globe.
In the following years, eToro kept adding new features to their service. They introduced CFD trading in 2013, added around 100 new stocks from the UK and German markets in 2014, and added new cryptocurrency pairs in 2017.
With the business going strong, eToro has sponsored various UK premierships around various football clubs including Tottenham Hotspur, Brighton & Hove Albion, Crystal Palace, Newcastle United, Aston Villa, Cardiff City, Everton, Southampton, and Leicester City. Recently, the broker provides new content about free daily market updates, which is useful for any trader.
Also, it is worth mentioning that eToro broker has survived the 2008 financial crisis as well as the SNBomb mayhem and continued its business onward. This is good news because it proves that eToro is a genuinely resilient platform and strong enough to survive market turbulence and other issues.
In summary, with the social and copy trading features, eToro is an excellent platform for both beginners and professionals. Beginners can copy the trade from more experienced traders while simultaneously learn about different trading strategies. On the other hand, professional traders can get their trades copied which can benefit them in the popular investors program. The program basically rewards traders based on the number of copiers they have in the monthly commission.
The Benefits of Using eToro
- A wide range of stocks, forex, commodities, cryptocurrencies, and ETFs that keep growing and expanding.
- eToro is a Non-Dealing Desk (NDD) broker which means they deal with many banks and liquidity providers, so they can show you the best prices at any time.
- You will get zero commission stocks if you buy the underlying asset, which is especially good for long-term strategies.
- eToro has one of the best user interfaces in the entire industry because it is simple to navigate with a clean and beautiful design.
- What matters the most is the copy trade feature, which is profitable not only for novice traders but also professionals. If used properly, you can make significant money flowing to your account by copying other people's trades.
How to Register an Account in eToro?
Signing up in eToro is a straightforward and quick process. The following are the steps that you must do to register an account in eToro:
1. Sign Up on the Website
First off, go to eToro's official registration page. You will see an electronic form where you should enter your personal data to open a new trading account. Make sure to fill in the relevant information requested in the form. In addition, the site also allows you to log in via Facebook or Gmail. After that, you will then be required to choose a username and enter a phone number to protect your account's security.
2. Complete Your Profile and Submit
To further ensure your account's safety, the site will ask you to fill in some basic personal information (you don't need to enter your "identification number" if you're unsure) and a couple of questions regarding your trading experience. It isn't a test or anything so you don't have to worry too much about your answers, but it is important to answer them truthfully and honestly.
3. Deposit Your Funds
The next step is to deposit your money according to the minimum requirement. Click "Continue to Deposit" or "Deposit Funds" at the bottom left. Then you need to do is to choose a payment method. The broker offers various payment methods according to the client's location, so you may be offered a local bank deposit should eToro broker provide the service in your country. After depositing your money, you are basically good to go and start trading.
However, there is an option to use the demo account (they call it a "virtual account") if you want to try the trading account and its features without risking any money. You can get a complete trading experience with the $100k that they give you as a starter in the demo account.
4. Navigate the Platform
If you open the eToro social trading platform, there will be features such as:
- Watchlist is used to organize the people and markets that you're interested in copying or investing in. You can add new people and markets that you want to check out later in the list. You can also make multiple lists based on your own categories, such as "people to copy" or "promising stocks".
- A portfolio is the central focus of your trade. Here you can view all of your open trades complete with the live tickers and values so you can monitor your overall performance.
- News Feed is similar to the Feed on Facebook or other social media where you can see the activities and posts from the traders you follow.
- Trade Markets is the markets available for you to trade. It includes but not quite limited to stocks, currencies, commodities, and indices.
- Copy People is an open space in which you can search for other traders who you may want to copy or follow. To help you narrow down the results according to your preference, you can use many different filters available on the platform such as based on their performance, what market you prefer, and so on.
A Complete Guide on Stock Copy Trading with eToro
Copy trading is the best feature offered by eToro broker. It allows you to copy someone else's trades and make them your own. This means that the money in your account will be traded in real-time to reflect the trading patterns in the same percentages. The feature is handy for new traders who are still learning to trade.
With the help of expert traders or the popular investors on eToro, new investors can try different strategies and gain profit from their positions. This is surely a new and attractive way to invest in the stock market instead of going the conventional route.
Furthermore, you can see the detailed information about the popular investor's trade history and also ask them how to improve your own trades. So clearly, the potential for making serious money is huge here.
For beginners, it is okay if you want to start small. In eToro, the minimum money that you should invest in a copy trade is $200 and you can pick up several traders to copy. By choosing a few traders at a time, you can try different strategies and keep your portfolio diverse, especially since eToro's instrument list covers anything from stocks, currencies, indices, commodities, cryptocurrencies, to ETFs. With the use of different trading instruments and strategies, you can lower your risk of failing and losing money because you have several different probabilities.
eToro broker offers a very interesting feature called Risk Score to measure the risk of your trade. The score basically ranges from 0 to 10, with 0 being no risk and 10 being incredibly risky. To maximize the use of your money, we suggest you invest in three low-risk investors, one medium-risk investor, and one high-risk investor. You can see the risk scores of each investor in the special column as displayed below:
Essentially, the more money you have, the more diverse your investments could be. But even so, you must be wise with your money management and not invest more money than you can afford. The main issue with the 68% of people that lose while trading with eToro is dominated by greed and recklessness. They don't follow the initial strategy that works. Remember that though more money means more potential profit, it can also mean more potential loss.
