In today's digital age, managing finances through online platforms has become a necessity for most. Gone are the days when bartering was a viable option for everyday transactions.
Now, the focus is on digital assets, whether it's cash, cryptocurrency, or other financial derivatives.
Navigating the world of online trading can be a complex yet rewarding journey. These platforms offer a plethora of opportunities, each with its own set of strengths, weaknesses, and risks. It's essential to weigh these against your personal goals, circumstances, and responsibilities to make informed decisions.
eToro stands out as a prominent player in the online trading arena, catering to both UK residents and international users.
As a regulated platform, it offers a diverse range of trading options, market access points, and unique features like social trading. This is particularly beneficial for beginners, providing a supportive environment to start their trading journey.
Our comprehensive review of eToro delves into these aspects, helping you understand how it can fit into your financial strategy.
At a Glance – Pros and Cons
eToro distinguishes itself with competitive pricing and a range of unique features appealing to investors of various experience levels. The platform offers a diverse selection of trading options, including stocks, exchange-traded funds (ETFs), cryptocurrencies, and more.
To begin trading, a minimum deposit of £200 is required. One notable feature is the CopyTrader system, which allows you to emulate the strategies of seasoned traders. This is particularly advantageous for those who prefer to leverage the expertise of others instead of spending years developing their own trading system.
Pros
✔️ Communal systems. Engaging platform that attempts to create a communal experience. You can copy high-performing traders' moves if you want to throw your hat in with their fortunes.
✔️ Educational resources. On one hand, there are forums and places where retail investors (everyday traders who are not professionals) can meet and share information. Alternatively, you can track the feeds of your favourite traders and mirror them.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 51% 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.
Cons
❌️ Noise. An intense amount of noise exists in financial markets, and filtering out the irrelevant information from the market-moving stuff is difficult. eToro is a tool, like any other, but it's by no means your investing guardian angel, so don't expect it to save you from your own mistakes.
❌️ Need to remain vigilant. The customer service is limited. One aspect of this is that the platform does not inherently treat itself as your professional investment adviser. Because it is a DIY approach to handling your capital, you must always be discerning and objective, applying best practices and due diligence.
eToro Review – Its Formation and History
So who exactly are eToro? Let’s explore their origin story as well as how they’ve been performing over the last couple of years.
Founding
eToro came about in 2017 in Tel Aviv, Israel. It was developed by two brothers along with a third associate. Then, in 2010, the company released a social investment offering, together with the copy trading capability — this let investors automatically mimic the top performers on the network.
Following this was the Social newsfeed and something called the Popular Investor programme — these all tied into the same offerings. Then came the company's debut on the Android app in 2010.
In the five-year stretch between 2013 to 2017, the firm attracted more than £30 million in funding after four rounds of raising funds. By the end of 2017, it partnered with Coin to release a blockchain social trading service.
A year later, it more than tripled its funding (£100 million) during a private funding campaign.
Stocks and authorisation in the UK
2013 saw eToro offer new features. It transformed its marketplace penetration by letting users invest in stocks and use CFD products.
Alongside this were offerings in currencies and commodities. The platform started with a bit over 100 stocks, and that number has since ballooned to 3000. In 2013, it also was approved to operate in Britain, under a similar subsidiary name. And in Q1 of 2014, crypto was added.
Continuing its pace, the spring of 2014 saw 130 German and British stocks existing on the DAX 30 and FTSE 100 index added as stock selections. Three years later, the full-blown CopyTraders feature was launched — this let investors copy the portfolios of the platform’s leading traders.
Crypto
In the realm of cryptocurrency, eToro launched its wallet for Android and iOS in 2018, marking its entry into the US market in the latter part of the year with the introduction of the Good Dollar project. This nonprofit, open-source initiative aimed to explore the potential of establishing a universal basic income using blockchain's centralised technologies.
By the end of 2019, eToro expanded its offerings with a crypto portfolio feature. This innovative tool employed artificial intelligence to gauge the shifting sentiments in digital assets by analyzing Twitter feeds.
