eToro Review

eToro is a great CFD trading platform. What makes the difference between eToro and other CFD platforms is the social features and openbook system with copytrader to help you on your way. This is because eToro is basically a trading platform which is sort of a social network too. For example, you can literally click ‘copy trades’ of a certain person and let them do the work without having to do anything. I guess their incentive would be to gain a reputation (as it is a social network) which can perhaps benefit them in the future in some form or another.

About eToro

It’s important to start this eToro review with a little bit of history. The company was founded in 2006 by 3 young professionals who wanted to challenge the dated methods and views of Forex. FX trading was an insular environment for those already operating in the financial sector. What the chaps at eToro did was make FX trading accessible to the general public. They did this by focusing on the basics.

eToro state they can offer traders the tools to take their trading further. Through their social investment network, eToro gives traders the opportunity to channel the collective potential of a diverse trading community by learning from, interacting with, and even automatically copying other traders

Social Trading and eToro

With social trading you replicate the trades of others based on their historic performance. You decide whether or not to copy other traders, whether you trust their decision making, investment rationales, and form. The extent to which you choose to do that is flexible; you can select timeframes, the amount of money and the levels of risk and leverage. In other words, do your research. Social trading puts you in a position where you can be involved and in control (of your trading), but also copy others. This allows investors to tap the wisdom of crowds to pick market trends while the engaging and interactive nature of ‘copy trading’ adds a spark of fun to an otherwise very technical and solitary trading experience.

Each trader on eToro can see the trades going through – who the traders are, what country they are in and what they are doing. eToro’s online platform enables the user to place trades so he or she can take the same positions as the trader whose onscreen views they have come to respect. A daily, weekly and monthly ranking table system helps identify the traders with the best track records, making it easy for newcomers to spot whose advice and ideas are worth following. You can see what instruments they are using, how much risk they are taking and, for example, you can also track everyone who is trading EUR/USD in the system. The network allows users to follow other people’s trades, learn from their methods, and even copy their dealings automatically, as well as interact with them to get useful tips and advice.

I’ve received this question from a reader:

I’ve heard about eToro recently and apparently one can imitate what other people are trading in order to make money. Now, I literally don’t know anything about trading but was wondering if you have any experience of using eToro to make money by imitating other people? Is it really as easy as it sounds? If so, how much can one make say in a week with around $500 investment?

In regards to me copying someone would result in prices being driven up…would that be correct in anything i.e. gold, oil, currencies etc or is that only relevant to stock? And I’m assuming that a person would need tens of thousands of people copying him/her to affect the prices, no?

First things first, there’s no easy way to make money trading, I’ll try to break it down as simply as possible.

When you imitate someone else this is what is happening (over simplified but generally true) and why they want you to do it, say you are copying me. I buy something, a few people copy me drive the price up, whilst this is happening I sell to those who were buying to copy me I bank the profit, rinse and repeat. Second thing, if you have a strategy as simple as copying someone the brokers will front run you because they know what you will be doing all the time. I end up with my returns being amplified at the expense of all those who follow me, so more people follow me. Now of course eToro tends to offer markets that are very liquid so the activities of copy traders are unlikely to result in much movement of the underlying instrument so your assumption is right.

Trading is not easy, it’s the most competitive activity in the world, you are playing against the smartest, richest, fastest guys in the world. Trust me $500 for a week or two is nothing, you cannot trade seriously with anything less than $10,000, 15k to be safe. If you want to learn trading yourself you have to gain a years’ worth of experience minimum watching price movement before you develop any real feeling for the market. Trading and investing are totally different disciplines.

How much money is recommended to get started? Please give a fair amount, I mean I have seen promotions to get started at etoro with $20, but I don’t believe that you can build a portfolio with that. Thanks

The minimum price is $50 but I will recomend at least $1000 to start copy trading!

Upsides: eToro has been around for many years now. They offer a very easy-to-use platform that is good particularly for beginners. You can trade currencies, commodities, indices and a number of popular stocks in a simple, transparent and social way.

Downsides: Lack of a MetaTrader 4 platform. Bid-offer spreads can become wider during fundamental news releases.

Introduction

eToro is the first global market place for people to trade currencies, commodities, indices and stocks online in a simple, transparent and social way. Although not a traditional spread betting broker, etoro provide CFD services.

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