How to use eToro to invest in the stock market

 

My interest in the financial markets has always been strong. However, I had no real understanding how to scale the castle walls and engage in stock market trading.

Wall Street and The City's gatekeepers are dedicated to keeping the general public at away so they may charge exorbitant trading commissions.

All of that was altered approximately a year ago. When I was a senior in college, I discovered the trading platform eToro. It blew open the doors, enabling me to begin online stock trading.

With 0% commission on actual equities, eToro is up to 20 times less expensive than conventional stockbrokers.

Profile on eToro

You should be aware that I have had a steep learning curve using eToro.

I've liked the process of buying and selling equities (as well as some cryptocurrency), but I've also made some rookie trader errors.

The eToro trading platform and the idea of investing may initially seem intimidating to complete beginners.

I've created this straightforward eToro review with the benefit of hindsight and my personal trading experience on the platform in order to assist others in achieving the best outcomes as soon as feasible.

Describe eToro.

etoro logoeToro bills itself as a social and approachable trading platform for investors. They remind me of Facebook for trading stocks and cryptocurrencies.

They began operations in 2006 and are currently the biggest investment network in the globe. Twenty million members make up the community of the secure trading site eToro.

The general social investing phenomenon, including eToro, has received extensive media coverage. among them is the current BBC film Traders: Millions by the Minute.

eToro's "CopyTrader" tool is arguably its most distinctive component.

You may browse other traders and view their trading histories. This contains the total profit or loss for any given time frame. You can set aside some money to invest automatically and copy a trader whose style you like if you find one.

The "Popular investors" initiative is another significant benefit.

Users receive monthly commission as compensation dependent on the number of copiers they own. The program also rewards ethical trading. At the conclusion of the guide, we'll go into further detail on this.

You will therefore pick up a lot of knowledge on eToro rather rapidly because to the social and copying capabilities. You may learn most of the essential information by reading this eToro review or practicing with a sample account.

Take it slow at first. Know how the stock market operates. Before investing more money, be certain you know what you're doing.

It can be quite beneficial to trade on eToro. However, if you work with the markets, you run the danger of losing money as well ("your capital is at risk").

opening an account on eToro

Register with eToro.com

Short forms are used here. It's simple and free to sign up for eToro.

Fill out the brief form and select a username. To ensure the security of your account, eToro requests your phone number.

You've now made the world of internet, real-time stock trading accessible. You'll be asked to finish your eToro profile before you can really make trades.

For your protection, eToro is a multi-asset platform that provides both CFD and non-CFD products.

79% of retail investor accounts that trade "CFDs" with this supplier experience losses. If you can afford to take the significant risk of losing your money, you should.

This information is provided solely for informational and educational reasons and should not be regarded as recommendation or advice regarding investments.

In this article, we don't propose CFDs, a form of leveraged instrument; instead, we focus on purchasing and keeping your own stocks.

Fill up your profile.

This crucial step will safeguard your account and allow you to customize the eToro platform to meet your needs.

The first section asks for basic personal information; if unsure, omit the "Identification Number" field.

There are then a few questions about your trading experience. Don't stress too much about the answers because there isn't a test; just try to be sincere.

Deposit

The smallest contribution you can make is $10, however if you can, I advise starting with at least $50.

Although you can deposit in other major currencies in addition to $USD, eToro's primary currency is $USD. Your account will be converted to US dollars.

Become familiar with the eToro platform.

For the time being, I'll just give you a brief rundown of eToro's key components. Later, when I thoroughly explain how to browse and trade, we'll go into more detail about each one.

Organize the individuals and markets you want to emulate or invest in. You can make a variety of lists, including ones for "promising stocks" and "people to copy."

Portfolio

your investment journey's nerve center. View all of your open deals with real-time tickers and values while keeping an eye on your progress.

Feed News

Similar to your Facebook News Feed, this is. You can view recent actions and statements made by the traders you follow.

Commerce Markets

The location for market research and trading for stocks (such as Apple), currencies (such as the GBP/USD), cryptocurrencies (such as Bitcoin), commodities (such as gold), indices (such as the UK100), and exchange-traded funds (ETFs).

clone people

the center of the neighborhood. Look for other traders you might like to imitate or adhere to. There are a ton of helpful filters, such markets and performance, to help you focus on the results you want.

I'm going to go over the three primary ways to invest on eToro with you now that you're a member of the community and have had a chance to look around the website a bit.

emulating successful traders (Copy People)

The simplest approach to invest on eToro is in this manner (see Liam's tale). Every deal someone makes when you replicate them is opened in your account at the same time and sold when they sell it on eToro.

It all depends on the percentage of your account's total funds that you decide to provide them (more on this later). In the end, your rate of return will be the same as theirs.

