When it comes to popular brokers, eToro definitely stands out because it seems to be taking over the world, for the better I might add. Now that eToro is available in the United States, a wider audience now has access to their pretty impressive social trading platform as well as the enigma that is cryptocurrencies, which I am slowly coming around to. We’ll look at how it works and why I put it into my Top 3 brokers.
- Regulation Licenses: FCA, CySEC, FinCEN (USA), & ASIC
- 2,000+ trading instruments (crypto, ETFs, stocks, Forex, commodities, and indices).
- Minimum deposit starting at $200.
- Social trading approach.
- Demo account available.
eToro Pros and Cons
What is eToro and how this social trading platform works
At first sight, eToro looks like a typical investment platform with a very attractive graphical user interface (GUI). In a nutshell, eToro is a regulated online broker that allows customers to trade manually, but also offers social trading features. This means traders with less experience can copy strategies and trades from others in real time. Experts can apply to become a “Popular Investor” and get an income based on the number of copiers, reputation and popularity. As an trader myself, I can see the benefit of using this as an extra income stream. As soon as they add stocks to the platform, I’ll be on there, be sure to follow! This feature is great for beginners because they can be profitable immediately but more importantly, they can learn how the experts are doing it.
If you’re not much of an expert, but you don’t consider yourself as a beginner either, you can combine manual and automatic trading by adding your favorite traders on your “Watchlist”. This is the way I would recommend getting the most out of eToro: by comparing my own strategies with those of the top traders.
eToro was launched in 2007, and since then, it has become one the largest platforms in social trading, with more than 10 million users around the globe. With the evolving global markets, eToro changed its corporate approach to dominate the retail trading space. eToro’s first venture into social trading was in 2010 when they launched the “OpenBook” service. All of this with the mission of making “investment technologies (Investec) available to anyone”. Its services are now available in 140 countries worldwide and eToro has built a robust trading platform that does not rely on third-party software. All you need is either their mobile application or web-based platform, which is easier and more user-friendly than other alternatives like MetaTrader or cTrader.
eToro Regulation: does it hold any license?
eToro is one of the most regulated brokers worldwide. If you’re in one of the allowed countries, you won’t have to worry about protection and reliability. eToro was founded in Tel Aviv (Israel) but now it has legal entities registered in the United States, China, The United Kingdom, Cyprus, and Australia. By March 2019, these are eToro legal jurisdictions and licenses:
- United Kingdom: registered as eToro (UK) Ltd. It is regulated by the Financial Conduct Authority (FCA), with a cross border license to offer services across the European Economic Area. License number: FRN 583263.
- Cyprus: eToro Europe Ltd, regulated by the Cyprus Securities and Exchange Commission (CySEC), license # 109/10. This is also a cross border license for some other EU countries.
- United States: operated by eToro USA LLC. This company is registered as a Money Service Business with the FinCEN.
- Australia: eToro AUS CapitalAustralia Pty is authorized by the ASIC. License # 491139.
Is it available for US-based customers?
As stated in this article, eToro is now available in the US. After several years, eToro has finally entered the US market, starting with its selection of cryptocurrencies and, of course, their social trading features. For now, US customers will be restricted to trading Bitcoin and other 12 altcoins. They will add more asset classes and a brand new trading platform (eToro X) later this year.
Trading at eToro
You can choose two methods to trade on eToro: manual or automatic (via copy trading tools). I don’t really like to blindly follow a trader, but I can completely see the how this is useful for novice traders or simply those lacking confidence. With a manual approach, I can perform my own technical analysis and set a risk management plan. Using eToro means I am part of a community where I can share my ideas, get some feedback, compare strategies, etc.
It is basically down to your level of trading expertise whether you copy others or be the one that copies. The size of your equity doesn’t matter too much because you can allocate a percentage to social trading features and then trade the remaining. If you want to get further information, please visit this Trading Tutorials page.
Bearing that in mind, eToro offers a good selection of trading tools that might help you with your investment decisions. We’ll cover the most important ones in the following sections.
Trading Platforms and Tools
As stated earlier, eToro offers its own trading platform and doesn’t rely on third-party platforms. If you’re a beginner, eToro is one of the best places to learn and start trading quickly. It has a modern look and it is fairly interactive, one discovers how to operate it very quickly. If your choice is manual trading, you can check the available markets/instruments under “Trade Markets”:
Click on your favorite to check the most relevant data and make your decision. You’ll get access to a “Feed”, similar to a social network timeline with posts from investors worldwide. If you click on stats, you can see a financial overview of the selected asset (day’s range, 1-year return, previous close, etc.). You can also find some basic data of each asset under “Stats”.
Some assets also have an advanced tab (“Research”) where you’ll find deeper insights on each instrument. There are many indicators that could give an idea of the popular investors’ bias. You’ll see price targets, analysts’ sentiment, hedge fund activities, and “insider transactions”. Currently, this feature is only available on selected stocks. Here’s an example for AAPL stock:
Technical Analysis is crucial to get better results and define your risk management. Especially in the crypto market, which is highly volatile, you’ll want to perform a technical analysis to foresee price action, establish support/resistance levels, check indicators, etc. eToro offers a simple tool to analyze your graph and, even though it is not as powerful as other tools—i.e., TradingView—, you’ve got all the basic charting tools necessary.