The subsequent year saw further advancements with the launch of a comprehensive crypto trading platform, complemented by a dedicated crypto wallet exclusively for US users.
Review of eToro – Pricing and Regulations
Perhaps the most important starting feature needed from an online trading platform is that it is secure and has tight regulations. So, can you trust eToro with your hard-earned cash?
Is eToro safe?
The question of safety in the online trading world is crucial and depends on your specific choices. While no platform can absolutely guarantee the safety of your funds, eToro stands out as a relatively secure option.
eToro, with its UK headquarters, boasts over 14 years of trading history and practices segregation of client funds from the company's bank accounts, making it one of the most trusted online trading platforms around.
The platform's collaboration with tier-one banks is a significant factor in reducing the risk of financial difficulties impacting client funds. Additionally, protections like FCSC insurance provide a safety net, making it less likely for clients to lose all their money without compensation in the event of the company facing financial issues or engaging in illegal activities.
Our review of eToro reveals that it is rigorously regulated by several authorities, including the Financial Conduct Authority (FCA) in the UK and the Cyprus Securities and Exchange Commission (CySEC). Other regulatory bodies in different countries include the ASIC (Australian Securities and Investments Commission) and MiFID (Markets In Financial Instruments Directive).
In summary, eToro is subject to extensive regulatory oversight. While we live in unpredictable times, our review suggests that eToro is as secure as any leading trading platform in the market.
eToro review of UK Laws
eToro has full licences to operate in Britain even allowing you to invest in gold. And that means you are required to go through the same process that any other licensed broker would request before it can approve your account, including:
☑️ Submitting a colour copy version of your passport with a signature.
☑️ Submitting a colour copy of a recent bank statement.
☑️ Being restricted to specific limits on credit card balances.
eToro review of fees
When using any online trading platform, it's important to be aware of the associated fees.
A key fee on eToro is the conversion fee, incurred when you convert one currency to another, such as EUR to USD or AUD to GBP. As eToro trades exclusively in US dollars, you'll face a conversion fee if you deposit or withdraw funds in a different currency.
Conversion fees vary, typically ranging from 50 to 200 pips. A pip represents a small percentage of a currency, usually 0.0001 of the currency unit.
Additionally, eToro charges a fixed withdrawal fee of £5, provided your account balance is at least £30.
The minimum investment per trade is £50. If your account is inactive for a year, including not logging in, you'll be charged a £10 inactivity fee.
Using the CFD (contract for difference) product also incurs specific fees, which depend on the particular asset you're trading.
These fees are applicable to the standard account as of this writing. Upgrading to a higher-level account or reaching a higher account balance may result in different fees and/or discounts, along with additional features.
eToro Overnight Charges 💸
eToro, as with a number of leading stock trading brokers, does charge overnight fees — these come into play if any position is held onto after the stock market closes.
One interesting benefit of using this platform is that these overnight fees are only charged if you are using a margin account (including trades leveraged via the CFD product). And this is only applicable on weekdays, apart from crypto, which do get charged overnight if held over the weekend.
eToro Review: What Exchange Rate Does it Use? 💳
As we said earlier, eToro requires you to trade in US dollars, which means you will need to convert your pounds into USD.
eToro’s exchange rate — last we checked — compounds by half of a per cent for every currency conversion from euro into pounds or dollars.
This means stacked fees can be reduced if your trading currency is converted before adding it to your account.
Is eToro Actually Free?
No. eToro will incur fees from the moment you load money into your account and withdraw it back into your bank balance. For instance, withdrawal and currency conversion fees. Not all of these can be avoided. However, what they charge you is reasonable compared to competitors' rates.
eToro’s Leverage and Availability on the Market
Leverage is financial parlance for debt.
You are borrowing something that you do not own in order to make a bigger trade. For example, when using the CFD product, you can bet only a fraction of the full trade and borrow the rest in order to make a speculation.
