What is eToro?
eToro is a global social investment market place for people to trade currencies, commodities, CFD stocks and indices online. Their aim is to give new and experienced investors the opportunity to benefit from the collective potential of their diverse trading community in a simple and intuitive manner.
They do this through their innovative social investment platform. This doesn’t just allows eToro customers to execute trades themselves (just like with any other broker), but it also allows them to interact, learn and automatically copy the trades from other successful traders (CopyTrading). These trades are copied in your account in real-time, as such allowing you to create a “people-based” portfolio.
eToro itself was founded in 2007 and as of November 2015 has over 4.5 million users in over 170 countries. The WebTrader web-based trading platform was launched in 2008. The OpenBook social investment network was launched in July 2010, with the CopyTrader feature released in May 2011. Since August 2011 eToro also made Mobile trader applications available on Android, iPhone and Blackberry devices. In November 2015 the “New eToro” platform was launched. It combines WebTrader and OpenBook into the same interface and works seamless across all devices (web, tablet and mobile).
To get started, eToro offers an unlimited free practise account with access to all the same features as their ‘real-money’ accounts (including the functionality to copy other traders) – click here to sign-up for eToro demo. Real-money accounts can be funded with eToro through a number of ways (bank wire, credit card, PayPal, MoneyBookers, Western Union, …) and are managed in $ USD. There are various funding incentives available, and depending on the amount you first deposit you sometimes can get up to $10,000 bonus. Since February 2016, the minimum deposit is $200 for all customers and all countries.
eToro also provides a range of responsible trading features such as pre-set leverage settings to help investors to easily calculate their risk. When you copy other traders you’re also restricted to allocating a maximum of 20% of your total capital per trader, hence protecting your equity by limiting your exposure. To find the people you might want to follow, eToro launched a “GuruFinder” feature in 2012, which since got revamped to the “Discover People” tool. This lets you filter the available traders to copy (aka Popular Investors) based on parameters such as their average exposure, winning ratio and risk level.
If you’re new to trading, there’s an online education centre with eCourses, live webinars, trading videos and tips. And obviously you can also learn from interacting with other traders on their social investment network.
There are no costs or management fees for using the eToro social trading network and investment platform. Because eToro also acts as your broker, they solely make their revenues through the broker spreads of the instruments you’re trading on (i.e. the difference between the Ask and the Bid prices). In addition eToro, just like other brokers, also charges overnight rollover fees (or credits) for any trades positions left open overnight and over the weekend.
The “Popular Investors” are rewarded based on the amount of copiers they have. When they have at least 50 copiers they make $350 per month. The more popular they are the more they can earn, with a maximum of 2% annually of the copiers’ funds (AUM), paid monthly. They will also receive rebates on the spreads of their own trades up to 100%. I.e. the more people they get copying them, the more commissions they’ll make.
Trading at eToro can be done on a diverse range of financial instruments: currency pairs, commodities, stocks, indices and ETFs (exchange traded funds). The amount of leverage you can use depends on the instrument.
eToro Europe Ltd which is regulated by the Cyprus Securities & Exchange Commission (CySEC). eToro UK Ltd. is regulated by the Financial Conduct Authority (FCA. Both companies also operate under and comply with the Markets in Financial Instruments Directive (MiFID).