Are you looking to invest and trade in stocks, cryptos, and other financial instruments? As a beginner, it may be confusing and a bit daunting. After all, there are so many platforms available, and all of them promise huge returns. One of the most popular platforms is eToro. This multi-asset platform with numerous features is ideal for new users. One can open an account, deposit funds, and buy and sell assets in minutes.
Since its inception, eToro has been at the forefront of the combination of finance and technology. Millions of people use their disruptive & innovative idea of social trading to make profitable trades. However, is eToro right for you? Read on to learn more about the platform in this detailed eToro review. Find out about the different features, regulations, ease of use, and all the pros and cons of the eToro trading platform.
Table of Contents
What is eToro?
As we mentioned earlier, eTorois a multi-asset investment platform founded in 2007. The founders include David Ring and two brothers, Ronen and Yoni Assia. Originally, it was known by a different name, Retail FX. It is based in the U.K. and has more than 20 million users around the world. In the beginning, it was a forex platform, but over time additional asset classes have been added for trade, including CFDs (Contracts for Difference) and cryptocurrencies.
The main aim of the founders was to empower everyone to learn and grow wealth as successful investors. A simple and transparent platform trading style assured new users and gave them the confidence to trade.
CFDs are complex instruments and carry a high risk of losing money quickly through leverage. 75% of retail investor accounts lose money when trading CFDs from this provider.
When trading in any type of financial market, finding the right broker for your needs is usually time-consuming and not easy. You may have to visit several broker or platform websites while searching. For beginners, the wording and language used can be confusing. Many platforms deliberately use terminology which is hard to understand.
Similarly, some trading platforms are complex, and even registering on them can be a problem. Even at first glance, you can see that the eToro platform is easy to navigate and understand for beginners and new users. The website is well-laid out and has a lot of useful information. Registering is easy and does not take much time. It allows users to learn at their own pace and trade according to their wishes.
From 2018, eToro is offering a new and more innovative version completely dedicated to cryptocurrencies, known as eToro X. It provides a safe and secure trading platform to users who want the excitement and fast pace of crypto markets and still want to always keep track of their investments. Unlike eToro, this new version is entirely based and built in the cloud and is a fantastic option for pure crypto investors.
eToro trading platform has many useful features. Where it shines is how it innovatively uses the platform to allow users to replicate the successful trades of other users. It acts as a social investing platform. New investors love this feature as they can learn and make profits by copying trades of other investors.
Copy Trading: traders can copy trades carried out by other traders. Once you choose the correct settings, automatic copying will start. Users can choose an individual trader or a portfolio to copy. Different traders have different strategies and risk appetites, and you can decide to follow any individual whose trading style you like. This is a great feature for beginners or experienced users and makes more profitable trades.
How does copy trading work?
eToro’s Copy Trader allows users to copy the moves of other traders and then trade automatically accordingly. You first have to select a trader you want to follow, and just by clicking a button, you can start copying their trade positions automatically. You can use the stop-loss feature to keep the potential loss down.
You will have to pay some amount for the option of copying trades. The minimum fee is $ 200, and it can go up to $ 50000, depending on the amounts you invest and the traders you follow. A user can follow up to 100 traders at the same time. Even without CopyTrader, you can see many of the trader’s portfolios, risk scores, and other stats. The US customers have access to all the public profiles on the platform; they can only follow other US users.
Apart from this, there are many other features such as:
Easy to open an account: all users will find it easy to open retail investor accounts which can be done online. It will ask for some information from you and, once submitted, will verify. This process may take a few days because thorough verification of your identity is necessary. For U.S. and Australian residents, the initial account opening fee is $ 50. The account opening fees for residents of other countries can range from $ 200 to $ 5000. eToro uses Plaid, a financial services company in the U.S., to connect your trading account to a bank. In some countries, it is possible to use credit cards, PayPal, Skrill, Rapid Transfer, etc., to fund the accounts.
Trading is simple: buying and selling on the eToro platform is simple. When trading in crypto assets, all you have to do is click on the ‘trade’ or the prominent ‘buy’ button listed on your portfolio watchlist. When you want to sell crypto, you need to click on the drop-down arrow. It will reveal all your holdings, and you can select the asset you want to sell. You can also create a customized watchlist to make it easy for you to trade. Users can also place stop-loss conditions on certain non-US asset classes, but this facility is unavailable to U.S. residents.
Mobile trading: the experience of trading on mobile is very similar to placing an order on the web. The eToro mobile app is efficient and easy to use. There is seamless navigation to different markets and watchlists. The app has a modern look and feel to it. Though the analytical capabilities are somewhat limited on mobile devices, the overall experience is still good. This is very convenient for users who are constantly on the move or users who always want access to the trading platform.
