You might have seen ads for Etoro in your online journey, and perhaps already have your own portfolio of shares and assets. We explore the features of Etoro and show you how you can use this platform to your advantage even if you are already invested yourself.
What is Etoro?
Etoro is a broker and platform that allows people to invest in a wide range of financial markets, including shares, indices, currencies (crypto and FIAT) and more. This platform is unique to many brokers in that it allows you to copy other traders and shows a full range of statistics so that you can make educated financial decisions with real information. So, a broker that provides a platform where you can access other peoples trades and see their stats before you go in.
How can I use Etoro to make an income?
There are two ways to make an income from Etoro. The first one is to become a trader and develop a good high quality history of trading that will entice others to copy you. Etoro pays you based on certain criteria so that even if you don’t have a huge account, you can make good money over time. You can also increase your own trading account while doing this, so kind of a double benefit there.
The second way to make money, is to copy other traders. Effectively, you put money towards traders, just like if you owned a hedge fund. When they make money, so do you. Of course, trading can be difficult and sometimes inconsistent, not to mention that you and your copied traders can lose.
Are there consistently profitable traders on Etoro?
In the Etoro platform, you can see a trader’s statistics (if they are set up that way) and analyse their trading. There are many traders doing well over time, but there’s definitely some tricks to finding the right traders for your portfolio.
You can assess things like risk score, which is how risky their trading style has been, profits and returns, markets traded by the person and more. Another area is how many trades per week they do, which is a good indicator of how often they trade. I like to ensure they have a few trades per week to reduce the chances of luck and market conditions being a factor in their success.
There is also a section for returns, which shows their trading history in percentage, month on month for how long they have been on Etoro. This section is incredible and is useful for working out a likely average return, understanding big drawdowns that might happen and how often you will come out on top. Finding traders that are consistent and have been in the game for a few years is very helpful as it seems they know what they are doing, if they are able to trade profitably through many market conditions.
How does Etoro make money?
So the traders can make money, and so can the people that follow them, but how does Etoro actually make money. As they are a market maker broker, Etoro makes money on every trade entered into the market. They make money in the spread (the difference between the bid and the ask price) and may even make money on losing traders to. Some trading systems may not work that well on Etoro as some markets have larger spreads than the average broker (such as the UK100 and AUS200). Etoro may also charge a fee on withdrawals, but I would check this on their website. A service like this that provides actual statistics on good traders could be viable for a monthly fee but Etoro has not done this, making it an incredible service to use.
How does this differ from investing myself through a broker?
Etoro is very much like a broker, allowing you to trade, but the difference is you can’t as easily follow other traders and trust the results. There are a range of issues when copy trading with a regular broker. The downside with Etoro however is that their spreads can be a bit larger than some brokers as stated above. If you are a good trader you can make an income from trading if others are copying you with Etoro which you won’t find with other brokers. One of the best parts of Etoro is their stats of other traders.
If you were a good trader, it could be worth having your own (non Etoro) broker to access higher leverage and tighter spreads. As far as investing goes, Etoro has tons of great traders to take the pressure off your own investing decisions.
How to own a portfolio of people that trade for you?
You can build your own portfolio of people working around the clock for you. It might take a bit of time to go through and refine your list of traders to eventually copy, but making sure the stats are ok with you and of course the drawdown is also acceptable is critical. Etoro allows you to select your very own traders to be working for you at no cost to you (as long as they don’t lose long term!).
Owning a portfolio of people allows you to benefit from a range of decisions and a range of successful trading styles without all the pressure of doing it all yourself. Traders can generate higher returns however that does come with higher risk.
What is Etoro good for in terms of investing?
Etoro is a great platform to help generate monthly returns. Rather than waiting on dividends from shares, dealing with rentals in property or running a business, Etoro allows traders to do the work for you and you simply get the end result.
It is always important to not have all your eggs in one basket so diversification can be critical.