How to Trade on eToro Social Trading Platform?
Last Updated : Wednesday 28th June 2017
Written By Tim Baudin
Forex Trading Instructor
Want to trade Forex for living or just for some additional support income?
Maybe you are a busy person and with personal commitments, business deals and regular work hours cramping your schedule, you find a little time to give to trading Forex.
But this does not mean that you cannot earn and get profitable margins!
First, let’s understand basics of social trading.
What is a Social Trading Platform?
The idea behind creating social trading platform was
“what if you could bring the advantage of the wisdom of many traders in a collective format to make fundamental investment decisions?"
This is what social trading is all about – Connecting on a global network with traders and investors around the world, following their ideas and experiences and using them to make your own investing decisions.
The Need of a Social Trading Platform
Similar to social media platforms like Facebook that let people with similar interests share their ideas, a social trading platform brings professional traders, followers and enthusiasts on a single platform to connect, interact and share. Through this platform, traders can
- Share information, relate experiences and read the latest news
- View and analyze the performance of different traders
- Copy the skills and trades of other traders to your account
If you are just starting to learn trading than social trading networks provide a great opportunity to learn and interact with more experienced traders.
How to get started with the social trading platform?
Once a trader can identify and understand social trading and all its nuances, the second step is to pick out a social trading platform. When it comes to discussing the top social trading & investment network, eToro makes it stand out from the rest.
Focusing on keeping things as minimally complicated as possible, eToro’s best feature is its simple user interface which maximizes the ease and simplicity of using eToro as a social trading platform.
eToro and the social investment network phenomena have been widely covered by mainstream media like Telegraph, Financial Times etc.including recent documentary on Bloomberg called Guru Networks Sell Social Investing to Copycat Traders.
Compared to and flaunted as the Facebook of the social trading platform, the eToro provides traders with many features. One of the most unique is ‘CopyTrader‘ . While allowing traders and investors to stay updated and monitor their progress, the CopyTrader allows you to automatically copy the progress made by the chosen investor.
Another interesting one is “Popular Investor” program which allows earning commission on top of your profit based on a number of people copying you. Popular Investor incentives responsible trading. It is a guideline published on the eToro website and amended regularly.
With social trading and copying features, it’s very easy to get started even if you don’t have very good knowledge on trading. You also don’t need to be sitting on your computer whole day looking at charts etc.
This guide can help you in getting started right way but still you need to remember that when you are trading any market ‘your capital is at risk’. So better to start with a low amount or demo trading at first.
Getting Started with eToro : Step by Step
1. Join eToro - Social Trading Network
It’s very simple & free. You can use either your Facebook account , Google account or with your details like username, password, email & phone number.
Now you don’t require to make deposit straight away if you don’t want. But you can only copy someone if you have min a $100 in your account. It’s better to start with $200 or $300 which allows you to copy 2 or 3 traders to diversify your portfolio.
You can deposit either through any major credit cards or any choice of alternate payment systems like such as Skrill, PayPal, Neteller, and WebMoney.
You can deposit using following currencies at present : USD, EUR, GBP, JPY, AUD, CAD
eToro also runs various promotional offers time to time.
You must first verify your account to claim this bonus. It's a simple process. You need one Government issued ID (front and back scanned colored copies are required). It's also mandatory to verify your phone number.
Once this verification process completed, you'll get an email with your Promotion code!
3. Get Understanding in using eToro Platform
Similar to Facebook, you get to know all activities for traders you are following.
This is the place to view all your open trades and monitor your performance.
Here you can add people or markets you are interested in knowing more. You can have multiple lists.
This section allows you to filter people to whom you would like to copy based on various criteria.
Place to trade or research various markets like Forex, Stocks, Indices, Commodities and EFTs
Now that you are part of this social trading network, there are mainly 3 ways to earn money.
1. Copying The Best Traders with CopyTrader
This is the best way to start for a beginner. When you copy a trader, their trades are automatically copied to your account.
2. Trading with eToro Yourself without Copying Other Traders
Once you are familiar with the eToro trading platform, you can also trade yourself directly for Stocks, Indices, Forex, Commodities, and ETFs.
