eToro is at the forefront of the social trading revolution. Established in 2007, the company primarily supplies contracts for difference (CFDs) to traders looking to place bets on stocks, indices, currencies, commodities and cryptocurrencies.
eToro claims to have 10 million account holders worldwide. The social trading features are eToro’s strongest asset and the company has a feed similar to Twitter, so traders can really embrace the community aspects of the platform. But can eToro really compare with other brokers with more diverse asset class offerings? Let’s find out.
Who’s eToro for?
CFDs are advanced trading instruments and over 75% of retail clients lose money trading them on eToro. Even so, eToro makes it easy to learn with its social trading features and online courses.
CFDs are banned in the United States, which limits American traders to cryptocurrencies only. Forex trading is done with CFD products too, so unless you’re outside the U.S, you can’t use the platform to its full potential.
If you’re a derivatives trader outside the United States, you can purchase CFDs for stocks, indices, ETFs, commodities, currencies and cryptocurrencies. Traders in the U.S. can go long cryptocurrencies on the platform since eToro purchases the underlying securities when a buy order is placed. This is the only product not traded using a CFD.
eToro’s Platform and Tools
You can create a portfolio that gives you access to the eToro community and tracking stats like P/L and success rates. Your portfolio is on display to the entire network, so you’ll need to get over any bashfulness if you want to explore social trading on eToro.
Here are a few of its best features:
The original eToro trading platform known as WebTrader was combined with eToro’s OpenBook to create a sophisticated one-stop shop for all clients. OpenBook is not only a trading platform but a social app where you can view other users’ profiles, check out prices on all available markets and use eToro tools like CopyTrader or CopyPortfolios.
This system is designed to allow new traders to easily pick out experts to imitate and supply funds for copy trades. You can copy up to 100 different traders at once and you’ll need a minimum of $200 to open up a live account. Setting up a trading strategy on CopyTrader can be accomplished with only a handful of mouse clicks or taps.
Just choose the trader(s) you want to copy, select a dollar amount and watch as the automated system begins methodically duplicating the experts’ trades. (Note: U.S. traders can only copy other U.S. traders.)
The CopyPortfolios feature is actually a combination of two different strategies: Top Trader Portfolios and Market Portfolios. The Top Trader Portfolio allows you to copy traders using your specific strategy.
If you want to trade commodities, the Top Trader Portfolio links your account with successful gold, silver and/or oil traders. Market Portfolios do not involve other traders, but rather, bundle different CFDs under the umbrella of a particular market strategy. You’ll need $5,000 to get started with CopyPortfolios.
Social News Feed
All eToro clients get a specially tailored news feed that’s a lot like a Twitter feed. You can post updates, discuss strategies and tag other users to start conversations. The news feed also provides alerts when markets get volatile or when a trader you copy creates a new post or trade.
eToro’s mobile app is available for both iOS and Android operating systems. Users can get access to all the markets and features available on the desktop platform, including the CopyPortfolios features.
eToro’s Research Offerings
CFDs are complex financial products and eToro understands that there could be a steep learning curve for some new traders. The brokerage has set up an education center with actionable info for both experienced veterans and newbie traders.
Two online e-courses are available:
Trader Course provides information on basic forex terms, order types and a few basic strategies. It’s complete with a financial concepts glossary.
You’ll learn more about the nuances of global trading in this course, but it also covers capital management and the different ways to analyze financial products, including advanced technical analysis.
If you don’t have time for e-courses, you can peruse the list of instructional videos or sign up for one of eToro’s many live trading webinars. If you’d rather read something the old-fashioned way, eToro’s blog also covers all the fintech news of the day.
eToro’s Commission and Fees
eToro has no commissions or trading fees, only spreads. But since all markets use CFDs as trading instruments, spreads tend to be higher than average. Stock and ETF CFD purchases come with a 0.09% spread on both sides. The U.S. dollar index CFD has a spread of only 4 pips, but SPX contracts are 75 pips, NSDQ contracts are 240 pips, and contracts on indices from countries like China and Japan can top out at a whopping 1,200 pips.
