eToro Performance and Signals Review
Your performance when investing in eToro depends on the strategy. If you become a trader by yourself, then it’ll be directly linked to your own trades and the percentage of benefits/losses. If you decide to use the copy-trading features, your performance will be directly linked to the performance of the trader (“Popular Investor”) you decide to copy. But that’s not the only choice for social-trading at eToro. By January 2019, eToro offers three social programmes: CopyTrader, CopyPortfolios, and Popular Investor. Learn how to get the most out of each, and how can you use these tools as signals for your trading methodology.
Will slippage affect my performance on eToro?
On an individual trade level, when we compare the prices at which the trades get executed in our live account, with the prices the trader received in their eToro account, we’ve noticed that more than 90% of the time they’re exactly the same. Only on very few occasions, the price differs slightly, though normally that would only be about 1 pip difference for Forex trades. Hence with eToro, unlike with some other social trading networks, slippage isn’t really much of an issue.
Obviously, this is because eToro acts as the broker for all the traders as well as for all the investors. Therefore the trade copy execution time should be quicker and more reliable (since it’s all within 1 broker and not between connecting brokers) and the spread on each trade will also be the same for everyone. Yes, arguably the spread isn’t the most competitive within the industry, though it’s also not the worst.
With regards to whether your performance (and gains) will actually be the same as the % gains reported in the eToro interface the story is a bit different. Before February 2015 eToro uses the Modified Dietz formula to calculate the gains and the numbers presented weren’t very transparent (i.e. we never were able to re-calculate them). In addition, the results were also distorted because the traders used to get paid in trading bonus credits for every copier they had (this changed in 2014). This meant popular traders would actually automatically get more “free” capital in their account to offset against losses or open losing trades (drawdown).
eToro Trader Performance Comparison: How to Choose your perfect trader
To get a list of the top traders on eToro, log into your account and click on “Copy People“. The eToro algorithms have improved drastically, and now you can assess many stats on each trader. You can also make a smart search with the following criteria:
- People from: choose from traders from all around the globe to assess their performance at eToro.
- Who Invest In: filter the markets that the traders use for their strategy. You can choose from currencies (Forex), commodities, indices, stocks, ETFs, and crypto.
- Gained at Least: minimum profits in the selected period.
- During the: the period of time for the profits selected earlier. Minimum: current month. Maximum: Two Years. Don’t let yourself go for the total profits; check how consistent is the performance instead.
Okay then, now you’ve got the fundamentals for discovering traders on eToro. But let check the featured lists that eToro builds for you. By January 2019, eToro has 5 rankings where they list traders based on Top Investors, Trending, Most Copied, Lower Risk Score, Medium Risk Score.
Trader rankings on eToro
To show how it works, we’ve decided to analyse the “Top Investors” list. Yes, the previous filter was very scarce if you are a pro, but this one is a lot better. To demonstrate how it looks, we’ve taken this screenshot:
Here you’ll be able to evaluate the following factors:
- Return: profits or losses on a selected period of time. To calculate the % gains or losses for each trader we use the following formula: (Units – Net Profit)/1000. I.e. we take the actual balance (including unrealised profits or losses) and calculate the % difference with the initial $1000 invested in the trader.
- Risk Score: a calculation made by eToro that gives you an estimate of how risky are the trades from each investor. The risk score ranges from 1-10 and you can find further information here.
- Copiers: how many people are copying his/her trades.
- Copiers Change: this might be a key indicator of how the trader is doing and what’s the response of the people following. If an investor loses too many people in a short period, the followers may not be happy with their results.
- Gained at Least: minimum profits in the selected period.
- Weekly dd: weekly drawdown. As stated in their own article, “drawdown can be defined as the decline in an investment, usually represented as a percentage.”
That’s the basics, but above the table, you’ll be able to be even more specific:
- Status: Verified or Popular Investor.
- Country: Filter the Traders by Country.
- Picture: Only show investors with a profile picture.
- Performance: filter by return, profitable months or profitable trades.
- Risk: you can choose from risk score, daily drawdown or weekly drawdown.
- Filter: a complete filter that, besides the factors above, includes:
- Portfolio: allocation and average trade size.
- Activity: active weeks and number of trades.
- Social: copiers, percentage change of copiers, copy AUM (assets under management).
Let’s say you don’t really care about risk, but you’re looking for traders with the biggest return rate. Just click on return to sort the list in a descending/ascending order. Additionally, you might remove the risk score filter so the list includes all the traders without considering risk.
As shown above, some investors have an impressive profit rate. Here’s where you need to be extremely careful, e.g., the first trader listed has zero copiers and—even though he has a very good return—he can’t be considered as very reliable. The second has many copiers, but his risk score is high (7 out of 10). He might be a good trader to copy if you have a high-risk tolerance. But let’s check the third trader: he has a very good return rate, low/medium risk score and a growing number of copiers. The investor you choose to copy is up to you; but what if you don’t want to copy their exact same strategy? If you’re more experienced, you can get signals from your favourite traders and place the orders yourself, based on your experience, preference and guts. That way, you might get better performance.
Get Signals from the best eToro traders
To check the performance and stats from your favourite trader, click on their picture to see his/her profile page. You’ll get four tabs you can switch as required:
- Feed: this looks like a social network feed, with messages and posts from the traders along with the “likes” and comments from other users at eToro. You can check this tab if you want to keep in contact with the investor and up-to-date with the posts. Some users are fairly active, while some others barely use this feature.
- Stats: check the trader’s performance over different periods of time. You can also assess other statistics like a number of copiers, average risk score, and profit/losses at each category.
- Portfolio: a summary of the trader’s current portfolio of assets and what percentage of his/her total capital is invested in each.
- Chart: net worth chart.
To get daily signals (trades and posts) from your top eToro traders, click on the plus sign (+) button. You’ll add the selected to your watchlist, and you’ll get real-time signals of every update on their accounts. For better results, install the eToro app, available for Android and iOS.
Conclusion: Is it possible to make money with eToro?
In summary, looking at the statistics above, it’s clear that money can be made on eToro. However, it’s unfortunately not as simple as picking the top 10 traders and some effort will be required to pick the ones with the best potential for your requirements . It’s also clear that the gain percentages reported by eToro do not necessarily match how the investment would have performed in your account, though the figures aren’t necessarily overly optimistic in their favour and gains normally mean gains. The answer is: yes, you’ll be able to get a good performance and make money with eToro if you know how to manage your risk and set a comprehensive strategy. Take your time to make financial decisions!