Social trading has become increasingly popular over the last few years. And only few social trading platforms, if any, are more popular than eToro. Founded in 2007 by brothers Yoni Assia and Ronen Assia, and David Ring, eToro’s mission has been to make trading accessible to anyone, anywhere, and reduce dependency on traditional financial institutions.
With registered offices in Cyprus, the UK and Israel, eToro is the most frequently used social trading and multi-asset brokerage platform in the world today. It has raised over $222 million in funding since its inception, and is used by over 10 million users from over 140 countries.
A brief history
The first commercial version of eToro was launched in September 2007 – an easy to use online FX trading platform available to virtually anyone around the world. By 2009, the company had launched its intuitive trading platform WebTrader, which allowed anyone, anywhere to trade financial assets online.
The world’s first social trading platform was then up and running in 2010. Called OpenBook, it allowed investors to copy strategies employed by other successful traders. Two years later, eToro introduced its mobile app, allowing WebTrader and OpenBook (as well as every other feature on the eToro platform) to be accessed through users’ Apple or Android smartphones.
A new eToro platform was launched in 2015, which more seamlessly combined online trading and social trading into one interface. This was shortly followed by the introduction of CopyFundsTM (later to be known as CopyPortfoliosTM), which bundles top traders under a predetermined strategy.
And having begun offering Bitcoin CFD products in 2013, eToro significantly extended its cryptocurrency offerings in 2017. This year, the company launched its cryptocurrency service for US users.
Who is eToro for?
Given its combination of online trading and social media component, eToro is particularly helpful for those who are new to investing. If you are keen to become a better trader, then its wealth of educational resources will help you do just that. But if you are simply looking to make money, then the Copy Trading feature will be of particular benefit.
The best way for novices to get started is to use the free demo account, an option available to users as soon as they sign up with $100,000 virtual money. This allows you to explore the platform in a test environment before committing to use real money.
But if you are more experienced, or are striving to improve your skills, then eToro has enough incentives for you to thrive. By sharing your insights and helping others to improve their performance, you can earn a healthy income.
Trading on eToro
eToro offers extensive market coverage across a range of asset classes and instruments, including:
- Stocks – trade the most liquid stocks in the world, sorted by both industries (Financials, Healthcare, Services, etc.) and exchanges (including NYSE, London, Frankfurt, and Hong Kong)
- Commodities – including oil, gold, silver, natural gas, and platinum
- Currencies – all major liquid currency pairs including EUR/USD, GBP/USD and USD/JPY
- Indices – major global benchmarks available including SPX500, NSDQ100, JPN225 and the US Dollar Index
- Exchange-Traded Funds – there are currently over 80 major ETFs to choose from
- Cryptocurrencies – most of the biggest crypto projects available to trade, including Bitcoin, Ethereum, Bitcoin Cash, Ripple, and Litecoin
Rather than trading directly with the market, eToro uses “Contracts for Difference” (CFDs) instead. CFDs have surged in popularity over the last decade or so, allowing online investors a convenient way to gain exposure to various markets including commodities, stocks, and currencies.
With a CFD you open positions with brokers to replicate the conditions of the respective underlying market being traded. If the position closes in profit, the broker pays the trader. If it closes at a loss, the broker charges the trader for the difference (Here should notify that not broker pays or charges traders).
Each asset also comes with its own news feed of relevant information, pricing stats, and charts:
And for convenience, you can add all the markets in which you have interest to a watchlist, so you can monitor their performance at-a-glance from one screen.
eToro also offers a wide range of methods to deposit your funds to the platform, including China Union Pay, Credit / Debit card, Giropay, Neteller, PayPal, Skrill Limited, WebMoney, Yandex, wire transfer, and online banking in some countries.
How safe is trading on eToro?
eToro is regulated in the UK by the Financial Conduct Authority (FCA), and throughout Europe by Cyprus Securities & Exchange Commission (CySEC). The activities and services of both eToro UK and eToro Europe comply with the requirements of MiFID (the Markets in Financial Instruments Directive) and ASIC (Australian Securities & Investments Commission).
But eToro makes it clear to do the appropriate research before starting to trade on the platform. It recommends you obtain advice from an independent financial advisor, as well as ascertain your own individual risk appetite, trading experience and knowledge of financial markets before proceeding.
This is one of eToro’s signature features. As a reminder, social trading is effectively a combination of social media and online trading to cultivate a community-based, peer-to-peer approach to financial trading. To find out more, read our piece on social trading
The use of social features for trading assets online can help both new and experienced investors alike. By publishing various performance metrics of each trader on the platform, new investors are given a level of transparency when deciding who to follow, which is rarely possible on other trading platforms.
As is normally the case with social networks, eToro has created a newsfeed which allows you to receive updates and commentary from other traders. This allows the community to share knowledge and explain why certain trading decisions have been made.
You can also ‘follow’ traders like in a real social media application, and monitor their decisions. In turn, this provides a great opportunity to learn about trading in real-time from experts. And a chat function ensures you can communicate effectively with the community and easily gain insights.
Arguably the best feature on the entire eToro platform, Copy Trading is the facility that allows investors to automatically copy positions that have been opened and are being managed by a professional trader.
As such, it effectively allows less experienced investors to leverage on the expertise of the best traders on the platform.
It enables you to select from literally hundreds of thousands of traders on the platform. And it is fully customizable, meaning that you can find just the right trader for your particular profile and preferences.
You can screen traders by country, specific market(s) in which they are active, and how well they’ve performed over certain time periods. For example, those who have only gained over 10% during the last 12 months.
