With the ‘copy trade’ feature on eToro, making money online has never been easier!
Welcome to this eToro beginners guide! Looking at Wall Street traders rolling in money, it’s easy to be drawn in and wish yourself into their shoes. Luckily for you, I am the genie that can grant this wish with the following guide! I will be covering a variety of topics in this guide:
- What Is eToro?
- Why I use eToro
- My experience
- How to sign up to eToro
- A basic Investment Strategy for eToro
- eToro Risk Score
- Final words of advice
For those wondering why you should listen to my opnion over others; I have been using eToro for 3 years I have been a popular investor on eToro and made a regular income from eToro! To say the least I have had a very broad experience into every faucet that eToro has to offer!
What is eToro? The History and changes.
So what is eToro? is ultimately a brokerage company that incorporates social trading and multiple different assets into its offering. eToro has registered offices in The UK, US, Australia, Cyprus and Isreal (which is where it began). eToro is valued at over $800 million!
Originally, In 2007 eToro started as a Forex company trading currency pairs (this is exchanging currencies from one to another) under the name RetailFX. In 2010 eToro introduced the idea of “Copy Trading” which enables new investors to copy the exact trades of more seasoned traders. With eToro you can see every single trade someone else made (as long as there account is set to public).
From 2010 eToro has raised over $150 million in funding to see expansion and to add to the services it offers to traders around the globe!
2013: eToro Introduced CFD trading which
2014: eToro added 100’s of new stock options, in the UK and German markets.
2017 eToro focused on adding new crypto currency pairs which has expanded massively in recent years
From 2018 you may have seen eToro sponsorship in the the UK premiership around various football stadiums such as: Tottenham Hotspur, Brighton & Hove Albion, Cardiff City, Crystal Palace, Leicester City, Newcastle United, Southampton, Aston Villa. and Everton. To say the least eToro has been getting around on the sponsorship front showing it is a platform that is 100% here to stay!
Recently eToro is constantly adding new content providing free daily market updates and caters to be seasoned traders, beginner traders and copy traders!
So now you should now what eToro is, lets focus on what it can offer you!
Why did I join eToro?
Recently, I had a very interesting conversation with my father about the accessibility of investing and markets. He told me that if he had the same access in his youth as I do now, he would have enjoyed managing a portfolio and making profit from the stock market. When he was younger, investment involved a lot of time and expertise, and was often limited to those who had studied it intently; it was not plausible for the common person to develop their own portfolio.
At the dawn of the internet, many things once inaccessible to the masses developed a mode for mass consumption, and investing was no different. Now, anyone with a few minutes and a little spare cash can get involved in investing, making money from the comfort of their own homes! It is this discussion with dad that encouraged me to create this eToro beginners guide, so others could learn!
I joined eToro in 2017. Since then, the social aspect of the platform, as well as its ease of use, even for beginners, has been a massive draw for me. Other than the obvious reason to use eToro, which is making money online, one of the main reasons I have stayed with the platform for several years is the social trading aspect. This means that no matter the topic, people are there to discuss the latest ideas, stocks, trends, and even provide information that can significantly cut research time! On top of this, using eToro also helped me to shape a strategy that has helped me make over 70% profit in 2019. Hopefully, this eToro beginners guide, gives you a clear path on how you can get started!
For new traders who are trying to find their feet, eToro is particularly helpful. The copy function allows you to pick a trader (much like when you choose an investment bank) to back with money. This means that the money in your account is traded in real-time to reflect their trading patterns in the same percentages. This allows new investors to try out investing money with the help of an expert trader who trades for a living! Furthermore, you can see exactly what trades the experienced investor is making, and ask them why and how to improve your own trades separate to them. Clearly, the potential for making serious money is huge!
How to Sign up to eToro
Signing up to eToro is quick and easy. The following steps, from the eToro website, give you all the information you need to sign up:
- Click the Link below.
- On the page, find and click on the button marked “Join Now” or “Trade Now”
- On the following web page, you will see an electronic form where you will be able to enter all the personal data that is required to open a new trading account
- Please fill in all the relevant information requested in this form. Logging in via Facebook or Gmail are additional options
- Upon completing your review of all the terms, please indicate your agreement with them by checking the appropriate box
- Submit your information by clicking the “sign-up” button
If if you want to start trading right away, click on the “Deposit Funds” button where you can place the amount of funds you wish to deposit! Then all you need to do is select a payment method. There are plenty of options here: Credit or Debit card, wire transfer, Skrill, NETELLER, and UnionPay, so pretty much whatever you want to use you can!
I have found the deposits to be very quick and easy and as soon as the transaction is processed you should see your equity (bottom right corner) increase! And you will be able to start trading!
A Basic Investment Strategy for trading on eToro
Congratulations on making it this far! If you like the idea of managing your own portfolio and making money online, then keep reading. Hopefully, you are signed up and ready to go: if not, sign up now following the instructions above.