Fractional shares: most U.K. brokers don’t offer fractional shares, but on eToro, it is possible. Additionally, it allows trading CFDs, shares, forex, cryptos such as Bitcoin and Ethereum.
This is one of the problems with many trading platforms. They are not transparent about their fees and commissions. Initially, they proclaim zero fees and commission but later charge a hefty amount. eToro is completely transparent about its various fees. All the charges are clearly mentioned, and the users are made fully aware of the same while they join. There is no commission for trading. However, even with 0% commission, there are some other fees that users should know. It is important to note that eToro has different tiers of accounts based on account balances. So, certain traders are eligible for discounts on the fees and may even get some additional features.
Conversion Fees: when a user deposits money in Australian dollars, Euros, or Great Britain Pounds, it gets converted to US dollars. Similarly, the money is converted to the user’s preferred currency at the time of withdrawal. The fees will depend on the currency you use while depositing.
Withdrawal Fees: there is a flat fee of $5 on all withdrawals. The minimum amount that a user can withdraw is $ 30.
Minimum Position Fee: eToro charges a minimum position amount of $ 50.
Inactivity Fees: if an account remains inactive, that is, there is no login for a period of 12 months, and an inactivity fee is charged. A sum of $ 10 will be charged every month from the account. It can be taken from the remaining balance in the account.
CFD fees: eToro is a multi-asset platform, so users can trade stocks using Contract for Difference Trading. This type of trading usually has multiple fees and commissions. If you are interested, you can learn more on the eToro website.
Calculation of costs on eToro
The fees on eToro depend on both the asset class you trade in and your location.
The customers trading in cryptocurrencies in the US pay between 0.75% and 5.0 %, depending on the currency. This cost is part of the execution price and is not separately charged.
All non-US customers who trade in stocks pay no commission for opening and closing a long position. Short sales will be charged a commission of 0.18% of the trade value.
All non-US customers buying a US stock will pay currency conversion fees.
If you want to transfer a cryptocurrency into your wallet, you will incur a fee depending on the crypto.
Pros and Cons of eToro
Like every other trading platform, eToro also has pros and cons. Before choosing a trading platform, users need to research and look at all the advantages and disadvantages. This is important to ensure that your trading experience is smooth and without hassles.
More than 17 cryptocurrencies are available for trading, including Bitcoin, Ethereum, Litecoin, etc.
24/7, seven days a week, trading possible
Zero commissions charged
Easy to use, mobile app along with the website. Attractive layout and simple navigation.
Great options for traders. They can see and copy other traders to make more profits.
High minimums needed for copy trading
The range of assets for investment can be wider
There is no commission, but spreads for executing trades are quite wide
A minimum purchase of $ 25 for any cryptocurrency means that smaller traders can only buy a small number of coins.
One big problem with eToro is that the users in the US do not get all the benefits of a multi-asset trading platform. eToro is truly multi-asset overseas but not in the US. It only offers cryptocurrency trading to US residents. This lack of stocks and other investment options is a big drawback, and the company plans to change this in the near future.
Moreover, only 43 states allow buying and selling cryptocurrencies in the US. Seven states, including Hawaii, Minnesota, New York, Nevada, and a few more, don’t allow crypto trading. The company is looking to have a presence in all 50 states soon.
For US customers, no conditional orders are available. They can only place market orders. Certain stop-limit orders are possible but can only be placed when the position is open. You cannot do it during order entry. The non-US users can set a stop-loss, buy rate, and take in profits when opening the position.
How does eToro work?
For US customers, eToro is a purely crypto trading platform. The users deposit the funds, usually in US dollars, into their accounts. They can also transfer other cryptocurrencies into their account. Usually, the customers link their bank account or make deposits through wire transfer.
Once the account is established, crypto trading is possible on both the web-based platform and mobile app. Users can also use the copy trade feature to follow the trades of any individual on the eToro platform.
As a new investor, you may not feel confident about investing your hard-earned money in crypto trading. They are, after all, virtual currencies. eToro offers excellent education and practical learning in this regard. All the users get access to a demo account with a credit of $ 100000 in a virtual portfolio. This lets users trade and invest without any risk and learn a lot in the process. As the user gains confidence, they can start investing in the real account.
Buying CFDs on eToro
You must not forget that when you hold a CFD (Contract for Difference) stock position, you do not own the stock in reality. This means that you can buy and sell stocks on the eToro’s platform but cannot move the open position to another person or another broker out of an eToro account.