The profile of the trader being copied, meanwhile, is visible to all users on the platform, so that the copier can access performance metrics such as risk score, gains, and portfolio diversity.
How to get started with Copy Trading:
Select Copy People from the sidebar of your home screen. Once in the Copy Trading section, select ‘Advanced Search’ on the top right-hand side.
Once the ‘Refine’ box appears, you can filter your preferences for your ideal trader according to a number of variables. Some of the most important variables that you should definitely adjust include Risk Score, Return and Copiers, but there are several more you can also monitor depending on your preferences.
Once you are happy with your preferences, click ‘Apply’. The relevant trader profiles will then appear in a list which you can then sort by various parameters including the return, risk score, and copiers, as below (the trade names have been blacked out):
Of course, if some have been consistently successful for longer time periods than others, this should bode well. Spend some time comparing and contrasting various traders to ensure you end up choosing the most suitable ones for your risk and return requirements. You can click on each trader in the list to reveal a more detailed analysis of their performance over time.
Once you have determined which traders to copy, simply click on the big blue ‘COPY’ button in the top-right of each of their profiles and decide how much of your funds you wish to allocate to them. You can also choose to stop copying the trader if the value of your allocation falls to a certain level, i.e. if the trader begins losing money.
Copy Trading’s popularity has given rise to CopyPortfolios™. This product is ideal for those interested in long-term investments. It is powered by machine-learning engines that identify the performance of the platform’s very best traders and combine them under-collected, diversified portfolios (Not only best traders, can be different ideas or markets). By investing in these portfolios, you are therefore giving yourself the chance to gain exposure to the cream of the crop on the platform.
There are three main types of CopyPortfolios:
- Top Trader Portfolios which comprise the best performing and most sustainable traders on eToro.
- Market Portfolios that combine CFD stocks, commodities or ETFs under one chosen market strategy.
- Partner Portfolios
And if you are only interested in cryptocurrencies, a Crypto CopyPortfolio is available that offers a weighted balance of exposure to the top crypto projects and is managed by eToro’s expert investment committee.
Training and Education
eToro’s Trading Academy offers plenty of resources for novice and expert traders alike. A range of useful learning resources is at your disposal including videos, guides, and webinars, all of which are aimed at teaching you more about social trading and financial markets.
eToro’s blog is another useful resource for education and market commentary. A daily market analysis is published to keep you regularly abreast of the latest happenings, while a monthly market webcast also offers more in-depth commentary. The March 2019 Market Webcast, for instance, covered hot topics such as the Chinese economy, US economic policy, a primer on Binance coins and an analysis of gold prices.
You will also find some interesting pieces on crypto markets, including overviews of the biggest projects and interesting perspectives on the space.
A comprehensive set of customer assistance channels have been set up to ensure you can have any issues resolved efficiently. There are 3 main channels through which you can receive assistance:
- The Help Center – contains an -in-depth troubleshooting FAQ that addresses the most common issues experienced on the platform
- Opening a ticket is the customer service center
- Live chat, enables you to speak directly with a support representative
That said, eToro’s customer service has received a mixed response overall. Although there are several channels through which you can receive assistance, a recurring complaint with the platform is that response times and the quality of the support is not always the best. But hopefully, with enough feedback, this minor issue can be rectified in the near future.
So what are the best ways to make money on eToro?
- Copy Trading – leaving all the important trading decisions to someone who has a wealth of experience in financial markets remains the best option on eToro.
Assuming that you find a suitably successful trader that is consistently profitable and that matches your trading preferences, copy trading remains by far the most straightforward way to make money. Latest data shows that since 2010 when copy trading was launched, around 73% of all copied trades were closed in profit (as of August 2017). (Please change and use the latest data, see the image as below)
- Become a ‘popular (investor)’ – if you are able to become successful, others on the platform will start wanting to copy you. This allows distinct advantages to come your way – (for those who reaches elite level) you earn fixed payments and up to 2% of your annual assets under management (AUM, the total amount other traders have allocated to copy you), paid out every month. This is on top of the profits you make from your trading strategies.
- Learn! – Simply piggybacking off of a successful trader without understanding the rationale behind making a certain decision means that you may end up learning very little about investing and financial markets. It also means you are putting your earning potential in the hands of someone else.
While that ‘someone else’ may well be more adept at trading than you, it means you don’t have control over your money (to some extent, users can control their copying positions as they can close copying positions and set stop loss). So, if you are looking to retain control, learning how to become a star trader on the platform may be the best decision over the long-term.
It is worth stressing that if you’re a novice trader, eToro’s platform won’t magically turn you into a money maker overnight. As the site itself observes, “66% of retail investor accounts lose money when trading CFDs with this provider.”
If you are simply looking for a scheme to get rich quickly then eToro is not the place for you. But if you are willing to learn through eToro’s academy and by interacting with the community, there is a good chance of generating success over the longer-term, by yourself, through the Popular Investor program, or through the platform’s well-regarded copy trading features.
Overall, eToro is a joy to use. Its intuitive interface means that if you’re new to the world of investing, you should be able to pick things up easily.
It’s by no means perfect, however. Customer service issues, sizeable trading fees (which is how eToro makes its money) including $25 for withdrawals and a limited service currently available in the US are some of the common issues users face with eToro.
That said, the benefits easily outweigh the shortcomings. So, if you’re looking to get started with investing, or you’re a seasoned pro that wants to earn by helping others, eToro is definitely worth investigating.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.