eToro is, in their own words, ‘a social trading platform’ where traders and investors can share their strategies and gain insights on potential opportunities through a so-called ‘popular wisdom’.
They have been in business since 2007 and millions of traders use the platform on a daily basis to make their transactions.
In this article, we will explore in detail several aspects of eToro’s trading platform.
So, if you are considering sign in up with them, here’s what you need to know.
The sign-up process starts with providing basic information such as your e-mail address, phone number and, your full name. You can also expedite this part by signing up through your Gmail account or your Facebook account.
After that, you’ll gain access to the trading interface, yet, in order to deposit funds, you’ll have to complete your registration. This registration involves providing a valid ID, a valid address and answer certain trading information that will allow the platform to measure your degree of expertise and trading knowledge.
Additionally, you’ll answer some questions related to your trading profile, whether if you an active day trader or a passive investor, these questions will help the platform get a sense of what you intend to do. Once you finish with all these questions you’ll be all set up to deposit your first round of funds to start trading!
Types of Accounts
Like most trading platforms, eToro offers two types of accounts depending on your profile:
Basically, all clients that sign up on the platform will be first treated as retail clients until they prove they are suitable candidates for a Professional Account. These accounts offer access to all of the platform’s available financial instruments and it also allows the trader to access a certain degree of leverage depending on the financial instrument to be traded. Here’s a list of the leverage permitted for retail clients:
- 30:1 for major currency pairs (such as EUR/USD)
- 20:1 for non-major currency pairs (such as EUR/NZD), Gold and major indices
- 10:1 for commodities other than Gold and non-major equity indices
- 5:1 for CFD stocks and ETFs
These limitations go in line with the latest regulations imposed by the European Securities and Markets Authority (ESMA).
In the eyes of eToro, a professional-client is one that “possesses the experience, knowledge and, expertise to make their own investment decisions and properly assess the risks that they incur”. This means that a professional-client will have to certify this to gain access to the higher leverage levels that are only available to professional account holders. This can often be achieved by passing a ‘fitness’ test applied by eToro to measure the trader’s knowledge and expertise.
Additionally, a professional account will also be granted to an institutional investor such as an insurance firm, a credit institution or a pension fund or; to any individual who has a Balance Sheet of over €20,000,000, a net turnover of at least €40,000,000 or available net funds of over €2,000,000.
Finally, the company also offers a third account, yet an uncommon one for most of our readers perhaps, known as the Eligible Counter Party Account, that is offered to clients that provide investment services that require the reception, transmission or execution of orders on behalf of a third party.
Which countries can you trade from?
According to their website, eToro is no longer able to provide its services to the following countries, due to their internal regulations, that conflict with eToro’s main services. This is the list provided by the company:
- Bosnia and Herzegovina
- Congo Republic
- Crimea Region
- North Korea
What can you trade through eToro?
The eToro platform allows you to trade stocks, currencies, ETFs, commodities, crypto assets, and CFDs, which include some of the major global stock indexes around the world.
US ETFs are offered as CFDs to users from European countries and Crypto CFDs are not available for FCA clients.
The company also offers what they call ‘social trading’ through a program known as “CopyPortfolios”, where you can mirror a trader’s activity if you see his trades match your trading profile and preferences. Additionally, they offer a “Popular Investors” feature that encourages successful traders to share their strategies by rewarding them with up to 2% their Assets Under Management if many people decide to ‘copy’ their strategies. Kind of like how Facebook or Instagram work, traders can have followers and copiers.
Deposits & Withdrawals
eToro offers many payment methods to deposit funds into your trading account. The most common of these are:
- Credit Cards
- Wire Transfer
These are the limits established by the platform for each payment method:
- The maximum deposit you can send via Credit or Debit card is £33,076 and the minimum is £166 ($100 in Australia).
- The maximum deposit you can send via Paypal, Skrill or Neteller is £8,269 and the minimum is £166.
- The maximum deposit you can send via Wire Transfer is £82,692,466 and the minimum is £414.
As for withdrawals, here’s some important information that can also be useful to you:
- The platform charges a $5 flat rate for each withdrawal made.
- The minimum withdrawal amount for any payment method is $30, or it’s equivalent in pounds.
- A withdrawal request will be processed in a period of 1 day and it will be accredited on the user’s account in a period of 1 to 7 business days, depending on the payment method.
What is a ‘pip’?
The word ‘pip’ stands for Price Interest Point and it refers to the smallest unit of change attributed to a certain financial instrument. A pip is 1/10,000 points and it is a measure often employed to trade currencies, options, and other derivatives.
The following comparison can help you understand more clearly what a ‘pip’ is, compared to other figures employed to describe relative changes in the price of financial instruments:
1 pip = 1/10,000
1 basis point = 1/100
1 percent = 1 for each 100
Here’s an example. Let’s say the price of the USD/JPY moves from 1.33201 to 1.33241. The net change of this is 40 pips while the percentage change of this movement is 0.03%.