The age-old adage by Benjamin Franklin reads
“By failing to prepare, you are preparing to fail”,
The world of investing is no different. By implementing a basic, but very effective strategy, you can start to make some money whilst still making your own investments. After you have signed up, you need only two things:
After you have signed up you will need only two things to follow my basic strategy:
- Time to research copy traders and investments ( or just use my top traders here)
Funding your new Passive Trading System
Clearly, not everyone is fortunate enough to have a spare £1000 just laying around to invest. When I started, I was a university student, so I took full advantage of my 0% interest student overdraft. Obviously, I do not advise this: you should NEVER invest money that you do not have.
However, you still need money to make money!
So I suggest investing over an extended period of time. For example, £200 per month for five months, or whatever figure you think is manageable for your finances. The more money you have, the more diverse your portfolio can be. This means that one bad investment has significantly less risk of completely wiping out your funds.
Plus £200 a month really is not a lot of money, if you break it down its only £50 a week or just £10 per weekday! and when you consider this will be money spent making you even more money its an absolute no brainier!
In fact, I invented the Passive Trading System Guide to show you how with just £200 per month for 8 years, you could be earning more than £30,000 per year every year after! Or you can just let the money grow and be very wealthy!
The hard part is sticking to the Plan! which is where my email service helps with monthly reminders and suggestions to help you pick good traders and save more to make more!
Who and what to Invest in
At this stage, you should have the £1000 deposited and ready to trade. Or be gathering the £200 per month!
The first £800 on eToro
The first $800 should be used to pick FOUR experienced low risk traders. As the minimum you can invest in a copy trade is $200 (approx. £168), and as I said before you need to diversify your portfolio to lower risk. By choosing various traders, you also get a flavour for different investing styles and patterns that can influence your own thinking!
If your investment is over several months, then each month that you deposit £200, it can be assigned to a different trader, and new funds added to traders who perform well!
How should you evaluate the copy traders on eToro?
As I mentioned a moment ago, you should be copying numerous people to keep your portfolio diverse. To make the most of your investment, I recommend investing in two low-risk investors, one medium-risk investor and one high-risk investor. To do this easily involves using the eToro platform to refine your search and find traders that match your requirements. Luckily, I have created a guide for you to get your investments up and running in no time!
Firstly, click on the “Copy People” tab on the left-hand side and it should show a screen similar to this:
Next, click the large, blue “go” button, without setting any criteria. You will see the following screen:
As you can see, there are 341 search results on a basic default search. Now, remove all of the options next to the button saying “Last 12M”. This can be done by pressing the ‘x’ mark on the right-hand side of the boxes, until you see a screen like this:
As you can see, this leaves 400 000 people to choose from, which is an overwhelming choice. It is now time to create our own criteria to narrow this down.
Finding High Quality Traders
All traders you copy should be verified, and part of the popular investor programme. You can see this from whether they have a blue, orange, red or green badge by their picture. These badges indicate that their trading style operates under the minimum guidelines set by eToro. This does not necessarily mean that they are good traders, it just means that they operate in a way that is considered more responsible.
To find these traders, you will need to click on the “FILTER” button, and the screen should show up with one similar to the one below. There are various options and restrictions to explore, but for now, you need to click the one that says “STATUS”.
Select both the “Popular” and “Verified” options, and press apply. This should reduce the number to a more manageable one, although 700 investors are still too many to analyse in sufficient detail. This means that we will need to restrict the options further.
After you click apply you will see that the search results have been reduced to a much more manageable number. If you look at the picture below you will also see that next to the blue Last 12M button your last two restrictions are in place. At this point, 700 people is still way too many to analyse. So we will need to restrict further.
Next, you will click the Performance tab and then click on Return.
Next, click the “Performance” tab, and click the first option, “Return”. After you have clicked this, an option box will open with “low”, “medium” and “high”. Below that is a section called “Custom”; here, type “10” in the section that says “Minimum”. Any return of 10% or over is considered beating the market, which is what you need to do to make money! This option will filter anyone who does not have returns of at least 10%. Your screen should now look something like this:
Now, click Apply. This will reduce the results quite significantly. In order to get the best results however, you will need to refine a little further. Click on the tab that says “Risk” and “Risk Score”. The Risk Score is a measurement tool designed by eToro, taking several factors into account, to determine how risky a portfolio. A good general rule to follow is that higher risk portfolios should be higher reward. You should choose “Medium” risk, as this encompasses a score range from 3 to 6. Then click apply.
This reduces the results to 148, which is far more manageable for the level of analysis we need to perform. The next step is arguably one of the most important when selecting a trader.
You will need to keep refining to find your perfect traders!
There is of course still a little more basic refining we can do. Next, you will want to click on the tab that says Risk and click on Risk Score. The Risk Score is eToros way of measuring portfolio risk and is based on several factors all to do with how the portfolio is organised. In general, the Higher the Risk score the higher the return should be!
It should open a screen like the one below. You will want to select Medium risk as this encompasses a nice range of risk from lower risk at 3 to higher risk at 6. Then click apply.
As you can see below that has now filtered the results to 148 people. This is a more manageable amount to do some more in-depth analysis. The next step is what I would argue is one of the MOST important factors when selecting a trader.
This reduces the results to 148, which is far more manageable for the level of analysis we need to perform. The next step is arguably one of the most important when selecting a trader.