To start charting, select your preferred asset and click on “Chart”. You can choose from several graphic types, trading tools, studies, etc. To see the items, just click on the expand button at the upper right corner:
Once you’re ready to open your order, click on “Trade”. You can “Buy” (long) or “Sell” (short) the selected asset. In addition, you can open market or limit orders, based on your strategy. Of course, you’ll be able to set your stop loss and take profit prices. (Trailing stop loss available to some instruments as well).
The minimum trading size depends on the asset and the leverage applied to your order.
If you’re not ready for trading yourself, you’ll be able to copy popular investors with different risk profiles and portfolios. eToro offers a lot of stats that you can analyze to choose your perfect partner and copy his/her trades automatically.
You can sort investors by earnings, risk score (1-6), country, number of copiers, daily/weekly drawdown, etc. As you would when performing TA on an asset, make sure the investor matches your financial interests and your expectations as a trader. I usually take a look at their long-term stats, not only the cover letter. The first thing I would consider if I were to copy a popular investor, is their risk score. Personally, I like traders with medium-high risk that have a strong history and grounded strategy. I also like that you can see the investors’ portfolios and how much they have allocated on each asset. Finally, please don’t forget to set a stop loss/take profit when you copy-trade. The minimum amount for copy trading is $200.
Trading pairs available
eToro has more than 2000 assets available for trading divided into 6 categories: Crypto, ETFs, Stocks, Indices, Commodities and Currencies. If you’re an American trader, then you’ll only have access to cryptocurrencies (although soon to be stocks as well I hear). You’ll be able to trade Bitcoin (BTC), Ethereum (ETH), Ethereum Classic (ETC), Cardano (ADA), Stellar (XLM), NEO, EOS, IOTA (MIOTA), Binance Coin (BNB), Ripple (XRP), Dash (DASH), ZCash (ZEC) and Litecoin (LTC). All trading pairs vs. American Dollars (USD).
If you’re trading from other countries, you’ll get a much wider portfolio, which includes their other asset classes as previously mentioned. Find more about the trade markets on eToro.
eToro Deposits and Withdrawals
One of the biggest advantages of eToro is the wide selection of payment methods allowed. As someone has tried and tested several brokers and exchanges, it’s not that easy to find services that accept payments from PayPal. eToro does! Depending on your location, you’ll have different payment options to fund your account. The minimum (initial) deposit will also change depending on your location and payment method; e.g., if you are in Europe, then you’ll only have to deposit a minimum of $200.
- Payment methods: wire transfer, credit/debit card, PayPal, Webmoney, Skrill, Neteller, Western Union, MoneyGram.
- Minimum deposit: it ranges from $200 to $500, depending on your location. Traders from Israel are required to start with $10,000.
- Minimum withdrawal: $50 (might change based on your selected withdrawal method).
eToro doesn’t charge fees directly when trading, i.e., you don’t get to pay a “trading fee” when you open a position. Instead, the company profits from the spreads between the buy and sell prices. That way, the broker makes sure to seamlessly get their share whenever you close an order. As stated on their website, “the spread will vary according to market conditions and liquidity”. Depending on the asset, you could also be charged for overnight/weekend fees. Lowest spread on crypto markets is applied to BTCUSD pair (0,75 %), while ZECUSD has the highest spread (3,45 %).
Commodities, currencies, ETFs, Indices, and stocks have better spread conditions. However, this is made to protect themselves from the high volatility of the cryptocurrency market. Keeping this in mind, I wouldn’t use eToro for intraday trades on the crypto market, unless I expected a big move. Otherwise, you’ll be significantly affected by the high spreads. Withdrawal fee is high (25 $), so I would not recommend to cash out small amounts of money.
Customer Support on eToro
Your customer support will be based on the account type you have. For basic accounts, you’ll get decent customer support which is not dedicated, but it’s enough to solve all the common issues. The customer service is available 24/7 and is provided in eight languages. You can contact eToro via email (support tickets) and live chat. During the 3 years I’ve been using eToro, I only needed customer support once, and they solved the issue within 24 hours.
Final thoughts on eToro: the easiest way to dive into financial markets
eToro is probably the easiest way to start trading in a secure and regulated environment. Pioneering in the social trading niche, eToro offers one of the most powerful trading platforms today. In my opinion, this is one of my Top 3 brokers in 2019, because it combines features that can be appealing for any type of investor. If you’re an expert, you can finally be in a social environment with people like you. If you’re good enough, you can also take advantage of your expertise and become a popular investor. Many investors make a living out of this type of platforms, but you need to have outstanding performance and engagement with your followers.
Its trading features are good enough for any trader, but I’d suggest to complement them with charting tools like TradingView. Even though spreads are a little high, I think the top-notch service provided by eToro worth it, and fees are actually within a competitive range. Potential customers will be able to test eToro through a Demo Account, so why don’t give a try?