It is important to note that CFDs are very complex in nature, and these financial instruments come with a high level of risk. Many retail investors lose money when they trade CFDs without understanding the risks thoroughly. First, understand how CFDs work and be clear about your risk appetite. Take the risk only if you can afford to do so.
Leverage trading on the eToro platform
Leverage trading allows an investor to borrow money and invest in certain asset classes in anticipation of higher returns on the investment. A temporary loan allows traders to open a trade of a larger size, even if they only invest a smaller amount. However, like CFDs, leverage is also risky, and a full understanding of how it works is important.
Let us look at an example to see how leverage affects your profits or losses. Without leverage, your investment of $100 will give you a profit or loss of $1 with every 1% move. On the other hand, if you invest the same $100 with 10 times leverage, the total value of your position will be $1000. 1% profit or loss of $1000 will be $10.
When you open a trade, you can decide whether you want to use leverage or not. According to the law applicable, there are different maximum leverage amounts for different instruments. However, eToro can choose to lower the leverage at any time. The European Securities and Markets Authority (ESMA) and the Australian Securities and Investment Commission (ASIC) have laid down the maximum leverage amounts rules. These apply to all eToro retail clients.
30 X: major currency pairs (like USD/GBP)
20 X: for non-major currency pairs (like EUR/NZD) and gold indices
10 X: commodities other than gold and non-major equity indices
5 X: for CFD stocks and ETFs
2 X: for CFD cryptocurrencies
The use of leverage requires careful assessment because of the risks it carries. If you get higher gains with leverage, then your losses will be bigger too.
When you increase leverage, you increase your exposure to a financial instrument. For example, you can go from 2 X to 5 X and get higher exposure. If you want to increase your leverage level, then you must keep in mind the following things:
What is the maximum leverage limit on the specific financial instrument?
Your risk appetite and tolerance, since leverage will result in potential bigger losses.
You cannot change the leverage on an existing position, and if you want to increase leverage, you will have to open new trade with the desired leverage levels.
Where can eToro improve?
eToro is one of the best and most popular trading platforms in the world. It is helmed by some smartest people and boasts of great features. However, there are some areas where the company can improve and become even better.
Research & Analysis: eToro does not have a research hub on its platform. There is information about each cryptocurrency on offer, including charts and technical analysis. Unfortunately, this information is not sufficient. The News is mainly made up of posts by other eToro users. When you click on ‘help’ and choose News and Analysis, all you get is some haphazardly organized blog posts. Serious investors want better research and analysis, which is expected from a platform like eToro.
Research for US stocks: research for individual stocks and ETFs is limited, and only the fundamentals of companies are provided. Financial data and a short overview of the asset are given. However, these ratings and price targets are mainly for the US stocks only. Stocks listed on the London Stock Exchange do not get much coverage. Video content with weekly outlooks and in-depth articles are available for information, in any case. eToro does not provide a stock screener or market news, unlike many of its competitors.
Portfolio analysis: not much portfolio analysis is available on the platform. When you click on ‘portfolio,’ you get to see your current holdings along with any changes in the values from the time you invested. It is possible to rearrange the portfolio columns or make minor changes, but the customization is limited. All you get is some profitability rate when you click on your name. There should be more options and flexibility in portfolio analysis.
Web Platform: eToro is available only as a web-based platform. It does not offer a downloadable platform as of now. The platform is user-friendly and provides easy access to trading, but a downloadable version will be even better.
What is great about eToro?
Charting: there are 66 technical indicators on eToro’s charting platform and 13 drawing tools. Users can change the chart types, intervals, and overlays apart from several other features. ProCharts is a handy feature, and you can compare up to six different charts in one go. However, ProCharts is currently only available on the web platform and not on the mobile app.
Education: the tools for education on eToro are great. When you click on ‘help’ in the drop-down menu, you get a page organized according to various topics. You can browse the material and learn about investing, depositing, withdrawing, and trading on eToro. A general search on the homepage ‘the complete guide to fintech’ can be very helpful, especially if you are keen on following other traders.
There are weekly webinars for non-US customers, which offer information about the basics of trading stock, currencies, and cryptos. The link for the webinar is not available on the US website, but it is possible to watch the recordings on-demand. The non-US users also get access to the eToro’s Media Center, which is under the Company Tab. It offers many podcasts, guides, tutorials, and blogs.
