An In-Depth eToro Review (Updated 2022)
Fintech company eToro was founded in 2007 in Israel and is well known as a social trading brokerage.
Throughout my life, I have been intrigued by the financial markets. Despite that, I had no real knowledge of how to actually trade on the stock market.
Keeping the masses at bay has been the goal of Wall St. and The City in order to charge hefty trading fees.
Until about a year ago, everything was as it was. During my final year of college, I came across an online trading platform called eToro. Through that platform, I began trading stocks online.
With 0% commission on real stocks, eToro is 20 times cheaper than traditional stockbrokers.
It is important that you know that I have been on a steep learning curve with eToro.
Despite enjoying the whole experience of buying and selling stocks (and some crypto), I have also made some rookie mistakes.
It can be intimidating for total beginners to learn the eToro trading platform and the concept of investing.
As a result of hindsight and my own trading experience with eToro, I’ve written this no-nonsense eToro review in order to help others get the best results as quickly as possible.
What is eToro?
Founded in 2006, they are the largest investment network in the world. It has a community of 20 million users and a secure trading platform.
A wide range of mainstream media outlets have analysed eToro and social investing in general. A current BBC documentary entitled Investors: Millions by the Min.
“CopyTrader” is probably one of the most unique features of eToro.
Traders can sort with one another and also see their trading histories. Over a given period, this consists of how much they have made or lost. Find a trader you like the look of, and assign some funds to automatically invest and replicate their professions.
Popular capitalists is another great feature.
A commission is paid based on the number of copiers a user has on a month-to-month basis. Responsible trading is also encouraged by the program. At the end of this guide, we will delve deeper into this topic.
eToro’s social and copying features will certainly allow you to find a great deal relatively quickly.
You should take it slow at first. Be sure that you understand how stock exchanges operate. Before investing large amounts of money, make sure you know what you’re doing.
eToro trading can be extremely profitable. However, when you are handling the markets, you can lose money as well (“your investment is at risk”)!
Opening an eToro account
1. Register with eToro.com
The paperwork is short and sweet. Joining eToro is simple and free.
Simply fill out the short form and choose a username. For your account’s security, eToro asks for your phone number.
As a result, you can now trade stocks online and in real time. eToro will require you to complete your profile before you can place trades.
Disclaimer: eToro is a multi-asset platform offering CFDs and non-CFD products.
This provider loses money on 68% of retail investor accounts that trade CFD’s. If you do not know if you can afford to lose your money, you should reconsider.
The content on this website is provided solely for informational and educational purposes, and should not be considered investment advice or recommendation.
Our guide does not recommend CFDs, because we are concentrating on buying and holding actual stocks you own.
2. Fill out Your Profile
3. Make a Deposit
4. Get to know the eToro platform
For now, I’ll just give you a very brief overview of the main sections of eToro. We’ll explore each of these in detail later, as I explain how to browse and trade.
Prepare a list of people and markets you wish to copy or invest in. Multiple lists can be created, such as ‘promising stocks’ or ‘people to copy’.
Your investment journey begins here. Monitor your performance and live tickers for all open trades.
It is similar to your Facebook News Feed. It shows you what your followers do and say.
Research and trade all the markets you want: stocks (eg. Apple), currencies (eg. GBP/USD), cryptocurrencies (eg. Bitcoin), commodities (eg. gold) and indices (eg. UK100) and ETFs.
You may want to copy or follow other traders. Markets and performance filters help you narrow down results to the ones you are interested in.
Once you’re a member of the eToro community and have explored the site a little, I’ll share with you the 3 main ways to invest on eToro.
Taking advantage of other good traders (Copying People)
You can invest in eToro this way. You copy someone when you open their account and sell their trades when they sell them on eToro.
All that matters is how much of your total account’s funds you choose to allocate to them (more on this later). In the end, you will achieve the same rate of return as they do.
It’s not always easy to find reliable traders on eToro to copy. You need to know what to look for and what to avoid (more on this later on).
Don’t make these common mistakes!
Beginners usually make the mistake of acting like sheep right away.
It is intuitive to sort by ‘most copied’ when searching for a trader to copy in the ‘Copy People’ section.
You’d think that the most copied people have lots of copiers for a reason, wouldn’t you? Perhaps the wisdom of the crowd.
Truth be told, most people on eToro are complete beginners and don’t know what they are doing.
A few people copying a trader for the wrong reasons could quickly lead to exponentially more copycats following suit without thinking for themselves.
Here is an example.
Despite this trader’s extremely poor performance (he would have lost 98% of your money if you copied him over the last five months), he still has more than 2,000 followers! As part of this review, I’ll explain how I copy trade on eToro, as this strangely occurs quite a bit.
In addition to consistently under-performing traders, over-trading is another common mistake beginners make.
It is very tempting to check how much you’ve made or lost every few hours, but emotions will cloud your judgement and lead to tinkering.
Every week or every month, no trader on eToro will make a profit. Taking a medium/long-term approach is highly recommended. It takes patience and discipline, but you’re more likely to see better results over time.