The limits of leveraged are decided by ESMA (European Securities and Markets Authority). They include the following:
- More than 30x leverage for any major currency pair.
- Up to 20x for any non-major currency pair, on major indexes and on gold.
- Up to 10x for commodities.
- 5x for CFD stocks and ETFs.
- Trading with leverage involves high risk.
Ultimately, this gives users the ability to make bigger trades than they would otherwise be able to afford. This is obviously extremely dangerous and can get gamblers into a lot of trouble. Although it can lead to bigger returns, that goes hand in hand with far greater potential downside.
As for market hours, crypto markets are open 24/7. The opening hours for trading stocks and commodities varies massively depending on the exchange in question. You can consult eToro's list of opening and closing times on their website.
eToro Review Part Two – What is Tradable?
A significant strength of using the eToro platform is the variety of trades you can do. There are eight central trading categories to be aware of. These are:
eToro’s Stocks 🧾: Stocks are the bread and butter of the platform. You’re able to access them via the London Stock Exchange (LSE) as well as other global stock market exchanges.
eToro’s Forex 📉: As for currencies, these are also supported on the platform, which means that you can place positions on the different currencies. You, of course, need to strap yourself in and be ready for a vortex as the currency markets are phenomenally disruptive.
eToro’s Crypto 📈: The crypto market is available non-stop. You can also trade these regardless of region, whether in the US or the UK there is availability cross-border of the popular crypto coins.
Crypto trading has taken root as a potential replacement to traditional currencies. Some believe that it is a pyramid scheme, whereas others view it as the evolution of digital money.
eToro Indexes 📝: eToro offers users the ability to trade in different indexes, such as the FTSE 100, S&P 500 or the Nikkei 225.
eToro’s Exchange-traded Funds 📰: Place trades using this vehicle, which are commonly used as a way of hedging and diversifying.
eToro’s Commodities 👑: eToro Gives you indirect access to certain commodities, such as silver, gold, and oil.
eToro’s Dividends 📋: As a last mention, dividends are another offering available to shareholders of certain companies. These are often larger firms with higher market capitalisations. When you own certain stocks, you can receive cash payments from those companies, or choose to automatically reinvest (drip) that money into buying more shares in the company.
More eToro Features
Although eToro made a name for itself by offering 0% commission (on real stock position), there are other features — some of these useful for beginners and others for more advanced users:
CopyTrader ✍️
In our eToro review, we couldn't overlook the “CopyTrader” feature. This innovative tool fosters a communal and collaborative environment, leveraging a community that numbers in the millions. Fellow traders share their expertise by allowing others to automatically replicate their strategies. You can examine the network's top-performing traders and choose to copy their trades.
This feature essentially allows you to allocate a certain amount of funds and select a trader to manage these funds in the markets. It's a potentially powerful tool for beginner traders seeking a passive approach to capital investment and possibly earning returns.
However, it's important to exercise caution. While you can search for a savvy trader with a track record of reliable results, remember that past performance is not indicative of future results. Letting them manage your investment does involve risk, so it's crucial to make informed decisions and consider the level of risk you are comfortable with.
Getting Expert Advice 👨🏫
eToro has a far-flung community of traders — some beginners, some intermediates and others professionals. There are multiple ways to seek out advice and guidance.
For example, the platform enables you to engage with its experts, allowing you to inquire about strategies, market trends, and other relevant topics. In doing so, eToro aims to cultivate a social community at its core.
You have the opportunity to glean valuable insights and research from these experts. Additionally, you can access ratings for specific analysts and explore their price targets for various assets and portfolios. This feature enhances your ability to make informed decisions based on expert analysis and community feedback.
Review of eToro’s App 💻
Its mobile app is available for both Android and iOS. Although professional traders do not turn to make serious investments from their phones, it does let you tweak certain things that you are doing, such as copying experts or taking any immediate advice from news feeds you subscribe to from expert analysts.