Social network: a unique aspect of the eToro trading platform is its social trading options. You also get to see a social feed when you view a stock price. It is very similar to Twitter and other such social media but meant for stock quotes. People can post their views and opinions on a specific stock. This feature is handy for new users who are unsure about stock trading and want to know more about it before deciding to trade. It is a great feature and not available on many other such trading platforms.
Wide variety of shares: eToro gives its users access to the most prominent international stock exchanges, including:
Zurich, and many more.
There are almost 2000 companies from various international markets for users to trade in. All the top companies, including Apple, Amazon, Facebook, IBM, Nike, Disney, and many more, are available to the users. You can choose from tech, retail, banking, auto stocks, and many other sectors.
The customer service provided to the users is more than adequate though there is some room for improvement. Accounts holding less than $ 5000 can ask for online help by email. They can create a ticket for the problem they face, and eToro customer service will get back to them. Sometimes it may even take a few days.
For users having more than $ 5000 in their accounts, it is possible to get customer support through live chats. You can chat live with a customer support agent only after your account gets the light blue link for the chat service. A dedicated account manager will look after your account.
Accounts that have $ 25000 or more are considered Platinum Club level members. They get better perks and services. Priority customer service is one such perk. Quick resolution of problems and excellent customer service is a hallmark of this. Unfortunately, phone support is only available in a few countries like Australia and not in all the countries.
eToro Negative Balance Protection
Is it possible to have a negative balance account? Yes, this can happen when your available balance is invested in different open positions, and some trading loss occurs, or a fee is deducted. This does not happen often, but certain market conditions can cause a negative balance in your account. In such cases, eToro performs a margin call. They will close all the open trades that you have. eToro has a policy of Negative Balance Protection and will absorb your loss. eToro will reset the equity to zero. Because of this feature, investors will not lose more funds than deposited in the eToro account.
eToro pays dividends
Your eToro account will be credited or debited if the stock or ETF you trade-in pays any dividend.
If your position is Buy, you will get a dividend payment added to your balance.
If your position is Sell, the dividend amount is deducted from your balance.
For the dividend payment rules to apply, you must be holding the position before the market opens on the ex-dividend date.
If a user holds a CFD position, the dividend payment will reflect in the user’s balance on the ex-dividend date.
Dividends received are taxable in some cases, and the tax percentage depends on the country’s laws in which the dividend is distributed. It is important to note that you may have to pay tax depending on your country of residence and what kind of tax treaty is applicable.
Digital wallets for cryptocurrency trading
eToro offers a free digital wallet to keep your cryptocurrency called the eToro wallet. It is available on both Android and iOS platforms. There is a cost charged to convert cryptocurrencies to US dollars and the other way around, which is the fiat currency. 5% conversion cost at 5% is a bit costly. Users can transfer cryptocurrency to their digital wallet from the eToro trading platform, but it only goes one way. You cannot transfer the coins back to the platform.
Safety & Security
One of the main problems that people have with digital currency is that they are unable to see or touch it. Similarly, many people still find comfort with the traditional way of trading, and online trading at such a large scale seems a bit disconcerting. Moreover, there is news about security breaches on such platforms every few days. The safety and security of your money, as well as your personal information, is of prime importance. It is crucial to check the regulatory standing of any company to ensure that you trade only on a reputable and trusted platform.
When it comes to eToro, the platform has 3 regulatory licenses:
Australian Securities and Investments Commission (ASIC)
Financial Conduct Authority (FCA)
Cyprus Securities and Exchange Commission (CySEC)
eToro provides good security, and your money is safe with them. Most cryptocurrencies are kept in cold storage. This means that they are on servers and not connected to the internet. Some cryptos are kept in a ’hot wallet’ for the sake of fast liquidity. The European insurance policies do not insure any security breaches in the crypto asset sections.
For US customers, the cash balances are insured for up to $ 250000. However, like any other platform, if your account is breached, there is no protection. It is essential to keep your passwords and other codes safe to prevent any mishap.
UK investors fall under the FCA regulations. eToro (UK) is a member of the UK’s Financial Services Compensation Scheme (FSCS). UK investors are covered up to 85000 pounds.
eToro offers a multi-asset trading platform that is also easy to use. Even new traders and users will find it easy, and if they get stuck anywhere, there is plenty of material available for learning. If this does not work, you can contact the customer service of eToro, and they will help and guide you. The users in the US will have a very different experience compared to users outside the US.
One great feature attracting many investors to eToro’s platform is the copy trading option. This gives even new investors a chance to follow and copy the trading strategies of successful traders and make more profits. eToro has been providing online stock trading since 2007 and has a good track record. The reputation and trust it has earned over the years from millions of users worldwide are a testament to its quality and capabilities.