Identifying the best traders to copy
Start by clicking the ‘Copy People’ button in the eToro sidebar.
The following list of popular investors can be found by scrolling down the page…
Alternatively, you can use the advanced search feature. You can change everything in blue to meet your criteria for potential traders to copy.
Then click ‘Go’ to view a list of matching traders, ordered by the number of copiers they own. You can further refine your search using the filters at the top.
The following are five characteristics every trader you copy must possess:
- Demonstrate their market knowledge and experience on their profile page
- They have low weekly and daily drawdowns (basically how much they have lost in a given period). Anything more than 10% should be a warning sign.
- Make sure your returns are reasonable. Even if it seems counter-intuitive, if you see someone with 1,000%+ returns in a very short period of time, realize that this is unsustainable luck and only possible with recklessness.
- Don’t aim for a 100% win rate. You may sell some trades at a loss. Such losses are a sign of discipline and experience. Beginners chase their losses; successful traders know when to cut their losses.
- Communicate effectively. To copy someone, you need to find someone who can teach you and is willing to share their trading method. Unless they reply to your messages, either they don’t care (likely to trade carelessly too) or they don’t know how to answer because they don’t know what they’re doing.
Analyzing a trader’s past performance
Next, I’ll explain how to assess a trader before outlining the steps to copy a trader. eToro allows you to understand what to look for and how the process works.
You can access valuable information regarding the status of a trader by clicking on the ‘stats’ tab in the trader’s profile.
We need to pay attention to two other factors here. Traders’ risk score indicates their level of risk, while their max drawdown indicates how much they have lost in a single week. This is the same for daily and yearly losses.
Comparing the current risk to the past months shows how their strategy has changed.
Almost anything green shows a low-risk, low-return attitude. The spectrum then moves through yellow, orange, red, and black, where the risks are highest.
Personally, I steer clear of anyone with a score greater than seven, but it can be beneficial to have a mix of traders with different trading styles.
Copying a trader on eToro
The act of copying itself is simple. After you have found a trader who you feel is reliable, simply open their profile and click on the blue ‘Copy’ button.
As a next step, you will be asked to enter an amount with which to copy that trader, and some useful information will appear.
The “average copied trade size” tells us how the copying actually works in real dollar terms if you copy a trader with $200.
You would (on average) be charged $2.72 for each trade you copy in the example above.
In proportion, this represents 2.72% ($5.44 out of $200) of your total investment in them. This is a good sign because it indicates a cautious and safe investment style.
It is also possible to set a “stop loss”, which is a way to protect against heavy losses, set by default at 40%.
You will automatically stop copying the trader if your account loses 40% of your investment. Based on how much risk you’re willing to take, you can set this level to whatever you want. For me, 25% works best.
Keeping track of your performance
A click on ‘Portfolio’ opens a list of your open trades.
Here you will find your trading area and nerve-centre. You can monitor and close any open positions here, as well as access a record of your eToro trading history.
Your eToro Portfolio will list all of your copied traders (and any of your own investments).
The performance of your trades will be shown. Find out what positions they (and you) currently have open, as well as how these positions are performing. By closing individual copies of trades, you’re able to avoid uncopying a whole trader.
It is also possible to just ‘follow’ traders (without copying or investing in them). As with Twitter, their updates show up in your Watchlist and News Feed.
This gives you an idea of whether they’re worth copying and how to tune into useful information.
Here's how you can trade on eToro yourself
After you’ve become familiar with the eToro platform and (hopefully) copied some trades from others, you can start thinking about placing your own trades to earn money from home.
You should do your research and think a bit harder. You are solely responsible for any shortcomings.
You get used to the eToro platform and the whole process of buying and selling positions by concentrating on the stock markets. You probably already have some consumer knowledge as well.
How do you choose stocks to buy?
It’s up to you, partner. I can’t provide investment advice. It pays dividends to do your homework, read the news frequently, and listen to earnings announcements.
Make sure you invest in stocks and companies you believe are in a strong and healthy position to resist market shocks, and ultimately have room to grow.
To identify undervalued/overpriced stocks, study the price-earnings ratio.
I can show you how to place a trade on eToro by reviewing and explaining the steps.
The process of buying stocks and shares
Go to ‘Trade Markets’, then to ‘Stocks’, then to ‘Industry’. Select a sector, such as ‘Consumer goods’.
On the next page, you’ll see a list of all consumer goods stocks available on eToro, along with their respective prices and changes over the past day.
Let’s say we want to buy $50 worth of Apple stock.
You will first see the ‘Feed’ when you click on ‘AAPL’ (the stock exchange ticker for Apple).
The chart displays all the latest news and insightful discussions concerning Apple’s stock price and its activity as a whole.
The chart shows the stock price of the company over the last year by clicking ‘Chart’. Zooming in and out allows you to change the period shown.
In the top right corner, click on ‘Trade’ if you are interested in investing in Apple (based on the assumption that the share price will rise over the medium/long term).
Trades must be made for a minimum of $10. For both loss and profit, you can set the amount at which the trade will automatically be closed.
