Being one of the best social trading platforms in the industry, eToro offers various instruments from different markets to choose from. Find out how to optimize the diverse market for your profit.

Each day, there's a bunch of newbies who join the financial market to start their trading journeys. Thanks to the internet and technology advancement, access to learning materials and beginner-friendly brokers are even easier than before.


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eToro is one of the highly popular brokerage companies that provide an excellent trading platform for most types of traders, including beginners, since 2007. The platform is known to have an easy-to-use interface and provides a wide range of instrument selections including stocks, CFDs, cryptocurrencies, forex, and ETFs. Regulated by top-tier regulatory bodies in the financial industry, eToro is considered a safe platform (low-risk) for trading.

Rating


Spread
Fixed
Regulation
ASIC, 491139
Min Deposit
$200
Established
2007


Trading contests

Free education

Personal manager

Segregated accounts

Affiliate program

Islamic accounts available

US traders are welcome

Payment

Credit/debit cards
Neteller
PayPal
Skrill
UnionPay
WebMoney
Wire transfer
Yandex.Money

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.

One of the best features offered by eToro is the copy trading feature. It basically allows traders to copy the exact trades of experienced traders. However, even copying someone else's trades still needs consideration and a lot of research, especially in a diverse market provided by eToro. Just knowing how the platform works is not enough. In fact, traders also need to learn how to take advantage of eToro's copy trading in its diverse market.

 

Browsing through the Markets Section

Essentially, one of the most vital things in copy trading is to do an early research in order to find the right and profitable investor to copy, especially if you want to create a diversified and balanced portfolio. This relates to several other aspects, including the popular investor's strategy and the markets that they trade in.

Knowing the importance of the relations between traders in copy trading, eToro prioritizes the social aspect of their services by creating what they call the Markets section. In this section, traders are able to monitor every market and assets that can be traded in the eToro's platform.

The Markets section would look like this on the platform:

The markets section in eToro.

The market section is divided into the upper and central areas. The upper area shows you the menu that consists of the various asset classes (cryptocurrencies, ETFs, stocks, currencies, commodities, indices) and an advanced filter tool on the top right. If you click on each asset class, the instruments are displayed with further information, such as:

  • Market: It shows the stocks' names along with their logo. For other asset classes, this column identifies the name of the trading instruments.
  • Change: It shows the price change in percentage and pips, which relates to its reference price. By default, it displays the change from the previous day, but you can customize the time to last week or last month.
  • Sentiment: It displays the percentage of investors who at that exact moment are having either Buy or Sell positions on that particular asset.
  • Sell and Buy: The two best prices for buying and selling of that particular asset. If you click on it, a pop-up to place an entry order will come up.

Take a look at the picture below:

Example of the details of an asset class.

In addition, there is a "+" symbol, which indicates that you can add that particular asset to your Watchlist, so you can receive constant updates directly from your profile without having to come back to the Market section every time. Technically, the display for all four assets is exactly the same, but since eToro focuses more on stock CFDs, there are more options to choose and it can be a bit overwhelming. So in this case, it would be wise to use the advanced search feature.

Underneath the upper area, there's the central area where you can find various groups of instruments based on either common or more advanced categories, like Trending Markets or Market Movers. However, the actual CFDs are actually displayed randomly.

See Also: 0% Commission on Stock Investing

 

Into the Markets

If you click on each market instrument, the platform will provide an interesting social tool that you can use because it consists of preliminary information of the nature of the instrument and allows traders to negotiate it. It also shows how other investors in the community are negotiating those instruments and who are the investors that are doing it.

The detail of the underlying.

On the top of the page we can see several things:

  • Name and Ticker.
  • The current price of the instrument.
  • Changes in terms of percentage and pips from the closing price of the previous day.
  • The + button to add it to your Watchlist.
  • The Trade button to execute a position.

Moving further below, there are four tabs that you can check out, which are the Feed, Stats, Chart, and Research. The Feed basically shows you all of the recent talks and updates regarding the instrument. You can check if it attracts interest from many investors or if it gets positive comments from other market players, which can help you measure the probability of investing in the instrument. Meanwhile, the Stat, Chart, and Research pages are dedicated for analytical purposes, both technically and fundamentally.