3. Become a Popular Investor
Anyone and everyone can become a Popular Investor on eToro – This do acts as an incentive for responsible trading and being an active part of the community. Even having just one copier starts getting your additional commission everything (25% of revenue).
There are total 4 levels of this program. As a number of traders copying your portfolio increases, so does your commission…and there is no upper limit to your final commission! This is on top of profit you are making with your trades.
It can take a while to get a number of followers but it’s not hard if you are making consistent solid profitable traders. By being active on the network, taking part in discussions, answering other people’s questions etc. can get your name out inside community quickly.
How to Select the Best Forex Traders to Copy on eToro
Avoid the mistakes of blindly following and copy the ‘most copied’ trader.
Selecting the right forex traders on eToro is a crucial step because this is how you avoid losses and get a profitable share of trade on this platform. There are dozens of traders to select and follow, and you can always view their profile to get a detailed analysis of their regular performance over the months.
If you are willing to learn from the best and follow the top traders on the block, here are some tips and guidelines you should have in mind:
- Look for traders who have been trading for a while now (at least 6 months) and are active in the feed, blogs, and discussions. It ensures that amazing gain was not just out of luck.
- If you are not willing to bank upon risky traders, look out for red flags in their trading history. This indicates that they lost their equity at some point and this shows that it may be risky to embark upon them.
Also, look for weekly and daily drawdowns. Anything more than 10% is sure sign of red flag.
- The gain ratio percentage can often be misleading. If the winning ratio of a trades is 100% or even greater than 90%, this does not usually mean a good thing.
This is an indicator of the fact that they left the position open until it became profitable, which will make you lose your capital as they widen their stop levels.
- Follow gurus who don’t leave their trade positions open for a long period of time. Short term eToro traders are the ones that get you the best profit.
Instead, look out for gurus who are prone to cut down their losses when the trade is not likely to work. Understand that trading is not always profitable. There will always be bad days.
- When looking at the performance graph, keep an eye out for a slow yet steady growth and not sudden drops and rises over a period of time.
A consistent upward graph is more reliable than gurus with graphs that have sudden peaks and drops, even if they have been profitable for the present year.
- Understand the guru’s strategy and check if you can relate to them and can look up to them. This is the whole point of trading on eToro –copying someone who you think is worth following!
Check how much communicative they are. If they are not replying to your message than either they don’t want to share their knowledge or may be worse don’t do what they doing !
Evaluate Traders Performance and Trading Behavior
To create people based portfolio according to trading style that suits you, the users stats page is one the most important page for you to decide if you should copy or not.
The stats page is built out of 5 cards:
Checking Trader's Past Performance
Here you can see full history based on months, years etc for that particular trader. This will give you idea about the consistency of profit and loss for any trader you are interested in.
There are two other important things to look. 'Risk score' shows risk the trader is taking and it's on scale 1 to 10. 1 means very low risk. 10 means very high risk. 'Max Drawdown' shows the greatest loss for this account equity during selected period (daily, weekly, all-time)
How to start copying?
One you have found any trader whom you like to copy , just open their profile page and click “Copy” button just below their profile.
Enter amount with which you want to copy. You can also set a “stop loss”, which protect you against heavy loss. It’s 40% by default. So, if trader you copying loses 40% of your total investments than you automatically stop copying them.
Monitoring your total Portfolio Performance
Inside your “Portfolio” page, you can view your all open trades.
You can close an individual trade without stop copying a trader here.
Managing Forex Trading Risks with eToro
Risk and money management while trading on eToro is an important consideration to take. Though copying other traders gives you an absolute edge and share on their profits, it also entitles you to a portion of the losses they incur.
Therefore, it is extremely important to select right traders to copy and monitor their performance to keep an eye on your assets. Following are some handy tips that can help you evade major losses and ensure a safe and profitable Forex trading experience.
- For a rough calculation of the amount of risk that you face when copying an investor, here’s a simple formula. If for example you are allocating 10% of your funds to a trader and they risk 5% on a trade on their account, then a 0.5% of your total balance is automatically risked.