Finding High-Quality Traders to Copy in eToro
Because you're about to copy someone else's trade, you must make sure that the trade is profitable and carried out by a high-quality trader. First off, all traders you copy must be verified and officially a part of the popular investor program. You can gather this information from the colored stars by their profile picture, which shows that their trading style and performance have fulfilled the minimum guidelines set by eToro broker.
Basically, there are 4 levels of investors that you should be aware of:
- Cadet level, indicated by a blue star.
- Champion level, indicated by a red star.
- Elite level, indicated by a green star.
- Elite Pro level, indicated by a black star.
Of course, the higher the level, the more recommended an investor. You can see the star indicator on the platform when you open the menu of "Copy People".
Aside from the abovementioned parameters, there are at least 5 qualities that the trader you copy must have, such as:
- Can really show their trading knowledge and experience on their profile feed.
- Can maintain low weekly and daily drawdowns. In this case, avoid traders with more than 10% drawdowns.
- Don't have incredibly high returns. While this may sound beneficial at first glance, but if someone gains 1000% returns in a very short period, it most likely to be unsustainable luck and not based on the actual strategy.
- Don't have a 100% win rate. Even the most successful traders experience downfalls once in a while. It is perfectly normal to close some trades in the red zones and get losses. It shows discipline and experience that only a proper trader has.
- Open and communicative. A high-quality trader would help you learn and willing to share their trading methods. If they don't reply to your messages, that could be a sign that they don't care or don't have the answer because they don't know what they're doing.
To check quality no. 1-4, you can go to a trader's profile and click the "Stats" menu. Meanwhile, the fifth quality can be checked in the trader's "Feed".
How to Copy a Trader
Once you found the trader that you want to copy, you should open the trader's profile and click the blue "Copy" button. The platform then will ask you to input the amount of money you are willing to invest. You can see some useful information appears on the page as well.
You can also set a stop loss to your trade, which helps protect you against heavy losses. It sets at 40% by default but in eToro broker it is completely customizable. You can set the level to whatever you want based on how much risk you can take. Setting the stop loss at 40% means if the person you copy loses 40% of their trades, your account automatically stops copying them and closes the trade.
See Also: Forex Brokers with Guaranteed Stop Loss
Now that you have an open trade going, you can check your performance on the "Portfolio" page. It shows all of your open positions and also access to your trading history. Other than that, all of your copied traders are also listed there. You can see their overall return on the investment in a trader and also see what positions they (and you) currently have by clicking on the person.
Trading with eToro
After you get the hang of navigating the platform and have several successful trades with copy trading, you must have the urge to try your own strategy and start trading freely. After doing proper research, you should pick a stock to invest in. For this matter, we suggest that you only invest in stocks that you believe are strong enough to survive the market shocks and still have plenty of room to grow.
How to Buy Stocks and Shares
The first step to start rading on eTorot is to click on "Trade Markets", choose "Stocks", then "Industry". The platform will show you a list of all stocks tradable on eToro, each comes with its respective prices at the moment.
If you click on the stock profile, you will see two pages with useful information. The first one is "Feed" which consists of news and insights about the stock along with discussions on the share price and the company's activity in general. The second page is "Charts" which displays the company's past stock performances over the last year.
If you're sure to invest in that company, you should click "Trade" in the top right corner. To start trading, you must prepare at least $50. Enter the amount of money you want to invest and set the stop loss and take profit levels. Finally, the "Leverage" option shows how much leverage you can get from the broker. Remember, the higher the number, the higher the risk. Once you are finished, click "Set Order".
Becoming Popular Investor
Apart from copying someone else's trade, you can also let other traders copy your trade. After you start trading on your own, you can now join the popular investor program. As soon as you joined the program and increase your performance quality, you'll notice that people will start copying you! Apart from being exciting, you can also receive a monthly commission as your number of copiers increase. Therefore, it can motivate you to be more focused on your trade and perform well.
Gaining high numbers of copiers may take a while, but it isn't impossible to achieve as long as you maintain a consistent winning rate and trade regularly. It is also important to be active in the community section by posting regular updates, participating in various forums, and answering other people's questions. Helping other traders to trade well can also bring another advantage as your name will be remembered and probably recommended to other traders.
Reducing the Trading Cost
As a business entity, eToro must make money from its customers in one or another way. Typically, they charge users a small spread fee after you close a position. However, there is a 0% commission option here, so the cost of trading with eToro is way lesser compared to other traditional brokers and fund managers. In eToro, stocks usually have the lowest fees, so trading stocks is really recommended if you want to keep the trading cost low.
The important thing to remember is that over-trade is definitely bad news for your trading cost, so try to avoid it as best as you can. Remember that when copying another trade, you will be charged the same fees as they are, so make sure to check your portfolio to see their opened positions regularly. Apart from that, the only other fee that will be charged is the withdrawal fee (flat at $5).
The Bottom Line
eToro is one of the best trading platforms for copy trading, a perfectly suitable strategy for beginners. By allowing you to copy trade, you can learn about various expert traders' strategies in the stock market while gradually preparing your own system.
Once you're ready, you can start trading independently and join the popular investor program yourself. But remember to be patient and trade realistically by not investing more money than you can afford.