On eToro, it might be challenging to locate trustworthy traders to copy. You must be aware of what to look for and what to avoid (more on this later on).

Prevent the frequent errors!

Being a sheep is the biggest error newcomers make right away.

It makes sense to sort by "most copied" when looking for a trader to copy in the "Copy People" section and to blindly copy the top results.

One would assume that the most copied individuals have a large number of copiers for some reason. The collective wisdom, perhaps.

The majority of users on eToro, however, are inexperienced newbies who have no idea what they are doing.

A trader can easily "become viral" if a small number of individuals emulate them for the wrong reasons. As a result, an exponentially larger number of copycats will do the same thing without questioning it.

Strangely enough, this occurs frequently on eToro, therefore as part of this review, I'll outline the steps I take while copy trading.

Following the warning against repeatedly underperforming traders, overtrading is another common mistake made by new traders.

It's highly tempting to frequently check your profits or losses, but doing so will make you make poor decisions because of your emotions.

On eToro, no trader will consistently turn a profit every week or month. So I strongly advise that you choose a medium- to long-term strategy. Although this calls for persistence and self-control, the results are more likely to improve over time.

locating the top traders to emulate

First, on the eToro sidebar, select "Copy People."

To view popular and trending investors who are promising, scroll down the page.

You can also utilize the advanced search function. You can alter everything in blue to make it suit the requirements you have for potential traders you want to imitate.

Google search

Hit 'GO!

' to get a list of businesses that match your search, sorted by how many copiers they have. Use the filters at the top to drill down even more.

5 qualities that each trader you emulate should possess:

Showcase your market expertise and experience on your profile feed.

possess minimal weekly and daily drawdowns (essentially, the amount they have lost over a specific time period). Anything above 10% should raise concerns.

Avoid having absurd returns. If you see someone with 1,000%+ returns in a short period of time, realize that this is unsustainable luck and can only be attained by being careless. I know this may seem counterintuitive.

a win rate that is not 100 percent. It's acceptable to sell certain deals that are in the red. This demonstrates maturity and discipline. Trading professionals know when to take risks, while novices chase their losses.

communicate well. You want to mimic a trader who can teach you and is open to sharing their trading approach. If they don't respond to your messages, they either don't care (and are probably trading carelessly too) or they are clueless and don't know how to respond.

Before describing the precise procedures to mimic a trader, I'll go over how to evaluate a certain trader. Then, you'll know what to look for and how the eToro process operates.

stats on etoro

You can obtain some extremely helpful information to assist decide whether a trader is worth imitating by selecting the "stats" option in their profile.

History of Etoro

My performance on eToro. Future outcomes cannot be predicted by past performance.

There are two additional important factors to consider. The max drawdown reveals the maximum a trader has "gone down" in a single week over this time period, while the risk score reveals how dangerous a trader is. Identical concept for daily and yearly.

risk/reward etoro

To understand how their strategy has changed, it's interesting to compare the present risk to previous months.

Anything in green denotes a very risk-averse, low-return mindset. The risk is then at its maximum in the colors yellow, orange, red, and black in the spectrum.

Although I personally avoid anyone with a score of more than seven, it can be beneficial to have a variety of traders with various trading philosophies.

How to follow an eToro trader

Self-copying is easy. When you've located a trader you believe to be trustworthy, just open their profile and click the blue "Copy" button.

After you enter the amount you wish to use to duplicate that trader, some useful information will appear.

If you duplicate a trader with $200, "Avg. copied trade size" will show you how the copying actually affects your account balance in actual money.

Each deal you duplicate in the aforementioned example would cost (on average) $2.72.

Only 2.72% ($5.44 out of $200) of your overall investment in them is represented by this proportion. In this instance, it's positive because it denotes a careful and secure approach to investing.

Another option is to establish a "stop loss," which serves as a safeguard against big losses and is by default set at 40%.

Your account automatically stops replicating the trader if they lose 40% of your investment. Depending on the level of danger you're willing to accept, you can adjust this level to anything you like. Personally, I try to maintain it at 25%.

keeping track of your performance

You can access your open trades by clicking on "Portfolio."

Your nerve center and actual trade area are here. Here, you can see a record of your eToro trading history as well as keep track of all of your open positions.

Your eToro Portfolio will contain a list of all of your copied traders as well as any investments you make on your own.

In a trader, you may view your overall return on investment. To view the roles that are open right now and their respective performance metrics, click the person's name. It's helpful to be able to cancel specific cloned trades without completely uncopying a trader.

users of watchlists

You might also simply "follow" traders (without copying or investing in them). Similar to Twitter, you can see their updates in your Watchlist and News Feed.

