Investing and trading has become a much more known phenomenon. Growing from a service the wealthy would buy to a product individuals make use of themselves. However, what if you simply don't have the time?
Perhaps you lack the required knowledge to invest? Or maybe you have doubts that are wellfounded, but can be beaten? Then Etoro copy trading might be a solution.
Etoro's copy trading platform can assist many individual investors whilst they learn the ropes & until they find the time to commit to investing by themselves. It may even be something worth considering for you. But do read the rest of this review before deciding if you are game.
Social trading vs Copy trading
As an investor, information is key. Transparency oftentimes saves a significant amount of time in any analysis and Etoro understands this. They offer individual instruments & their data in logged out & logged in mode for you to browse.
More importantly, they list the amount of Etoro investors that are following the instrument, how many comparatively hold it & if they are bullish or bearish. Quick facts that might help you decide to follow, or go against the market. Moving on to the individual input, Etoro also provides comments posted by investors in many languages.
Social trading alone enhances the platform, but the true value lies in the Etoro copy trading feature. You can decide to copy a trader based on their past performance, overlap in investing approach and your financial/ethical goals.
It made it easy to review anyone's current and past portfolio & performance online. Again, also available without a login. Once you found a compatible trader, you hit copy, set your investing amount & the platform scales your portfolio to that of the trader.
Etoro copy trading deepdive
It's time to look at the more advanced features and possibilities, for those who wish to tailor their control beyond the one click of a button simplicity. Below stop-loss default, copy timelines, copied traders & traditional investing is covered.
Stop loss default
Any broker and trading platform offer some form of stop-loss functionality. After all, most people prefer to limit their losses & see unlimited gains. However, on the Etoro copy trading platform, the default is set to 40%. Meaning your individual investment positions can drop 40% before they are sold.
Thankfully, using advanced settings can adjust this amount up or down, to fit your personal preference. Investing Guides, however, believe 40% is extremely high when you consider the risk of choosing the wrong trader, at the wrong time.
Copying someone's portfolio when you just started, but they have been active for years, brings along doubt. Thankfully, you are free to decide if you will start copying their trades from the moment you hit copy, or if you want to mimic their portfolio entirely from the start.
Copying a popular and historically high-performance trader might be relatively safe. But what if you picked a less known trader due to high performance in the past week? The risk of losing money has now significantly increased, yet you needed to use your own scepticism, to reach that conclusion.
Consider the following scenario: Three traders that each consistently outperforms the overall market, have only slightly overlapping portfolios. Will you decide to copy all three? The slight overlap might mean you are risking over-diversification which can result in no returns. Even worse, it might mean you end up losing money.
Traditional vs copy
Traditional instruments such as ETF & Funds have been managed by asset managers for decades. Although the cost involved did not directly get charged to the investor, the fund would usually lose a small % each year on management fees.
Copying a trader is effectively outsourcing your own investment and thus an asset management service. However, the trader managing your assets doesn't necessarily know as the trader is more focused on making returns for himself/herself. This can benefit you as the trader is just as motivated, if not more, as you are. Nevertheless, it can also backfire as humans are prone to error & over time the copied trader might lose interest, change careers or neglect the portfolio.
Etoro Review verdict
Etoro copy trading feature enhances the platform and creates significantly higher information transparency than other brokers, especially when paired with the social trading side.
It enables investors short on time and/or knowledge a way to 'participate' in investing and a chance at the same returns made by others. However, when used carelessly and sporadically, the tool can backfire.
Furthermore, it really keeps investors from teaching themselves by choosing the path of least resistance. This is why Investing Guides gives this tool 3 stars for its functionality & application. Best to be used before or during self-education of investing, so you may take control when ready.
|Broker name||Type||Review||Rating||Broker site|
|CMC markets*||Mostly Trader||Link||4.5||Visit broker|
|Trading212||Investor & Trader||Link||4.1||Visit broker|
|Bux Zero||Investor & Trader||Link||4.0||Visit broker|
|Admiral Markets||Investor & Trader||Link||4.0||Visit broker|
|Fusion Markets*||Trader||Link||3.5||Visit broker|
*If you choose a trading broker, please remember: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Copy trading Frequently asked questions
These questions come up regularly when discussing the topic of copy trading. Hence, Investing Guides hope this will serve as an easy overview of the most sought after answers:
Copy-trading can be good for new investors who have neither the time nor the knowledge to manage their own investments.
Copy-trading can be bad for new investors who blindly follow a trader that performs poorly or does not follow the investor's beliefs.
Etoro has become the most known copy trading platform online. However, the following brokers also offer copy trading: AvaTrade, Naga, PrimeXBT, FXTM, BingX and Pepperstone.
Copy-trading works by choosing one or more traders to copy & deciding the amount you wish to invest. The copy trading platform then executes trades based on the copied trader(s) in real-time.
It costs investors nothing to use Etoro's copy trading feature. Other copy trading platforms might charge an additional fee.
Etoro is a good copy trading platform for new investors who are unsure how or where to start.
Social trading involves investors deciding on their next trade based on a group or several individuals' consensus. Whereas copy trading is automatically executed based on following one or more traders.
Etoro is arguably the most known social trading platform out there. Several others include ZuluTrade, NAGA Trader, Darwinex, AvaTrade, FXCM, IC Markets and Pepperstone.
Copy trading is useless when you have the required knowledge & confidence to make your own investments. As you would not need someone to lead the way at that point.
You can lose at most 40% of your investment with Etoro copy trading. This is the default point the stop-loss kicks in. However, you can adjust this value up or down.