What to check before copying ANYONE on eToro.
Now, you have the necessary skills to copy people and narrow down the search results. You can even narrow these options further by adding in risk and return factors, depending on your personal goals.
The first thing you should check is the level of Realised Profit that has been generated from closed trades. If there is a high level of realised profit, then the trader has made good trades in the past, and has closed those trades at a profit. In simple terms, a high realised profit backs up what a trader is saying about themselves, and is a good indicator of performance. You can learn more about Realised and Unrealised Profit here.
To check this, click on the trader’s profile, and then on the Portfolio tab. Then, click on the blue drop down labelled “Portfolio”, and switch it to the “History” setting. Your screen should now look like this:
Next, you will click on the blue Portfolio drop-down menu directly below the trader’s name and switch it to History setting as I have done below. As you can see I have a realised profit of 47% which means I have closed a lot of good trades in the last year!
As you can see, I have realised a profit of 47%, meaning that I have made many good trades this year! I want to show you the importance of not just copying the most popular investors, which can be tempting, but of doing your own independent research and asking questions. Indeed, some of the most popular investors have negative realised profits meaning they closed various trades at a loss! I am not suggesting that these are bad traders nor that realised profit should be the only measure of success, but it is something to consider when picking who you invest with.
Evaluating a Traders Style
As I said earlier, this strategy is based upon picking four good traders to copy, and profiting from their expertise. The next step in securing your portfolio is making sure that you don’t pick four traders doing the same thing, or this beats the purpose if diversifying! Most traders tell you how they trade in their Bio, which you can get to by looking at their Feed. You may also want to check the Stats tab to see more information about the investor you’re going to copy. This is my bio:
This is a really solid strategy for getting off to a good start on eToro. However its not over yet! One of the most important features of eToro is the Risk score mechanic which I will explain more about next!
eToro Risk Score
The eToro risk score is an incredibly useful feature that without in depth analysis allows you to gauge both your current risk and other risk. The eToro risk score goes from 0-10, with 10 being incredibly risky and 0 being no risk. etoro places traders into three risk categories. These are Low, Medium and High. A low Risk score is defined as 0-2, a medium score is 3-6 and high is anything above a 6. eToro also colours the risks from green for lower risk, yellow for medium risk and Red for high risk and also include black for a risk score of 10.
Please note eToro will not allow you to copy a trader with a risk score of 7 or more, this is mostly to protect new traders from very high risk traders. But what you will sometimes see is a high risk trader temporarily reducing there risk score to a 6 so people can copy then ramping their risk taking back up. I would not recommended copying anyone above a 6 risk score.
As a rule of thumb a logarithmic approach should be taken when looking at traders risk score to potential return. By this I mean the higher the risk the greater the return needs to be. I have seen traders with 10 Risk score on eToro get a 2000% Roi in less than a year but I have seen far more traders with a 10 Risk score achieve -100% in less than a few days.
My rule of thumb is as follows
- 0 Risk Score 0%
- 1 Risk Score – 5%
- 2 Risk Score – 10%
- 3 Risk Score – 25%
- 4 Risk Score – 35%
- 5 Risk Score – 50% (be cautious of larger draw downs)
- 6 Risk Score – 65% (be very cautious of larger draw downs)
- 7 Risk Score – 90% (You will likely lose all your money)
- 8 Risk Score – 150% (You will likely lose all your money)
- 9 Risk Score – 400% (You will likely lose all your money)
- 10 Risk Score – 1000% (You will likely lose all your money)
Increased risk is not inherently bad!
As a rule of thumb You should stick to mostly lower risk traders with a risk score of 1-3 but have a few traders with a medium risk score of 3-6. Please note although eToro considers 3 a medium risk score I see it as still lower risk. I suggest following the 80/20 rule, (Which I talk about more in my Passive Trading Guide) which is essentially sticking 80% of your funds in lower risk traders and 20% in higher risk so that the lower risk traders can balance the potential risks of the higher risk traders! The thing is riskier traders can generate much higher returns but they can have greater draw downs (periods of money going down).
So that’s an easy Strategy
So that’s pretty much the basic strategy to get you off to a really good start on eToro. This was just an eToro beginners guide and trust me there is a lot more to learn! The next steps would be to add more funds over time and to diversify your portfolio. eToro is a fantastic platform for both the social aspect and a great way to make money online. I would also recommend joining my Passive Trading System so you can get monthly reminders tips and tricks to build a reliable source of passive income!
From eToro trading and investing I have paid for a Michelin star restaurant and used the money to help build a deposit on a house!
If you haven’t done so you can check me out on eToro, or signup below! Feel free to check around my website! The homepage is HERE!
Final Words of Advice
- Traders, just like the market, can experience rough patches, and this does not make them a bad trader
- eToro should be part of the plan, not the WHOLE plan
- Do your research! Investors that were once unprofitable may change their strategy and become massively lucrative
- Don’t rush into independent trading – take your time learning from the experts
- Be patient! Many traders leave after a month at a loss, which is a waste of money; give the strategy time to work
- Making money online has its ups and downs!
Other Useful Links for learning
- Passive Trading System Guide
- 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. 62% 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.