Complete Guide to eToro
Although eToro is best known as being a major player in the cryptocurrency trading world, the company is one of those that has been leading the fintech revolution for more than a decade. Over the years, they have also gained the reputation of being the leading social trading platform globally. Although eToro started off as a general trading platform, the company has added financial trading instruments, including cryptocurrency, to their portfolio to keep up with growing demand and changing markets.
eToro currently has more than 6 million registered users, making it an undisputed industry leader.
eToro was founded in 2007, way before the term cryptocurrency even existed, when three entrepreneurs decided that they wanted to make trading more accessible to people from every walk of life. They also had the vision that they did not want to be dependent on any traditional financial institutions, including banks. The company started out as an online trading platform with an intuitive interface and graphs showing financial instruments.
eToro launched its trading platform, WebTrader, in 2009. WebTrader offered a wide range of professional tools that could be used by traders of any skill level. With the launch of OpenBook, the first social trading platform of its kind in the world, another big step was taken in 2011. The platform included the CopyTrader feature, which enabled anyone to copy what successful traders did. Stocks to other assets including commodities and currencies were added in in 2012. The reach of the platform was expanded with the launch of the eToro mobile app in 2013. This was also the first time that eToro touched on crypto, enabling trading of Bitcoin via CFDs.
The platform’s interface was updated in 2015, making the experience even more intuitive and innovative. CopyFunds was added in 2016. This feature enabled managed portfolios that could be used to bundle top traders or various assets within a specific marketing strategy. To maximize returns, these are driven by machine-learning engines. eToro finally expanded its reach into cryptocurrency in 2017 by adding crypto trading options to the platform, starting with XRP, Litecoin and Ethereum.
How is eToro Different from Other Platforms?
The major difference between eToro and other platforms is the huge number of trading and investment options that are available on eTorro. Users are able to use the platform not only for their cryptocurrency trading needs, but also for investing in and trading with traditional assets.
eToro is also unique due to the social elements it contains. CopyFunds for example, is a long-term investment tool that enables managed portfolios to bundle top traders and assets with a set strategy. Other innovations of the platform include the Popular Investor program, as well as the ability to copy successful traders’ investments.
Which Cryptocurrencies are Supported?
The range of cryptocurrencies available on eToro are limited when compared to other platforms due to its nature as a general trading platform rather than one focused only on cryptocurrency. You can however own or short most of the popular cryptocurrencies, including Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Ripple and Litecoin.
What Other Trading Tools are Offered?
Registered eToro users receive $100,000 in a “virtual-money account” to explore strategies and build skills before any real money is actually invested. Many other tools are also provided to assist with actual trading. One such tool is the economic calendar which is used to capture the dates and time zones of interest, as well as the assets to be traded. The calendar then predicts what the impact of certain events will be on your assets. It also provides regular market updates that include quick overviews, but also greater detail. You decide how much or how little information you want to utilize.
eToro aims to both educate traders and to provide them with an investment platform. It is a pity that most of the tools available are aimed at trading traditional assets rather than crypto. They are however extremely useful for individuals who are looking at expanding their portfolio beyond cryptocurrency.
How Are CFDs Used when Trading Cryptocurrencies on eToro?
A contract for difference (CFD), is one of many types of derivative trading. With CFDs, investors predict whether fast-moving global financial markets will fall or rise. This technique is not only used with cryptocurrencies, but also with shares, indices, treasuries, fiat currencies and commodities.
It is important to understand that with CFD trading, the underlying asset (in this case cryptocurrency) is not bought or sold. You rather buy or sell a number of units for the instrument based on the predictions if the price will fall or rise. When the instrument moves as you predicted, you receive multiples of the CFD units you have bought or sold. You will however make a loss every time the instrument moves against your prediction. CFDs are very risky as it is possible for the loss to exceed the deposit, resulting in a shortfall that has to be paid.
Cryptocurrency and CFD trading go hand in hand on eToro as mentioned earlier. Many of the crypto trades are still CFDs rather than dealing with the actual asset.
As of Sept. 3, 2017, those who invest in the BUY position on eToro for crypto, actually own the underlying asset. Prior to this date, they didn’t own the asset, but a CFD. This does however not apply to SELL or open short positions for cryptocurrencies on eToro, as these remain CFD positions. eToro does actually also offer cryptocurrency trading.
What is eToro CopyTrading?
