Is eToro safe? Is it a scam? How can I tell that it’s legit? Find the answers to your questions and a whole lot more in this explainer!
eToro is one of the most popular social trading platforms in the investing sector. Despite this, you may still have your reservations about whether or not you trust the platform with your hard-earned money. Like all investing and trading, there is still some degree of risk: you are trading in real assets, and these can suffer losses. If you cannot afford to potentially lose the money you might be investing with, then it is better to hold off until you can afford to mitigate that risk. This applies to all trading platforms, whether they are as safe and secure as possible, or completely rogue.
If you’ve been looking to use the eToro financial trading platform, but you’re unsure about using it, then you’ve come to the right place. In this article, we’re going to provide a brief guide that answers all of your questions about eToro and how safe it is. If you’ve been on the fence about this platform, then by the end of this article, you’re going to have all the answers that you were looking for!
Let’s jump into this guide and answer all of your questions.
What Is eToro?
eToro is a platform that allows users to trade at a variety of levels. You can trade individually, or by copying another trader and explore a variety of markets. The most commonly traded assets on eToro are real stocks and shares, CFDs, cryptocurrencies and Forex trades. eToro does focus on CFD trading as its main feature. This means that there is a massive variety in trading options, and a sense of flexibility that means eToro can appeal to almost any trader!
The platform began to operate in 2006 and has three partners that have played a role in the business operations. This long history suggests that eToro is a fairly stable and viable option; the company has survived setbacks and hurdles, including the 2008 financial crisis, which may mean it is a better way to invest your money.
For new traders, there is a variety of options. eToro offers both live and demo accounts so that users can practice with unlimited ‘fake’ money before they actually invest. By having an option for demo accounts, eToro allows users to learn the ropes with no risk and become experts in their own time at no additional cost. This means that users can develop their understanding of the market and the website without it costing a penny! There is also the option to copy expert traders on both the live and demo account types so that you can start earning a passive income with very little understanding of the market. Whether you’re a seasoned professional or a complete novice, there’s an option on eToro that will work for you.
Is eToro Safe?
This is the section that you’ve been waiting for! Is eToro safe as a platform? Is it safe to invest here? Do they meet international standards? In short, yes! eToro complies fully with the three different regulatory bodies that it operates under. These are the Cyprus Securities & Exchange Commission (CySEC), Financial Conduct Authority (FCA) in the UK and the Australian Securities and Investments Commission (ASIC). These organisations maintain some of the highest trading and regulation standards in the world and offer some compensation for users if they are affected by security breaches.
According to these organisations, eToro must meet a minimum standard in terms of security in order to protect consumers’ details and money. On top of these, eToro also ranks and grades traders available for the copy trading feature to protect users from rogue traders and suspicious investments.
If eToro fails to meet these compliance regulations, it could mean that the business faces heavy penalties and would have to cease business until they are back within compliance guidelines. MiFID is the name of the service provided to European entities, and it’s under the umbrella of the Cyprus Securities and Exchanges Commission (CySEC). This protects all European users, not just those in Cyprus.
Users in the USA are severely limited in both their usage of eToro and the protections offered to them. As CFD trading is not allowed in the USA, eToro is limited there to cryptocurrency trading. As cryptocurrency is such a volatile asset to trade in and a fairly new entrant on to the trading and investment scene, there is little legislation to protect users outside of the regulatory bodies I mentioned earlier. If you are a user in the USA, use your common sense and only invest what you can reasonably afford to lose.
How Are Users Protected?
When it comes to knowing exactly how you’re protected when using the platform, there are some things to know. You can use your leverage, which is a loan that the broker provides to the trader to trade with. This loan is then paid back automatically if you make a profit on your trades.
Brokers, however, do have to lower the leverage level to help reduce the likelihood of traders losing money when the risk of higher leverages comes into play. There is a specific limit that has been set on the leverage that traders use in particular circumstances. This essentially means that eToro places a limit on the amount of money you can trade, and therefore owe, in order to minimise excess debt. If you’re going to trade using loans, then check out our article here (LINK) on investing using loans!
For example, when using leverage for cryptocurrencies, the maximum multiplier for leverage is x2. This protects you as the trader and other top traders from losing all of the money that you leveraged with. With cryptocurrencies being so historically unstable, this is for the best to protect both traders and the platform itself from heavy losses.
We hope that the information you found above thoroughly answers the question of is eToro Safe? The company has to comply with a strict set of guidelines to ensure that the trader is protected at all times, no matter what. It is important to remember, however, that all trading and investing comes with a degree of risk, and you should fully understand this before embarking on your trading journey!
If you’re looking for a reliable platform to fulfil your trading needs apply today with Velox Investments to find out more about our Passive Trading System. We look forward to educating you and helping you with your trading needs!
Thinking of Investing or Trading? Why not just copy professional traders!
My name is Joseph Moricca, I run Velox Investments and I am an Investor on eToro and have been for a number of years.
Do you want to get involved in trading but don’t know where to start?
Do you want to Diversify your income or simply Make more money?
I have used eToro for a number of years but did not realise the potential to make a solid return consistently until I started copy trading!
If you want to find out how to make money online then read my Beginners Guide to trading on eToro.
To start RIGHT NOW, Sign up to eToro through the link below and take advantage of the free demo account! I mean really what do you have to lose from following my very simple strategy on a demo account! Literally nothing and you might find that you actual find a hidden GEM!
Other Useful Links for learning
- eToro Trading Academy
- Market information: The Motley Fool, The Economist, The Financial Times, Zero Hedge
Disclaimer: eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFD assets.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Cryptoassets are volatile instruments which can fluctuate widely in a very short timeframe and therefore are not appropriate for all investors. Other than via CFDs, trading cryptoassets is unregulated and therefore is not supervised by any EU regulatory framework.
This guide is intended for educational purposes only and should not be considered as investment advice. The author and publisher are not liable for any losses or damages you may incur as a result of you following the advice given on this page. The etoro.com layout and content may change since this content was published.