Therefore, it is important that you take a look at your trader's trading history and then decide on the amount that you allocate on their funds to face minimum risks on your account.
- For most gurus, the profile shows a “Risk Breakdown” analysis, which shows how many of their previous trades were either “low”, “medium” or “high” risk.
- In case the analysis is not shown, a manual method to calculate their risk factor is to start copying them through virtual money in a demo account.
Look at their “open trades” and “history” tabs and the “amount” and “units” will indicate how much they risked on their trades. Here the pip risk indicates how much the trader won or lost when the market moved up or down 1 pip in general.
Traders who trade on a daily basis stop 100 pips away while long term traders may use 500 pips. Copying such long term traders is generally not advised because they lock in your funds and may cause you losses.
- There is an option of copying the open trades of a guru once you start following them. One should understand that open trades that comprise a few weeks or even months are generally going into a loss and it is not a smart move to copy them.
Therefore, one should always uncheck the option of copying the previously open trades of a trader.
There is withdrawal fee with eToro based on amount you want to withdraw
To reduce cost, it’s better to wait till you have above $500 to withdraw and withdraw in one lump sum. This way it’ll cost you only $25.
Tips for Trading Forex with eToro Platform
The following tips can help you a great deal in making the right move at the right time and get the profits rolling!
- Before signing up for the real deal, try out the eToro demo account to get familiar with trading on the platform.
- Apart from trading your own investments, look out for gurus to follow and copy
- Browse through the different gurus and test them with your demo account first
- You can adjust and close the trades of your gurus yourself but refrain from doing so. Choose gurus in the first place who you think are competitive and up for profitable trades
- In case, you do not believe in the capabilities of your gurus anymore or they are going downhill, stop copying them to save on your initial investment
- Keep investments realistic so that you do not end up investing more than you can lose
- Copying high-risk gurus may go both ways – you may either gain a lot of profit or risk losing your initial allocation and investment
- After copying a guru, wait patiently for a few weeks to start earning profits. If you had closely followed their strategy during your demo period, you will see results in a few weeks time
- Read the eToro help and manual and visit the blogs and discussions to stay abreast with the latest news, updates, and handy tips
Why do I need to verify my account with eToro?
As eToro is a regulated broker by FCA and CySEC, it's legal requirement for them to verify all traders. A verified trader can make unlimited deposit and withdrawal. This also comes with faster approval.
What is the Least Amount Needed to Begin Copying?
You can start copying a trader with as little as $100 or up to all of your account balance.
Does it Cost me to Follow or Copy a Trader?
No, it does not! You can start following and copying as many traders as you want and intensify your trading experience to the max. eToro makes money through a portion of the bid/ask spread of the trades you place. The spread is same in both cases either if you trading yourself or copying someone.
How to stop copying a trader?
It can be easily done through Openbook portfolio. Any o
pen traders you copied from this investor will be automatically closed as well.
How Much Risk is undertaken by Social Forex Trading?
The Forex social trading like any other market, the margins for risk and profit of trading and investing is susceptible to rise and fall due to many different factors and any industry or trend changes.
All traders are advised to research all investments and financial trading opportunities thoroughly to minimize the risk factor.
Social trading platforms have their own regulatory scans and risk management features that control and assists all users. These services differ greatly depending upon the network chosen so investors should choose wisely.
What can be traded through eToro?
eToro is a social platform focusing on the trade of commodities, indices and Forex on a global scale. All items that are classified under these groups are available for social trading purposes.
Is Previous Experience in Trading required by eToro?
eToro’s social platform is renowned for its simplicity and ease of use. These factors appeal to people because eToro created its platform with the assumption that anyone who signs up is new to social trading.
Programmed with this thought, the platform intuitively regulates the mechanics while allowing users to focus on the trading aspects of the platform.
Previous experience is not required for new users but it is highly recommended that new users opt for registering in Practice Trading to get familiar with the platform before graduating on to Real Trading.
You can also read our guide "7 Steps to Getting Started In Forex Trading" to learn about forex trading in general.
Is it possible to copy more than one investor?
It’s a good idea to copy more than one trader to reduce risk. You can copy up to 20 investors at a given time.
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