Types of Orders.
There are 4 basic types of Orders featured by the Plus500 trading platform, these are:
This is an order that will be executed at the next trading session, during market hours, and it will buy or sell the financial instrument at the current market price.
Pending Order (Limit Order):
An order that will be executed once the financial instrument hits a pre-established price point. It will remain open until that price is reached or until the client decides to close it.
Trailing Stop Order:
This type of order enables the trader to instruct the system to maintain a certain position open, as long as the price keeps increasing (or decreasing, for a short-sell) but it will be automatically closed if a decline of a certain number of ‘pips’ occurs. This type of order allows traders to take advantage of profitable positions while protecting them from substantial downturns that may wipe off their accumulated earnings. Same as the Stop-Loss Order, there’s no guarantee that the system will close the position at the exact parameters set, yet it will do it on the next available quote.
Stop Loss Order:
An order that allows the trader to set a price point at which the position will be automatically closed. Yet, even though this should be the trigger to close the position, if the volatility is too high the order may be executed at a slightly different price point than the one set. This is known as ‘slippage’.
The limitations set by the European Securities and Markets Authority (ESMA) on leverage levels for retail clients have restricted the maximum leverage to 30:1.
Nevertheless, if you qualify as Professional Client, you will be able to access a much higher leverage level, of up to 400:1.
To get approved for a Professional Account, a client must demonstrate that he has sufficient knowledge and expertise in the financial industry and especially, in trading activities, and you also have to agree to waive the coverage of the Investor Compensation Fund.
Commissions & Fees.
eToro doesn’t charge percentage commissions per trade.
Rather, they charge a spread, based on the price at which the order was executed.
Here’s a reference of how much they charge for trading the most popular financial assets:
0.09% unified spread on all ETFs.
Spread of 45 pips on GOLD, Spread of 10 pips on NATGAS (Natural Gas) and 5 pips on OIL.
0.75% spread on Bitcoin and 1.90% spread on Ethereum, Bitcoin Cash and Litecoin.
For major currencies, 1 to 5 pips and for non-major currencies usually from 20 to 50 pips.
eToro charges 0% commission on stock investments, as long as it is a long position (buy) and there’s no leverage involved.
- This is only available for eToro UK Ltd.
eToro is a regulated brokering service provider.
In the UK, eToro (UK) Ltd. (“eToro UK”), company registration no. 7973792 is authorized and regulated by the Financial Conduct Authority (FCA), under firm reference number 583263.
eToro Europe and eToro UK both operate under and comply with the Markets in Financial Instruments Directive (MiFID) and eToro (UK) Ltd. also retains a cross border license from the FCA to offer its services in member states of the European Economic Area.
The company is also a member of the Financial Services Compensation Scheme (FSCS) that entitles clients to total compensation of up to £85,000.
The trading experience.
One of the most attractive features of eToro, compared to other trading platforms, is social trading.
If you are not willing to invest yourself in analyzing hundreds of financial instruments to determine which ones are the ones most likely to bring a profit, you could easily follow the best traders within the eToro platform and instantly copy their strategies.
The platform allows you to see the 12-month performance of the trader’s portfolio, their holdings, a brief personal bio and even a News Feed where they share their thoughts about their trading strategies.
This gives traders access to the portfolio of people with great skills in real-time.
Additionally, eToro offers a portfolio management service named “CopyPortfolio”, which works similarly to a mutual fund, even though they are different.
You can pick among several alternatives offered by the eToro Investment Management team and the portfolios follow many different investment approaches such as a combination of the portfolio of top traders, industry-specific portfolios, mirror portfolios that mimic the investments of financial gurus such as Carl Icahn and market-specific portfolio such as a Cryptoasset’s portfolio.
The minimum amount required for a CopyPortfolio is $1,000 and there’s no management fee for the services provided by eToro on managing the portfolio, yet, the company does earn money on the spreads paid on each transaction made by those who manage the portfolios.
eToro’s sophisticated social trading platform is what makes it such an innovative alternative for those who are looking to start trading.
You have the alternative to decide if you want to take the traditional road and perform the required technical analysis to determine which are the most potentially profitable trading operations or you could also take the passive approach, something that has gained popularity among investors these days, and you can rely on the strategies and portfolios of seasoned and successful investors that you can pick from a large list. Whether if you decide to go one way or the other, eToro is a great alternative to start trading if you are in o social trading.
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. 68% 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. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision.
Copy trading is a portfolio management service, provided by eToro (Europe) Ltd., which is authorised and regulated by the Cyprus Securities and Exchange Commission.
Cryptoasset investing is unregulated in some EU countries and the UK. No consumer protection. Your capital is at risk.
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.