CopyTrading is an option on eToro that can be used for fiat and crypto investments. This option allows users to copy traders they choose. Traders can be rated as Popular Investors when they deliver consistent returns and have a low-risk score. Popular Investors receive rewards for sharing their know-how. A big advantage of using CopyTrading is that you don’t have to do much research yourself, but can get exposure to the market by copying investors that trade in cryptocurrencies..
What is eToro CopyFunds?
CopyFunds is available for traditional fiat trades and cryptocurrency trading. The Investment Committee members at eToro compose CopyFunds and rebalances them from time to time. A CopyFund is a single tradeable asset made up of carefully selected traders or assets of a specific strategy. Several cryptocurrency CopyFunds are available for investors to select.
Two cryptocurrency CopyFunds are worth mentioning:
1. The Crypto CopyFund is a recent CopyFund comprising a balanced crypto portfolio that contains Ethereum, Bitcoin, Ripple, Ethereum Classic, Dash and Litecoin.
2. The Crypto-currency CopyFund provides exposure to Bitcoin and Ethereum. In May 2017, cryptocurrency experienced a bull run and this fund increased by 66%..
Can I Use eToro?
eToro can’t be used by people who reside in countries where the platform is blocked. These blocks are normally due to regulations that conflict with trading laws. eToro has a list of countries where this is the case, including the United States, Cuba, Canada, North Korea, Japan, Iran, Turkey, Serbia, Syria, Sudan and Albania.
Is There a Minimum Trade Size on eToro?
eToro aims at offering tools that traders and investors at all levels of experience can use, so it tries to avoid applying minimum trades. You must however invest at least $200 to use CopyTrading, while the minimum investment for CopyFunds is $5,000. Minimum values for manual positions depend on the instrument used, and will range from $25 to $200.
eToro recently made a change for new users where the size of a minimum trade depends on exposure, calculated by multiplying leverage by the invested amount. This total minimum amount is $200 for cryptocurrencies if you have a leverage of x1.
What Fees are Payable on eToro?
eToro generates its profits from fees that it charges. No fees are payable when a position is opened, but the fee is generated based on the spread. There is a list of minimum spreads per cryptocurrency, but these rates are not guaranteed. It should also be noted that spreads will vary based on market conditions and liquidity.
Cryptocurrency trading is available 24/7, and there no extra fees are charged for weekend or overnight trades. eToro only charges fees for shorting cryptocurrencies or for users who hold leveraged BTC or Ethereum positions.
How easy is eToro to Use?
It is generally agreed that eToro is very easy to use. As it was designed to be intuitive, individuals without trading experience should be able to get the information they need and start trading without a problem. The platform can be used on Macs, PCs and iOS or Android devices.
How Do I Deposit or Withdraw Funds on eToro?
There are numerous methods to deposit money for eToro, although variousmethods have different minimum deposit requirements. You can deposit via bank transfers, wire transfers, MasterCard, Visa, PayPal, NETELLER, Webmoney UK, Yande and Skrill,.
A form must be filled out to withdraw and the money is typically received via a bank transfer, PayPal, or your debit or credit card. Withdrawals require a copy of your signature and color passport, and proof of address.
Is it Safe to use eToro?
eToro has taken a number of security steps to provide peace of mind to users. The company adheres to guidelines of CySEC and FCA, and is fully regulated. To assist traders in making responsible decisions, its tools cater for all experience levels, including guidance for risk-management and the first steps. eToro also takes strong measures to ensure the safety of both personal information of clients and funds. Traditional funds is kept securely in tier 1 European banks.
You should keep in mind that cryptocurrencies are not regulated. As a result, there is no insurance from investor compensation schemes in the UK or Cyprus if you engage in crypto-related investments, including cryptocurrency trading. This also means that you can’t file complaints with a financial ombudsman service. In spite of this, eToro endeavors to resolve all issues as quickly as possible. There are also many social platforms where complaints can be registered, which might influence other users.
Even though eToro offers a lot more than cryptocurrency trading, it is useful for individuals who want to invest in crypto. The platform not supporting many cryptocurrencies is however disappointing. Having said that, the major ones are supported and those are the ones you’re most likely to invest in. eToro really has an edge with the additional features it offers, including CopyFunds and various graphs. The platform is also easy to use and highly intuitive, something that will benefit anyone. Although eToro is not ideal for those that want to trade lesser known cryptocurrencies, it is a very good option for individuals who only want to trade with the major ones, or who want to do both crypto and fiat trades on the same platform.