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eToro is a global online brokerage with built-in social trading features. Many traders are attracted to eToro for their “copy” features which allow you to replicate the trades of other traders. Read our review to see if it makes sense to use eToro and copy other traders.
What is eToro?
eToro is a global online brokerage that enables users to trade a variety of financial instruments including stocks, ETFs, indices, forex, commodities, and cryptocurrencies via CFDs (contract for difference). The intuitive mobile platform along with the social trading features have caused the popularity to flourish worldwide. The platform claims to have over five million users worldwide in over 170 countries. These users have executed over 250,000 million trades to date. eToro is currently not available for U.S. customers but is working on making it happen soon.
eToro is a brokerage platform operating under two entities eToro Europe Ltd and eToro U.K. ltd. eToro Europe Ltd. is based in Limassol Cyprus and registered as a Cypriot Investment Firm (CIF). It is regulated by the Cyprus Securities and Exchange Commission. eToro U.L. Ltd. is based in London and regulated by the Financial Conduct Authority (FCA).
Originally launched as a forex trading broker by brothers Yoni and Ronen Assia and their partner David Ring in Tel Aviv, Israel in 2006, the platform has since expanded to include stocks, commodities, and cryptos. 2010 was a pivotal year as eToro rolled out its social network called Openbook which enabled the CopyTrading function, allowing users to follow and auto trade the specific trader’s trades on the platform. Additionally, they rolled out their mobile trading platform on Android, which sparked growth like wildfire. The platform has evolved into a comprehensive one-stop-shop for traders wanting instant access to some of the most popular global trading instruments. Is this platform worth your time? Read our eToro review to find out.
Due to the global nature the eToro platform, certain countries and regions may have different policies, pricing, and processing schedules. While eToro technically has “no-commissions” or “ticket-fees” on most trades, they make their fees from the spreads and additional fees like USD LIBOR for U.S. stocks. Here are the minimal spread fees. It’s best to confirm the rates specific to your country.
Forex trade spreads can range from two-to-five pips on the most popular major pairs like EUR/USD, USD/JPY, USD/CAD, GBP/USD and AUD/USD. As the pairs get less liquid, the spreads widen up to 20 pips or more for more exotic pairs like EUR/SEK.
Cryptocurrency trades are “commission-free” when opening a position, but (like forex) they make their fees on the spread. The spread can range from 1.5% for Bitcoin (BTC) to 3% Litecoin (LTC) to 5% on less popular (and liquid) currencies like NEO. The spreads vary during periods of heavy volatility and liquidity. BTC spreads can range from 100 to 225 pips. Therefore, it’s wise to consider using limit orders.
Commodities trade spreads range from two pips for copper to 45 pips for gold trades.
Stock and ETF trades have a 0.09% minimal spread fee for both buy and sells.
Stock and ETF trades held overnight (CFD trades leveraged or sold short) incur additional daily fees of 6.4% + one-month LIBOR for buy orders and 2.9% + one-month LIBOR on sell orders. (IE: A $1,000 value buy order results in a $0.22 daily fee. A short-sell position results in a $0.12 daily fee.)
The minimal account starting account balance ranges from $200 to $10,000 (residents of Israel) depending on your region. However, a demo account is provided free-of-charge just for registering as a user.
Some other key points regarding eToro fees:
- There are no software fees.
- There is a $5 inactivity fee if no trades are made during 12-months
- There are also various withdrawal fees based on the region.
Trading at eToro
As mentioned above, eToro allows you to trade a variety of assets. When we set out to review eToro, we didn’t realize just how many features and trading options the broker offered. In fact, eToro has one of the best selections of assets amongst online brokers. Let’s take a closer look.
Stocks and ETFs
You can buy stocks and ETFs at eToro as you would with any stockbroker. You can trade most stocks listed on popular exchanges. The platform comes with some convenient tools for analyzing companies (which we will discuss soon).
eToro recently launched its cryptocurrency trading features. You can trade popular cryptocurrencies like Bitcoin, Ethereum, Ripple, and more. There are over 90 different cryptos that you can buy and sell through the platform.
eToro offers forex trading for non-US clients. You can choose from over 40 popular currency pairs.
eToro is a CFD trading broker so it’s worth taking some time to explain CFDs.
CFD is short for “contract for difference.” CFD’s can be created for a variety of assets, including stocks, ETFs, and more. When you trade a CFD, it can feel like you are trading the actual asset, but you are not. You are trading a contract for difference. If you are going to be trading CFDs, you need to do some additional research to make sure you understand exactly what you are trading. We could write an entire article on the topic.
For now, it’s important to focus on some key points regarding the risk of trading CFDs.
CFD Trading Risk
Trading CFD’s is exceptionally risky because you have a high risk of losing your entire initial investment. It’s common to lose money when trading, but CFD’s have an even higher risk. Whereas stocks tend to fluctuate a few percentage points per day, CFD’s are more of an “all or nothing” approach to trading. You need to decide whether or not you can take the high risk and whether you can afford to lose the money you invest in a CFD. It is estimated that over 70% of CFD accounts lose money when trading. While eToro offers some tools that may increase your chances of success, you still have a high risk of losing money when trading these financial instruments.