Commodity spreads are lower, with copper at 2 pips, oil and silver at 5 pips, natural gas at 10 pips, and gold at 45 pips. For currency pairs, spreads range from 1 pip to 50 pips. EUR/USD and USD/CAD are both 3 pips, USD/JPY is 2 pips, and AUD/USD is 1 pip. Exotic pairs like USD/ZAR and USD/TRY are 50 pips.
No fees apply to unleveraged cryptocurrency buy orders, but shorts and leveraged buys are subject to spreads. Bitcoin has the lowest spread at 0.75%, Ethereum and Litecoin are 1.9%, and Ripple is 2.45%.
Additionally, eToro charges a $25 withdraw fee and overnight/weekend fees. Withdrawals must be at least $50.
eToro is registered with the Cyprus Securities and Exchange Commission (CySEC) and the British Financial Conduct Authority (FCA). Additionally, FinCEN in the United States and the Australian Securities and Investment Commission (ASIC) recognize eToro as a licensed broker. Client funds are kept in top tier European banks.
Client data is protected using top of the line data encryption and firewall technology. Specific information about clients can only be accessed by authorized eToro employees. When depositing or withdrawing money, customer transactions are protected by secure socket layer (SSL) technology.
eToro’s Customer Support
Contacting customer service on eToro is an adventure. eToro’s preferred method of contact is a support ticket, where you send a message to an automated system.
If you want to reach eToro via email or phone, you’re out of luck. No email addresses or phone numbers are listed on the main customer service page. For corporate inquiries, eToro has addresses listed in Hoboken, London and Sydney, but only the Australian office has an email address and phone number listed. If you need to troubleshoot your eToro account, expect to wait for a response.
eToro’s Tradable Asset Classes
eToro offers a number of tradable markets, but there’s a catch involved. Only CFDs are traded on eToro, not the underlying assets. Even with currencies, eToro clients purchase CFDs in order to trade. This could be a sticking point for some users who would prefer to own the actual currency pairs themselves. However, if you don’t mind using CFDs as your primary trading vehicle, there are plenty of options to choose from.
CFDs are available for:
- Stocks: Hundreds of shares can be traded; mostly large-cap U.S. companies.
- ETFs: Offers funds from companies like iShares, Pimco and State Street Advisors.
- Indices: Trade all 3 major U.S. indices (DJIA, S&P 500 and NASDAQ) along with international indices like the DAX, FTSE and Nikkei.
- Commodities: Contracts for gold, silver, copper, platinum, oil and natural gas.
- Currencies: 47 different pairs can be purchased, including some minor pairs like GBP/NZD and USD/MXN.
- Cryptocurrencies: 10 different cryptocurrencies are available. Unlike other eToro products, cryptocurrencies don’t require CFDs to purchase and U.S. traders can access these markets through eToro. Short selling of cryptocurrencies is not allowed in the U.S.
eToro’s Ease of Use
eToro’s platform is simple yet highly interactive. New users won’t have any trouble learning the basics and experienced traders can execute multiple trades quickly.
Your watchlist, portfolio and newsfeed are all accessible on the main sidebar. Navigating from market to market is simple and you’ll quickly build a base of users to follow and interact with.
The social trading experience is still a new phenomenon, but eToro makes it easy to get involved and copy the users you want to imitate. Entry barriers are light, too. You only need $200 to open an account and can begin trading instantly (most markets are open 24/5).
Social trading is on the rise, and eToro has put itself ahead of that curve. You no longer need decades of experience to trade like a pro. The platform is highly functional, without a steep learning curve and interactions with other users are very similar to Twitter.
But eToro is also expensive and forces you to trade CFDs, which are highly speculative products. Contacting customer support is also a chore. Even though copy trading makes it seem easy, it’s really important that you know what you’re doing on eToro so you don’t lose your hard-earned cash.