eToro have just updated their CopyTrader functionality. One of the key updates is that when starting to copy a new trader, you can select whether or not to copy their existing trades. By default this option is selected.
When selecting this option open trades will be copied with the same settings (Such as Stop Loss, Take Profit, Over Weekend) and the same proportional amount. This proportional amount is calculated as follows for winning trades:
(CopyTrader Amount * Profitable Trade Amount) divided by: (Available Balance + Sum of All Losing Trade Amounts + Sum of All Profitable Trade Amounts).
Or for trades currently in loss, the copied trade size will be calculated as follows:
(CopyTrader Amount * Losing Trade Amount) divided by: (Available Balance + Sum of All Losing Trade Amounts + Sum of All Profitable Trade Amounts).
eToro does recommend leaving this setting “on” because “they believe that this is the best way to experience the CopyTrader function”.
We do however suggest you think very carefully whether you want to copy the existing open trades of a Guru. When checking the Gurus open trades it’ll be more likely that they are currently losing trades, because that will be the reason the trader left them open. These trades may have been opened a while ago and the market conditions and direction may now have totally changed. Hence do you really want to open trades now which were based on different conditions when they were initially opened? In addition, for some Gurus this may take up a large part of their equity, something you cannot check in advance. Hence you may risk being locked into losing trades against the current market direction from the start.
Also, the eToro argument that this functionality enables you to better copy the trader by avoiding the distortions you may previously experienced when you copy a trader who already has open trades that use a significant part of their equity also holds true up to a certain part. Yes, at the time of copying your proportions will be the same. However, any popular Guru will receive bonuses in their account depending on the number of live copiers they have. You won’t have those bonuses, so at the end of each month some new distortions are created anyway, and hence your relative positions will only be equal for a few days or weeks, depending on when you start copying the Guru.
In addition to this functionality, eToro now also let you share your new investment with your friends on social networks: Facebook, Twitter and/or LinkedIn. We personally don’t feel the need to share our investments with friends, though we’re sure some people may find this additional feature useful.