It should also be noted that CFD trading is banned in the United States, which is why many US investors will not even be able to open an account at eToro.
eToro Platform Features and Tools
We are going to continue our eToro review by taking a closer look at the trading platform. This is important because this is where you will be placing all of your trades.
The eToro platform is accessible on desktop as well as mobile on Android and iOS. There is no direct-access trading and the order entry is suited for investors and newbie traders who don’t require sophisticated tools. The navigation is very intuitive and fits like a glove for most experienced traders. The demo is identical to the live account platform, which makes it easy to learn.
The platform can be used for trading CFDs, cryptocurrency trading, stock trading, and forex trading. Let’s take a closer look at some of the features.
eToro Procharts has various types of charts including candlestick, bar, and line with time frames ranging from 1-minute to monthly. It has drawing tools that enable trend lines and basic indicators from moving averages to Bollinger Bands. Multiple charts can be opened on the workspace to show multiple time frames on a single asset or multiple assets to compare performance and any combination of each. While these charts aren’t as customizable as those in standalone charting platforms like TradingView, they definitely do the trick.
Users can click news for access to headlines and articles relating to the underlying symbol. The newsfeed also allows for keyword searches or a general stream of headlines that you can configure by symbols, themes or markets.
Traders can create watchlists of their favorite markets and trading instruments. It’s pretty fluid and impressive to have such a variety of diverse products all in a single window. You can also set up watch lists of traders on the platform to follow their performance and trades. Ultimately, you may consider the CopyTrade function if the style and strategy fits your preferences.
eToro renames leverage as ‘risk level’, which can range from 2x to 400x depending on the underlying financial asset. The max risk level on stocks ranges between 5x to 10x. Currencies range from 50x to 400x. ETFs have a max of 5x and commodities range between 10x to 100x. There is no leverage provided for cryptos.
Trading with leverage should not be taken lightly. With this kind of leverage, it’s crucial that newbies understand they can owe more than they have in their account if margin calls trigger. There is a high risk of losing more money than you actually have if you over-leverage yourself. Be careful and make sure you take the time to understand what you are actually trading.
eToro’s Trading Academy
From live webinars to e-courses and training videos, eToro provides a nice array of learning content to get newbies situated with the platform. The material doesn’t dive too deep into specific methodologies, that’s on the user. However, the instructional content allows for quicker acclimation to the platform.
The order entry windows have a comprehensive set of user-configured conditions. The ability to place limit orders with conditions like risk level (leverage) along with pre-set profit and stop losses are very convenient. There is no ‘direct-access’ on stocks as all orders are routing through eToro based on their own spreads, which will differ from other platforms since they factor in their fees.
Users can create and customize their own watch lists or use the pre-set watch lists like the most active stocks or benchmark index stocks like the S&P 500 or Nasdaq 100. Stocks can be linked-to charts so simply click on any symbol in a watch list can quickly update the chart along with all your indicators and studies.
Social trading is one of the most unique aspects of eToro. While many fintech’s have tried the social network approach to markets, eToro set up a system that is equally rewarding to both the following and followed traders. This is the main platform differentiator coupled with the convenience of mobile trading. We will focus the next part of our eToro review on these social trading features, which are arguably the features that attract customers to eToro.
There are a few different components to the social trading features at eToro. First, there is the most popular – copy trading.
Copy trading allows new traders/investors to copy the trades of other successful traders. These trades can be made directly through the eToro platform.
Traders who are copied frequently are eligible for the “Popular Investor Program.” This program is designed to reward popular traders on the platform. Popular investors get additional payouts based on the sizes of their followings.
Let’s take a closer look at some of these social features.
This function enables users to allocate up to 25% of their accounts to auto trading. The funds will mirror the trades placed by selected Popular Investors. This win-win situation enables followers to mirror performance while the traders receive various fees and benefits based on the number of ‘Copiers’ auto trading their trades.
This is arguably one of the most popular features eToro offers (and the one that first got me interested in this review). Copy trading is every new trader’s dream. The idea that you could simply piggyback off the success of another trader is very enticing.
While there are plenty of programs that offer investment/trading advice, there are very few that will actually trade for you or allow you to copy their trades in real-time. This is where eToro really shines.
You can choose which traders you’d like to copy based on a variety of metrics, such as risk score, location, profitability, and more. Once you decide to copy a trader, you can choose which percentage of your portfolio you’d like to allocate to this strategy.
From there, trades are placed on autopilot and you take profits and losses alongside the traders you are copying. Of course, it’s important to remember that copying a successful trader does not guarantee that you will be profitable. If it were that simple, we’d all be putting out life savings into eToro and watching it double every year.
There are risks to copy trading because you are copying both profitable and unprofitable trades. Furthermore, a copied trade is slightly delayed, which means you may not achieve the same results as the person you are copying.
With that in mind, start small and make sure you find a copy trading strategy you are comfortable with before risking a significant portion of your capital.