Much of what is available on the full website will be available on tablets or mobiles. But there will be limits to support features like charts and technical indicators. One of the most useful aspects of this could possibly be accessing the social community, viewing any updates to the market, and reviewing the performance of your portfolio.
eToro’s Support 💬
Some reviews say that the support for eToro is limited. Others say it is extensive. What we do know is that it is available in multiple languages, including French, German, Italian and Spanish. There’s a live chat with email support to handle resolutions.
As for the live chat function, some sources say users get responses to issues within three minutes. And that this is regardless of your native language (as long as it is supported by the platform).
Review of eToro – Running Trades Prudently
Negative Balance Protection is an important safety feature on eToro, particularly relevant when using CFD products or operating margin accounts. This protection comes into play under certain market conditions, ensuring that you don't lose more funds than you have deposited in your eToro account.
Here's how it works: If market conditions are such that your Equity becomes negative, eToro will initiate a margin call. This means all your open trades will be closed. As part of eToro's Negative Balance Protection policy, the company will absorb the loss and reset your Equity to zero. This action prevents your account from falling into debt with the broker.
It's crucial to understand that when using CFDs with leverage, you're essentially trading with borrowed money. Market volatility can rapidly deplete your balance, potentially leading to significant losses. However, with Negative Balance Protection, eToro automatically steps in to close trades if your account balance hits zero, preventing further losses. This feature is inherently more secure than a guaranteed stop, offering a crucial safeguard against extreme market movements.
Stop losses and take profits
In any case, it's crucial to have a system for using stop losses. This brings us to the second risk management tool you should be aware of.
Stop loss is a feature that allows you to create an instruction to automatically close a position if it loses a certain amount or drops to a value you specify. This is essential for limiting potential losses in a trade that doesn't go as planned.
Additionally, a “trailing” stop loss is a valuable setting. It secures gains by keeping trades open during favourable price movements and automatically closing them if trends reverse. This dynamic feature adjusts with the market, providing a balance between securing profits and limiting losses.
Take profit, on the other hand, is a feature where you create an instruction to automatically close a position if it gains a certain amount or reaches a value you specify. At that time, the system will attempt to close at the nearest possible value. However, it's important to note that the number set for take profit is not guaranteed due to market conditions.
It's important to understand that setting these features does mean you are capping the potential profit a trade can achieve, but you are also locking in the maximum loss that can occur. Even though you might set your stop loss to a particular figure, it depends on when the broker is able to process the order and at what market price it is executed. This can result in a trade settling at a lower or higher amount than your actual stop loss due to market volatility.
In scenarios where the market moves astonishingly fast, or there is a significant delay between the stop loss being activated and the broker executing the order, this can lead to what is known as slippage. Slippage means that a trade is executed at a different price than the one set by the stop loss, which can affect the outcome of your trade.
Take Profit and Stop Loss are not guaranteed.
eToro Review UK – The Verdict
eToro may not be the primary choice for professional investors, who often seek platforms with the most competitive fees and specific advantages. These professionals typically avoid more general, retail-focused platforms.
Developing a competitive investment strategy requires mastery and dedication, which is why eToro is particularly suitable for casual traders and investors. It offers direct access to financial markets without the need for a sophisticated team or strategy.
One of the platform's key features is the ability to mirror the trades of leading investors, potentially offering a slight edge in maintaining the value of your capital, as opposed to solely relying on cash savings.
Recent research suggests an approximate 6% increase in success rates for users of this feature, though this is a general estimate and can vary based on the traders chosen, luck, and other variables.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 51% 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.
In summary, eToro is a relatively safe, well-regulated, and institutionally supported online trading platform. It provides tools that are particularly beneficial for beginners in online trading, offering a way to actively engage their capital. However, caution is advised when dealing with CFDs.
Disclaimer: eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 51% 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.
Past performance is not an indication of future results. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision.
Copy trading is a portfolio management service, provided by eToro (Europe) Ltd., which is authorised and regulated by the Cyprus Securities and Exchange Commission.
Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment, and you should not expect to be protected if something goes wrong. Take 2 mins to learn more.
eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro.
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