It's a fantastic approach to assess their value to you and tune in to information that's helpful.

How to purchase and sell for yourself on eToro

You can consider placing your own trades with the intention of working from home once you've become familiar with the eToro interface and (hopefully) experienced some success copying other people.

You should conduct more research and think more carefully. Any flaws now entirely rest with you!

You become accustomed to the eToro platform and the entire process of buying and selling positions by concentrating your efforts on the stock markets. You also likely have some basic consumer understanding in this area.

What stocks ought you to purchase?

Well, partner, that's up to you. I am unable to provide particular investment guidance. All I'll say is that doing your homework, reading the news frequently, and paying attention to earnings releases all pay off.

Only make investments in stocks or businesses you think are solidly positioned to withstand market shocks and ultimately have room to grow.

If you're serious, learn how to recognize undervalued/overpriced stocks by using the price-to-earnings ratio.

I can walk you through the steps involved in placing a trade on eToro.

How to purchase shares of stock

Then select "Trade Markets," "Stocks," and "Industry." Select a sector, such as "Consumer products."

Following that, you will see a list of all stocks in consumer products that are available for trading on eToro, together with information on their individual prices and daily changes.

Click "Trade" in the top right corner if you want to invest in Apple on the assumption that you think the share price will increase in the medium to long term.

$10 is the minimal tradeable amount. Below this, you can choose the points at which you want to automatically close the trade for profit or loss.

Finally, pay attention to the "Leverage" number. The figure is the maximum factor by which you can compound gains (and losses). Increased numbers indicate higher danger.

In essence, X1 is purchasing actual stock. Any price change is multiplied by two if you traded at X2 (doubles).

Typically, it is set to X5 automatically. I advise newbies to click on the number and change it to X1 for the purposes of this eToro review.

Once you are prepared, select "Set Order."

Do not fall into the trap of examining the real-time performance of your transactions every hour, as I previously cautioned! This only results in excessive trading, which is also very expensive.

I've had to cultivate the self-control to let the markets run their course and have faith that the value of my portfolio will increase in the long run (which it has).

It's a tactic I've found to be successful on eToro because it prevents me from acting impulsively just because a company released some 'bad' news and the market overreacted in the short term.

How to Become a "Popular Investor"

Users of eToro are encouraged by this program to engage in responsible trading and contribute to the community.

You'll notice that others will start copying you as soon as you start succeeding on eToro! As your fleet of copiers grows, you will be able to earn a monthly commission, which is a very satisfying and exciting opportunity.

popular investor etoro

Increasing your copier numbers can take some time. But if you make consistent, wise trades and heed the recommendations in our eToro review, it actually isn't that difficult to do.

Being involved in the community pays off as well. Regular updates, participation in discussions, and answering inquiries from others all help to spread the word about you and draw attention.

Fees on eToro

Like any business, eToro's goal is to turn a profit by offering customers a service.

They primarily achieve this by imposing a small spread fee on positions for users (outlined on the order windows).

The costs of trading here, however, are significantly lower (up to 20x) than with conventional stockbrokers and fund managers because there is 0% commission.

On eToro, trading equities often has the lowest costs, therefore I advise you to stick with this market when you first start out.

The slight discrepancy between the purchase and sell prices that all brokers give is known as the "spread." This is how eToro generates revenue, much like a Bureau de Change, and is comparable in size to the markup on equities. When you sell or close a position, you will be charged.

up-to-date eToro fees.

Not overtrading is one way to reduce spread fees. You can receive a partial or even full refund on these eToro costs if you sign up to be a Popular Investor (see above).

It really boils down to personal trading preferences and strategies. But to give you an idea, I typically hold onto stocks for at least six months, and all other trades typically last for two to three weeks on average.

You will be charged the same fees as the copied user on trades when you copy them (which may not always be stocks). It is worthwhile to check your portfolio to see if any positions have become available.

If you want to move money out of your account, you will also pay a withdrawal fee of $5 flat on eToro.

Review: Avoiding typical errors

Over the course of this eToro review, I've covered a LOT of ground and avoided a lot of pitfalls. Congratulations on making it this far!

Before we wrap up, I just wanted to provide you with a list of the most common errors:

Overtrading is a bad approach for novices because it quickly accrues costs.

giving one trader access to more than 25% of your total equity (funds) (copy)

copying without thinking the most copied traders

copying individuals at absurdly high rates of return (what goes up often comes down)

without properly investigating their profile and activity, copying others

not doing your research before buying stocks

putting more than ten percent of your equity in one of your own trades

using excessive leverage (advanced trading)

Make an effort to close each and every trade in the black (don't chase losses!)

A final note on excessive trading

I want to elaborate a little bit further on this subject, particularly in relation to mimicking other traders.