Introduction
This is a review of the eToro copy trading service, in which traders can pick their own trading signals which can be copied to their platform in an automated fashion, simply by choosing which professional trader’s trades they can follow. This service is provided by the eToro CopyTrader.
eToro is a global brand which operates several divisions. The differentiation in divisions became necessary over the last three years, when different regulatory bodies began fashioning out their own unique regulatory protocols by which regulated brokers could operate. As such, eToro had to split into the following:
a) eToro (Europe) Ltd, operating from Cyprus and regulated by the Cyprus Securities and Exchange Commission (CySEC). This branch functions effectively as the EU branch of eToro.
b) eToro (UK) Ltd is authorized by the Financial Conduct Authority, using license number FRN 583263. Since Brexit, it became necessary to differentiate the UK from the EU operations, necessitating the formation of the UK brand.
c) eToro AUS Capital Limited is regulated by the Australian Securities and Investment Commission (ASIC), under AFSL 491139.
d) eToro (Seychelles) Ltd is licensed by the Financial Services Authority Seychelles (FSAS), under license #SD076. This division is the offshore branch that caters to international clients of eToro.
Assets Traded
What are the assets available to you to trade when engaging with eToro CopyTrader? You can trade You can copy traders who trade currencies, cryptocurrencies, commodities, indices, stocks and exchange-traded funds (ETFs).
Depending on your preference, you can choose to copy several traders that trade at least one of these markets (thus giving you complete asset index coverage), or you can choose a trader that trades one, two or all the markets.
How Does eToro CopyTrade Work?
The trading signals on eToro come in the form of automated, copy signals which are transmitted from a copied trader’s account. This eliminates some of the problems associated with other trading signals formats such as delays in receiving alerts, missing trading signals, not being able to utilize sent signals on time, or confusion in the interpretation of these signals.
The signals are provided free of charge. You do not pay a separate fee to the traders whose signals are copied. These traders are compensated under eToro’s Popular Investor Program. All you need to do is to open and fund a live account with eToro, select the Copy People function in the left navigation bar, and you are taken to the Copy Trader portal where the top traders are displayed. At this stage, you are not yet ready to copy a trader because you have to choose the traders whose trades will be copied using carefully set parameters. Not every trader listed under the “Editor’s Choice” may suit your trading style or risk parameters.
By default, the Copy Trader page displays traders using the following parameters:
a) Editor’s Choice
b) Most Copied
c) Trending
d) Long-term Stock Investors
e) Multi-strategy Investors
f) Long-Short Investors
For each listed trader whose signals can be copied, certain criteria are displayed. These are:
– Risk Score, which is a score that classifies how conservative or aggressive a trader’s strategy is. The lower scores are for more conservative styles while higher readings show increased aggressiveness of the trading style.
– Return, which is the trader’s rate of return in the last 6 months or 12 months (usually displayed as 6M or 12M).
– Number of copiers
– % profit/loss in the last 7 days.
You can also decide to use the metrics set out in the top navigation bar to pick out your preferred traders.
– You may decide to use geographical location by selecting traders from specific countries (People from…)
– You can decide to use the asset index to filter out traders using the “Who Invest in..” function.
– You may also use the rate of return by selecting from the “Gained At Least” tab.
– The duration of the trading history of the trader you intend to copy can also be used (During the…). A drop-down list shows the default durations that are available to choose from.
Once you have set your preferred parameters in the filter, click GO to display the Popular Investors that match your filters. There is also a News Feed which allows you to follow the latest market-moving events.
How Much Does the Service Cost?
The CopyTrade service comes at no extra cost to the trader. All that is needed is for you to open a live account and fund it with at least $200 to start trading.
Profitability
The success rate provided by the eToro CopyTrader varies. This is because the profitability is only as good as the performance of the trader being copied. Also, it depends on the duration of the copy trade relationship. A trader being copied may not be profitably in a month of trading, but may end up being profitable for the year. A trader can be profitable in three months and by the time the trading relationship is in its 6 month, things may have gone south.
However, the eToro company says that the profitability rate of its top 50 traders of 2020 was 83.7%, which is a health profitability percentage. But ultimately, such figures do not necessarily translate into the individual performances of the traders who copy the signals.
Pros and Cons
What are the pros and cons of using the eToro CopyTrade signals service?
- One of the factors that caused losses in conventional trading signals programs is the inability of the trading receiving the signals to put them to use in a timely manner. This can be from electronic delays in transmitting data (either via email or from the trading servers), recipient trading being off the computer, or inability to correctly apply whatever signals are received. eToro’s CopyTrader has made this all a thing of the past. This is virtually a set-and-forget system where the Popular Investor does the heavy lifting and you get the trades transmitted to your accounts automatically.
- Another pro factor is that the trader doing the copying only gets to do most of the work associated with the copy trading system once. This is usually at the point of trader selection. Once a trader’s signals are selected to be followed, the trader does not have to place the trades or stare at charts all day every day.
- The CopyTrader service comes at no extra cost to the trader. eToro takes care of the compensation of the traders whose signals are copied as part of the Popular Investor Program. The only commitment is the opening of a live trading account, and funding it with a minimum of $200.
- eToro boasts of one of the most comprehensive trader education suite in the FX market today. This allows users of the CopyTrader to understand the entire concept of trading, what is traded and how trading can be put to work for their benefit.
- Finally, the process of selection of traders to copy puts the control into the hands of the traders themselves. The metrics by which trader selection for copying are clearly spelt out, and can be adjusted if there is a need to do this. These metrics also help in evaluations down the road.
- Trading using eToro’s CopyTrader is leveraged activity. Depending on which platform you choose, leverage on eToro tends to be capped at lower amounts than you may find with other brokers.
- No refunds or compensation can be claimed if the signals being copied start to underperform.
- Also, there is no guarantee that a trader who has delivered good profits in the previous 12 months of trading can carry this performance forward. This is why evaluation of performance is necessary.
Customer Support
eToro operates a layered system of customer support. First, you are sent to the Help Center, which is a page that provides the answers to most of the questions that users and visitors have. Thereafter, you can access other channels of communication with the customer support team as follows.
a) Live chat service
b) Email: support@eToro.com
c) Social media channels (Facebook.com/eToro; Twitter.com/eToro; Instagram.com/eToro_official).
Conclusion
The eToro CopyTrader’s simplicity, ease of use and workability are not in doubt. With a proper method of selecting which trader to follow, the eToro CopyTrader signals service has the potential to generate a steady income flow.
This service is already being used by thousands and represents the fastest way to get involved in the markets. What are you waiting for?
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