eToro – Copying profitable traders
eToro is a revolutionary trading platform, which combines social features with money making strategies. In eToro you can invest in stocks (google, tesla, apple, etc), currencies (forex), crypto currencies (bitcoins, ethereum, etc), commodities (metals, timber, coffee, etc) and indices (SP500, FTSE100, etc).
What is social trading?
There is a general consensus amongst 99% of the world population that social media (e.g. Facebook) is mostly a waste of time, so how can a “social” trading can help someone in making money?
Simple, eToro gives you easy access to global diversified investment strategies. If you can’t be bothered, you don’t need to learn about currencies, markets, stocks commodities, investment strategies, etc. etc. Using eToro, you can just choose people that are making money, and set the software to copy their trades.
Many brokers offer broad investment options (stocks, crypto, commodities, etc), but few have eToro social platform, which enables you to:
- find and follow profitable traders, knowing what they are doing with their own money;
- automatically copy other traders (whoever you want. In this case, the software will automatically invest your money in the same way as the traders you are copying;
- as you decide to make your own trades, you can also get people to follow you. Effectively, you become a true investment manager;
How to start trading with eToro?
First of all, you need to register yourself. This will take only few minutes, by filling a simple form that asks you your personal contact details and what is your trading experience/knowledge.Click here to jump straight there
To complete the registration, you will also need to upload to eToro a copy of you ID and proof of address. I guess they ask due to regulatory requirements and apart from playing on the simulator, you should not start trading without sending the docs and making sure your account is verified.
2. Trading simulator
Once you are registered, you can also use the trading simulator in eToro. They will give you $100,000 of virtual money to play. The best thing about eToro simulator, is that you trade exactly in the same ways as if you were dealing with real money.
You just need to switch from “Real” to “Virtual” in the main menu, to start the trading simulator.
I highly recommend you to play in the trading simulator before sending any money, just to make sure you are comfortable with the platform. Also, it is a great way to validate your short term strategies trading strategies.
Depositing funds into your eToro account is very straightforward. They offer you a number of different options to send money:
- Credit Card
- Wire Transfer
All eToro trading accounts are managed in US Dollars. You can still deposit using EUR, GBP, JPY, AUD or CAD but will then be charged a conversion fee.
4. Choose your market
Once you are ready to trade, you just need to choose which markets you want to invest in. eToro offers you access to
Stocks – this just means buying shares in companies, such as Apple (AAPL), Google (GOOG), Johnson and Johnson (JNJ), Barclays (BARC) and many more.
Indices – an index basically mirrors the general performance of a certain part of the stock market, rather than just one particular company. For example, if I invest in the FTSE 100, that tracks the overall performance of 100 companies, and so it’s a good way for me to manage risk and diversify (you can click here for a full list of the FTSE 100 companies).
Commodities – commodities just means trading a resource, such as oil, gold etc.
ETF – An ETF (exchange traded fund) is an investment fund based on certain stocks and indexes. It’s another way to diversify your investment across a particular industry, without having to choose individual stocks.
This is one of the most important topics to look at when choosing a broker for trading, and although the number of fees below seams overwhelming, there are not too bad. They are mostly trying to ensure that you are continuously trading, and not holding each position for more than few days.
eToro doesn’t charge you any fees at the moment you are opening your position, but it will usually charge you :
Overnight: eToro make a small charge for most leveraged positions held overnight, or over the weekend. This is common practice amongst most CFD brokers. The larger the trade, the larger the fee will be. When trading in eToro, you will notice the fee being adjusted in real time, when you select different multiples of leverage.
Withdrawal fee: When you are taking your money out of eToro you will need to pay $25 withdraw fee. Also, the minimum withdrawal amount is $50.
Currency conversion: If your currency is not american dollar, you will need to pay eToro a conversion fee when you are making deposits and withdrawals. This fee accounts for the currency conversion, and can be significant depending on the amount of the transaction. Still, it is unlikely you will be less on currency conversion elsewhere.
Inactivity fee: If you don’t login after a long time (4 to 12 months, depending on the case), eToro will charge a monthly inactivity fee of $5 . This will only be charged if you have available funds for investment. If you login again, the fee is cancelled.
What sort of investment is this?
eToro focus on CFD (Contract For Difference) trading, which can easily be considered as short term investments. By “short term”, I mean that you will be looking to make a profit for every transaction within less than a week, or sometimes just in some minutes.
When trading with eToro, in each transaction you will:
- open a trading position, by giving an order to eToro to buy or sell something (stocks, currencies, commodities, etc) at certain price.
- at the same time, define its closing price
Each “trade” (transaction) made in eToro platform, is actually a contract (CFD) between the trader and the broker eToro. In a very simple way, you are making an agreement with eToro that something will increase or decrease in price. If the price moves the the way how you want, you will make a profit. But, on the other hand, it would be a loss if goes to the wrong direction.
It is very important to understand: when you click to “buy” something like Google stocks in eToro, you are not buying a piece of Google. You are making a contract with eToro, that Google stock price will go up or down. Your profit or loss will dependent on the difference of the opening/closing price, the leverage you’ve selected and the broker fees.
Trading CFDs instead of owning something (like Google stocks) directly, has many pros and cons, which are important for you to understand. As more you understand where you are investing, more chances you have to make more money.
Entrepreneur, real estate investor and occasional trader.
“If you don’t find a way to make money while you sleep, you will work until you die.” -Warren Buffett