Last but not least, observe the “Leverage” figure. Multiplying your gains (and losses) by this number tells you how much you can make. A higher number means a greater risk.
In essence, X1 is buying the real stock. You would double (double) any price movement if you traded at X2.
Normally, it will be set to X5. In my eToro review, I recommend reducing the number to X1 to make it more intuitive for beginners.
Click ‘Set Order’ when you’re ready.
There you have it! You now have $50 invested in Apple.
Keeping track of your eToro performance
You can view your open positions by clicking ‘Portfolio’.
The Apple stock can be viewed in more detail if you click on it.
My example below shows I bought $400 worth at the end of September, and I’m now up 3.94% on the trade.
The amount I would profit if I decided to sell these stocks (close my position) right now by clicking on the ‘Close’ button (red X).
Don’t fall into the trap of checking the real-time performance of your trades every hour, as I warned you earlier! As a result, over-trading occurs, which is also very costly.
Having developed the discipline to let the markets run their course, and to be confident that over time the value of my portfolio will rise (which it has), I’ve learned to let the markets take their course.
It’s a strategy that has served me well on eToro and means I don’t make rash decisions just because a company released ‘bad news’ and the market overreacted in the short term.
Advanced eToro trading
After you have proven that you know what you’re doing on eToro (i.e. been actively trading for a few months), you can start trading indices, crypto, currencies (forex), and commodities.
These markets involve much more risk than stocks. I will only touch on these briefly to the extent that you know what you’re doing already.
Trading currencies (Forex)
Let’s look at an example of how to buy EUR/USD (currency market). Our first step is to click on ‘Trade Markets’, then ‘Currencies’, then scroll down until we find EURUSD.
The sell price and the buy price are displayed. In order to open the order window, click on the ‘B’ box. Ensure that the dropdown is set to ‘Order’ rather than ‘Trade’.
eToro is quoting you a buy price of 1.0599 for EURUSD at the time of writing.
You are investing a certain amount of money into this trade. We will display the equivalent number of units. In this case, $90 with X100 leverage equals 9,000 units.
This concept relates to finance. Basically, what you need to know is that the number in the box tells you how much you can multiply your gains (and losses) by. High numbers indicate higher risk.
Change this from a minimum of X1 to a maximum of X400, and you can adjust your risk level accordingly.
Since you would be buying real, ‘hard’ currency, any fluctuation in the exchange rate would be almost exactly equivalent to your gains or losses. Nevertheless, if you make the same trade on eToro at X2, any movement in the exchange rate magnifies your gain or loss by 2 (doubles). Personally, I would recommend reducing your risk level as much as possible.
You can set a bottom price limit to prevent you from being hit too hard by a falling price on a position. eToro will automatically sell/close your position if the price drops this low, so you don’t have to chase your losses.
This can be set as either a dollar amount or as the EURUSD price level at which you want the trade to close.
If the value of EURUSD drops by $45, our position will be closed. In the EURUSD chart below, the red line represents this stop loss.
On the other hand, you can also set a price that will also trigger eToro to sell/close your position once you reach the return you were looking for.
In the EURUSD example given above, our position will also be closed when the value has risen by $45.
Once you’re satisfied with the parameters, click ‘Send order’ and your trade will be placed.
eToro is a company that provides a service to make money.
Users are charged a small spread fee on positions (outlined on the order windows) to do this.
Though there is no commission, the costs of trading here are far less (up to 20x) than with traditional stockbrokers and fund managers.
As a new trader, I recommend sticking to stocks on eToro because the fees on this market tend to be the lowest.
Brokers charge a small spread between buy and sell prices. That’s how eToro makes money (just like a Bureau de Change) and similarly to how stock prices are marked up. If you sell your position or close it, you will be charged this.
You can minimize spread fees by not overtrading. Popular Investors (see above) can get a partial or even total rebate on these eToro fees.
Trading strategies and preferences really depend on the individual. Just to give you an idea, I tend to hold on to stocks for at least six months, and all other trades tend to last two to three weeks.
When you copy another user, you’ll be charged the same fees they are for trades (which may not always be stocks). Check your portfolio to see what positions they have opened.
On eToro, the only other fee you may encounter is the withdrawal fee (flat $5) if you want to withdraw funds from your account.
Lastly, a word about overtrading
Here is a point that I want to elaborate on, specifically in relation to copying other traders.
I have attached a screenshot of my equity chart. The red line shows how many people are copying me on eToro.
As you can see, copiers flooded in when my total equity (blue line) hit a peak and left when my gains fell.
While it may appear rational, it’s a clear sign of knee-jerk reactions without considering the overall long-term trend.
Everyone has fluctuations in the market. Many eToro copiers lose money by copying at the peaks and stop copying shortly after because they’re down a few dollars.
In my case, these people would have been much better off if they had stuck with me for a longer period of time (as I recommend throughout the guide).
This is also true of the stock market generally.
Despite short-term market crashes, it is up over the long run.
Why is this? Every stock market company strives to create VALUE.