If you are already a successful trader, you may be interested in the Popular Investors program.
eToro Popular Investor Program
The Popular Investor program is designed to attract successful traders. eToro’s Copytrading program is only as effective as the traders who participate in trading on the platform. These traders need an incentive to allow other people to copy their trades.
The Popular Investor program will pay these traders to share their trades. Payouts are based on the number of traders who follow a popular investor and may be as high as 2% of the investor’s assets under management (i.e. funds allocated to copying the strategy).
eToro also offers another type of pre-packaged trading tool called CopyPortfolios. These portfolios provide the ultimate hands-off approach to investing.
There are two types of CopyPortfolios. Top Trader CopyPortfolios are designed to copy the trades of some of the most successful traders on the eToro platform. Market CopyPortfolios are based on financial assets only, not traders. These are constructed by eToro’s investment teams. These portfolios bundle CFD stocks, commodities, and ETFs. The portfolios can be used to achieve a variety of different financial goals.
The minimum investment for CopyPortfolios is $5,000.
eToro has 24/5 customer service via online/mobile chat. Visitors and existing users have access to the help center and the ability to open tickets with the customer service team. The website operates in 14 different languages. Customer service is pretty good overall, especially considering that eToro is serving a global market.
eToro Platform Differentiators
eToro stands out due to the social tools incorporated into the platform. There are very few established companies that offer social trading features and “Copy trading.” That said, traders should be careful to not become overambitious in their pursuits of profit. Copy trading is not always as simple as it sounds.
eToro also covers a wide range of assets, including stocks and Forex.
Common Questions About eToro
We’ve noticed that a lot of new investors and traders have the same questions about eToro, so we decided to answer them all in one spot.
Is eToro Legit?
Yes, eToro is legit. The broker is regulated and fully licensed. eToro is authorized and regulated by the Financial Conduct Authority and authorized in other countries as well. The platform has millions of users and has maintained a positive reputation. You can find plenty of positive eToro reviews from both customers and third-party review services (such as ourselves).
eToro is a safe place to invest. That said, it’s important to consider how you invest your money, as that will ultimately determine whether or not you are profitable. This leads to the next question.
Can You Make Money on eToro?
The short answer is, “yes.” eToro is a broker that allows you to trade a variety of different financial instruments. You can definitely make money with these instruments, but you can also lose money.
It’s important to have a game plan before you start investing. Before you invest any money, consider whether or not you can afford to lose any of that money. There is no form of investing that is 100% safe. That said, certain investing strategies are safer than other.
You need to be extra cautious when trading CFDs. CFDs are complex instruments and carry exceptionally high risk. As mentioned earlier, over 70% of retail investor accounts lose money when trading CFDs. That means the odds are stacked against you and you need to consider whether or not you want to take the risk of trading CFDs.
The same goes for copy trading. While you may achieve better results by copying the trades from other retail investor accounts (i.e. Popular Investors), you are still responsible for managing your money. The traders you copy may be taking risks you cannot afford to take. They could have a bad day, week, or month that could cause you to lose money if you are copying their strategy.
None of this is intended to scare you away from the platform. You can actually make good money with eToro if you are diligent and focus on mitigating risk. If you are looking to get rich quick by simply copying other traders, you will likely end up losing money.
Is eToro Good for Beginners?
eToro is a very user-friendly platform. The entire trading platform and members’ area is intuitive and well-designed. The platform is clean, easy-to-use, and resourceful.
It’s great for beginner traders who want to trade Forex and CFDs. If you are looking solely to trade stocks or cryptocurrencies, you’d probably prefer the simplicity of a platform like Robinhood.
That said, if you want to trade a range of financial instruments and get access to the copy trading features, eToro is a great option.
Is eToro Good for Cryptocurrency Trading?
eToro is decent for cryptocurrency trading. You can trade cryptocurrencies directly or trade crypto CFDs. While the platform is decent for crypto trading, you’d be better off with Coinbase or Binance if you are solely focused on cryptos.
Will eToro Ever Be Available in the United States?
Most US citizens are disappointed to find out that eToro is not available for United States residents. Unfortunately, it doesn’t look like this will change unless the SEC changes its rules on CFD trading. eToro’s business is built around CFD trading which is banned in the US. Therefore, even if you could use the platform in the US, it would have very little value.
What Type of Trader Is eToro Best For?
eToro is an exciting brokerage platform that takes a direct approach to social investing. This platform is great for beginners to seasoned traders and investors, who are educated in the underlying financial assets they are trading. While the learning curve is shallow thanks to the tons of education and instructional content, it’s easy to get overconfident with the leverage.
Please note that virtual currencies are highly volatile. Your capital is at risk and you should be extra cautious when trading these types of assets.
- One-stop trading access to a diverse range of products
- Great free demo platform to test out first before using real money
- CopyTrade is simple and win-win for both copier and trader
- Mobile app is amazingly fluid and intuitive
- Easy deposits and fund transfers
- Constantly improving platform
- Confusing fee schedule
- Spreads can get wide