eToro is a revolutionary online trading site that is shaping the future of forex trading and leaving conventional broker sites behind. They’re one of the pioneers of social trading and copy trading, and eToro offers its most successful traders (known as Popular Investors) the chance to run their own financial businesses under the wider eToro structure.
There’s little doubt that this makes eToro one of the most interesting, innovative and potentially profitable online brokers in the world. However, new traders shouldn’t sign up and expect to become top Popular Investors overnight. There is a definite learning curve and a lot of hard work before you can expect to start earning a lucrative second income on top of your day to day trading profits.
75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
We’ll start with some basic explanations of the key terms involved, and then look at eToro’s trading platform and Popular Investor Program in greater detail. Hopefully by the end of this article you’ll have a clear idea how to approach online trading and investing at eToro and get the very most out of your trading experience.
Social trading has been described as the Facebook of online investing. eToro connects millions of traders across the world and encourages them to talk and communicate with each other about every aspect of the financial markets and trading. Social traders use their News Feeds to discuss open trades, news releases and trading strategies. Generally there is a very friendly and vibrant feel to the site. Experience levels range from beginners to experts who trade for a living. The atmosphere is mutually supportive and there is real enthusiasm for investing.
Copy trading developed as a logical extension of social trading. If you see somebody whose investments impress you, it’s possible to set your account to automatically copy all their trades. When they profit – you profit. You can build a people portfolio as easily as you can build a portfolio of conventional assets.
Popular Investors are social traders at eToro who’ve attracted a minimum number of copiers. They join the Popular Investor program and receive monthly payments in addition to their own trading profits. The best can earn up to 2% AUM (assets under management) + $1,000 / month. Being a Popular Investor at eToro is in effect a financial business and program members receive help to develop their businesses.
Becoming a Social trader
Before you can become a Popular Investor you need to get some solid trading experience and build a strong public profile. People will usually only copy successful investors who communicate openly with others on their News Feeds and have a profitable trading history spanning several months in their profile.
The best approach is to start gradually and don’t be greedy. You will need to accept from the outset that some of your trades will fail. It’s inevitable and happens to even the world’s most experienced and talented investors.
The goal of many investors is to build a diversified portfolio containing a selection of different asset classes. These include commodities, stocks, indices, currencies and ETFs. Even if you don’t trade those yourself, a small number of copy trades can give you full exposure to other assets through the popular Investors who you copy.
Don’t wait to develop in experience and confidence before you begin talking to other social traders and asking questions about their strategies. You can add interesting assets and people to custom Watchlists and monitor their performance closely. When you’re happy that you understand them, and that the market conditions are in your favour, you can open trades with a single click.
And don’t forget … you can try eToro for as long as you want for free.
How to Copy Trade
eToro’s Discover People tool allows you to make filtered searches through its database of millions of traders. You can narrow your search down by country, markets, percentage gains and over a dozen other criteria. When you find Popular Investors who have potential, don’t be in too much of a hurry to copy them. At this stage it can really pay to do some deeper research. The public section of each trading account shows the owner’s News Feed, portfolio (open trades), Stats and trading history going back a whole year. There is also a User Chart that shows you how a copy trade could have performed over a previous time period.
Most people will first check a Popular Investor’s Stats to see how he performed on a monthly basis since he joined eToro. Is his current success just a fluke or is he a long term winner? You can also see at a glance whether the Popular Investor has a diversified portfolio, or whether he focuses on a narrow range of assets. This is not necessarily an issue if you are copying a number of people – but it is a factor to be aware of.
We also highly recommend looking at their portfolio to see the number of current open trades. If the Popular Investor has a lot of their capital locked in only negative open trades they’re likely to operate a “martingale” type strategy, which is something to avoid.
But don’t just look at the past performance and and also consider how the Popular Investor interacts with other traders on his Feed. Does he take the time to answer their questions and explain his trading strategies? Does he get good feedback? Check how many copiers and followers he currently has and what his risk level is.
Risk Management and Stop Loss Tools
Online trading and investing is inherently risky. Any broker or reviewer who says differently should not be believed. People lose money all the time on the financial markets – just as they do in other business ventures or investments. The first key to successful investment and sustained profits is effective risk management. We already covered some of the basics in the previous paragraph, but there are some more very important tools that you can use to minimise risk and protect your investments.
For most ordinary investors it’s not practical to monitor your trades on a full time basis. Mobile trading allows greater flexibility, but at some point you will have to leave your open trades running. eToro’s Stop Loss tools allow you to do that with peace of mind. When you open a trade it takes another couple of seconds to set a Stop Loss, Copy Stop loss or Trailing Stop Loss. These tools will automatically close any trade or copy trade that begins to make unacceptable losses. The Trailing Stop Loss self adjusts to allow your to preserve your profits.
eToro is possibly the ideal online broker for anybody who is looking for a long term approach to trading and investing, and an opportunity to learn and develop as an investor. The site is dynamic, fully mobile responsive and continually improved. And also, very importantly, eToro is regulated, not just by CySEC but also by the UK’s FCA. Levels of transparency and fairness are very high. Ambitious traders are encouraged to aim for a place in eToro’s tiered Popular Investor Program. The system is progressive, allowing traders to build their businesses at their own pace and receive clearly defined financial rewards. eToro is probably one of the very few sites that can be wholly recommended both for new traders AND experienced investors.
eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro. eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs. Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. Past performance is not an indication of future results. Cryptoassets are volatile instruments which can fluctuate widely in a very short timeframe and therefore are not appropriate for all investors. Other than via CFDs, trading cryptoassets is unregulated and therefore is not supervised by any EU regulatory framework.