 

How to Diversify Your Portfolio

In copy trading, it is important to keep your portfolio balanced and diversified. It means that your portfolio should be strategically varied in order to minimize the risk and survive many different market conditions. What you want to do is combining different types of investors, investment techniques, degree of risks, and financial instruments so your overall portfolio will not depend solely on a single investment.

It is worth noting that diversification doesn't depend on the "quantity" of the investments, but more on their nature and correlation with each other. You must consider the positive or negative correlation between two or more instruments, whether they move in the same direction or going against one another.

If the components are too interconnected positively, there's the risk that the entire portfolio is going in the same direction and could possibly bring loss all at the same time. This means that the risk is actually increasing, which is not good. On the other hand, if the negative correlation is too strong, your portfolio's profitability can be affected because you can gain a similar amount of profit and loss simultaneously, so the profit will be tapered by the loss and vice versa. Therefore, it is crucial to pay attention to the correlations so that the performance of each instrument is truly independent, hence diversified.

See Also: Correlation Between Stock Market And Forex

 

What You Should Do

The first step to diversify your portfolio would be to break down the overall risk of your portfolio by controlling its volatility and potential drawdowns. Volatility refers to the speed of price movement. You can also measure the volatility of your overall portfolio from the sum of them. High volatility means faster profit, but it can also mean higher risk. While it puts you in a position where you can get a lot of money in a short time, you can get a lot of loss instead if the market suddenly goes against you. Meanwhile, drawdown refers to the loss of invested capital because of the negative performance of the financial instruments in your portfolio. A non-diversified and unbalanced portfolio would more likely to get more drawdowns because of the simultaneity of the investments' negative performance.

How to Diversify Your Portfolio

The next step is to look for the best investments that might give the best returns as well. In short, you must first protect the investment by ensuring that the risk is manageable and it can survive during market turbulences. After that, look for the best opportunities that can be included in the portfolio and try to maximize the profit as much as possible but keep the same level of risk.

While the theories of correlation between instruments and their advantages have been around for a few decades, the concept of the people-based portfolio –a portfolio where the assets are not based on instruments, but people or traders– is still considered quite new. eToro is one of the trading platforms that focus more on people-based portfolio and social trading.

See Also: 6 Things You Should Know About eToro Social Trading

There are at least 3 aspects that you can use to diversify your portfolio in eToro:

 

1. Diversifying the Trading Style

While there are loads of investors to choose from, you can sort them out based on their operating style, the strategies and instruments that they use, and how they operate to diversify your portfolio. But despite being different from each other, you should also make sure that each investor is compatible and useful to be included in your portfolio.

 

2. Diversifying the Markets

Another thing that you should pay attention to is the market. In this case, eToro offers a wider range of options compared to other trading platforms because you can pick investors who use completely different asset classes such as stocks and cryptocurrencies. Moreover, you must identify the investors with reputable experience in certain asset classes and allocate them to your portfolio. So the goal is to copy different expert traders with different strategies and underlying so that could lead you to several winning positions at once.

Furthermore, eToro has a special sector that gathers a number of instruments and puts them into specific groups to form CopyPortfolios. By choosing the portfolios, traders can invest directly in eToro's choices of market groups. They classify the portfolios based on market sections, top traders' choices, and their partner's research.

Copy Portfolios eToro

 

3. Diversifying the Leverage

The term leverage here refers to the leverage used to replicate trading positions from the investors in your portfolio. The first thing to keep in mind is not overdoing the leverage because it can harm your portfolio. Set a specific limit and stay consistent with it. Another thing is to distribute the leverage according to the operating characteristics of the investor's strategy by considering their strength, consistency, and risk.

 

Conclusion

Given the wide range of trading instruments that you can choose while trading in eToro, you must build a strategy that can bring the best returns and minimum risk. The goal is to keep a diversified and balanced portfolio to increase your chance of surviving any market condition. It sure takes some time and practice to be able to identify a profitable investor with the right combination of instrument choices, so take your time and do your research thoroughly.