Etoro
Online Social Trading
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Investing on eToro is possible in three
different ways, which can each be combined
Copy People
The most unique feature of eToro, is that it allows to copy other investors' portfolio. So basically, everyone on eToro (with a public profile), becomes a fund manager. Just as with investing in typical funds, it is important to carefully choose the right investor to follow.
When you choose to copy a trader, you will have to allocate an amount of money you want to copy him with. That amount of money will be invested according to the trader you follow, relative to the amount you copy him with. If for instance you follow a trader that has a portfolio value of USD 10.000, with USD 1000, you are following that trader at a ratio of 1/10. If the trader has a position of USD 250, you will automatically copy that position for USD 25.
To start copying people, go to the Copy People section, and select the investor you want to copy. Click on Copy, and select the amount you wish to start copying that investor with. You can decide to copy someone with all your funds, or diversify over different investors.
You have the choice to whether copy open trades or not. If you select to do this, it simply means that when you start copying that investor, your assets will immediately (when the markets open), open all trades that that investor also has open at that moment. If you keep this option unselected, only new trades from that point onwards will be copied. So, if the investor is in for the long term and he doesn't open/close trades very often, it might take quite some time before you actually start copying him.
Defining a stop-copy-loss means putting an amount at which you stop copying that investor. If the investor is performing badly, and you selected a stop-loss, eToro will automatically stop copying that person when that level is reached. Personally, I recommend turning this option off, or put the stop-loss very low because it will lead you to sell positions when they are at their lowest. Price dips do occur, and I think it is better to hold on to those positions when prices are low, instead of selling them.
If you are not decided on whether or not to copy a specific person, you might also choose to follow him. As such you will stay informed about his posts, and you can more easily trace back your potential favourites.
An important note: It is impossible to see the absolute amount that someone has invested in someone else. Nor the copying, nor the copied trader have access to any of that information. eToro only alows relative information to be shared.
Invest in Assets
It is also possible to invest in individual assets such as a variety of stocks, ETF's, indexes, commodities, currencies and cryptocurrencies. To open trades in those, go to Trade Markets, select the asset you want to invest in and click Trade.
You have different options:
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Determine whether you want to open a buy or a sell position.
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The set rate allows you to choose whether you want to buy the asset at the current price that the market defines, or if you would prefer to buy the asset at a pre-determined price. Let's say for instance you want Amazon to drop first by 5%, before letting eToro buy the asset. If Amazon drops, eToro will buy. If Amazon doesn't drop, eToro will not buy and the trade will not happen.
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Besides the stop-loss, you can also determine a take-profit. Which is a predetermined price at which you want to sell your asset to cash in the profit. If your asset reaches that price, eToro will automatically close your position.
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Finally, you have the option to set a leverage. (Leverage X1 means no leverage)
An important note: Only the non-leveraged buy positions are kept open free of charge. Whenever you open positions with leverage, or a sell position, a daily fee is charged to your account by eToro for holding those positions.
Copy Funds
Copy funds in eToro is similar than investing in funds through let's say banks, or other investment brokers. eToro offers a variety of Copy Funds based on a variety of elements. Some of the funds are focussed on specific industries, i.e. the Gaming industry. Other funds pool together eToro investors, and as such create a fund of investment managers, further diversifying risk.
To invest in Copy Funds, go to the copy funds section, select your fund and click Invest. The stop-loss function is also available here.