eToro is an online investment platform which offers retail investors the opportunity to trade in currencies as well as a select range of other financial instruments; namely stocks, commodities, metals, bitcoins and a few of the major stock indices.
Strictly speaking eToro is neither a market maker nor a broker, but rather provides access to the markets with straight through order processing (STP) via its partner-brokers and liquidity providers: namely RetailFx, IC Markets and FX Solutions.
The company has been in operation since 2007, and eToro now manages a network of over 2.5 million online traders worldwide. This makes it one of the largest of its kind.
Their simple trading interface and integrated social features make it a popular choice for novices and experts alike.
Key Features of eToro
- Low opening balance of $50
- Trade execution via straight through order processing to its partner brokers
- Preset leverage from 2:1 up to 400:1 for foreign currencies, 2:1-100:1 for commodities and stock indices
- A responsible Trading policy helps prevent new traders getting out of their depth with excessive leverage
- Active user community sharing trade ideas, news, advice and copy trading
- Choice of three trading platforms, including mobile, web and desktop
- Access to eSignals for premium account holders
- Premium live customer support (they typically respond within 5 minutes during peaks)
- Stop losses are typically executed with minimum slippage during normal market conditions
- Access to a range of interactive trading courses such as the Forex Matador e-Course
eToro’s Trading Platforms
eToro’s clients have the choice between three trading platforms: the Web trader, desktop and mobile. Web Trader is for online web access. Those who need a more advanced platform can use MetaTrader. However, at this point MetaTrader is only available to premium customers with a certain minimum account balance. There’s also a mobile trading app that works on iPhone, Android and BlackBerry.
The Web Trader 2.0 platform is clear, well formatted and easy to use. It’s designed for a quick learning curve and works well to that end, though in my view it is lacking in functionality for more experienced traders. The charting software is also limited and can be frustratingly slow.
The mobile app is basically a condensed version of the Web Trader offering nearly the same functionality on the small screen.
I’ve used Web Trader extensively both on my Android tablet and on my laptop, and it works reasonably well on both devices.
I did have some issues with keys and menu options sticking on the web interface, which I assumed was down to my browser settings. When I changed from Firefox to Internet Explorer these seemed to be resolved.
Trend line and sentiment indicators Basic information about the major currency pairs is displayed at the top of the screen. This includes a very useful mini-trend line and a sentiment indicator for each.
The sentiment indicator is derived from eToro’s order book for that currency pair, so you get a feel for which direction the market is trending. However, I suspect this could tempt some into “crowd following” behavior.
Market news If you need more in-depth content for example news or analysis, you can access this through the news tab.
Being a social trading network, the platform incorporates a number of features that let you participate in the wider eToro trading community.
OpenBook The OpenBook is precisely what it says, an Open Book of all eToro traders; on registering you’re assigned your own public profile page, and once you start to trade this will display your performance, winning ratios, draw downs, risk profile and so on.
If the Web Trader is not meeting your needs, you can make a special request to use the desktop Meta Trader 4 (MT4) instead. However due to its more complex nature, you’ll need to convince them that you can deal with the interface and range of options available. Traders normally require a minimum $5k balance to be allowed to use the desktop. eToro clients are generally encouraged to use the Web Trader.
eToro offers investors two account types. In addition, there’s also a practice account:
- Basic : Minimum deposit, $50
- Premium : $20,000
- Unlimited demo account
The practice account is funded with $10k of “play money” which replenishes if you go below $500.
With the premium account comes a whole raft of additional perks such as a dedicated investment advisor, risk analysis, and access to the eSignals – forex signal software.
eToro’s main offices and support staff are based in Cyprus. At the time of writing this review, events in Cyprus are unfolding at an alarming pace and bailout terms are currently being agreed for the county’s banks. Depositors in the two major Cypriot banks are likely to take significant losses on their assets (“haircuts”).
Although eToro is registered in Cyprus (as are many online brokers), its clients’ funds are not held in Cypriot banks. Therefore investors are not impacted by these events (read more here).
Bonuses vary depending on promotions which are on offer from time to time. Currently this is what’s on offer:
- $200 – $999 : bonus $20
- $1,000 – $4,999 : bonus $100
- $5,000 – $9,999 : bonus $500
- $10,000 – $19,999 : bonus $1000
- $20,000+ 10% bonus (up to max $10,000)
Bonus policies change frequently, so do check what is available at the time you signup. eToro also offers a cash back service to premium members. To be eligible, you need to enroll with the cash back program. Once in the program, you will receive a rebate on your trading fees. The rebate is calculated on your trade volumes – the more trading you do, the higher your rebate.
So What is Social Forex Trading?
As well its trading platforms, eToro has a massive social community where users discuss market conditions, trade strategies, and exchange tips and ideas. The company’s philosophy is on learning and sharing knowledge. This integration of social networking and trading is one of the main aspects that distinguish eToro from other retail forex brokers.
The social investment network, Open Book, brings the trader into a virtual trading floor, where information can be exchanged between other traders readily and through the contact tools provided.
I like this part of eToro as unlike other online trading environments I’ve used, where you can feel pretty isolated – Open Book makes you feel much more involved in market activity and events that are going on – you pick up “the vibe”. Having inputs and viewpoints on different parts of the market is key to long-term trading success in my view.
Copy Trading – Guru Traders Working for You
Copy trading is one of the main cornerstones of eToro’s social trading environment. I cover this in a little more detail here. As an eToro client, you have the option to allocate “part” of your portfolio to the strategy of another trader.
This is known as copy trading and it works by automatically following “trade for trade” the activity of another trader. You can allocate any proportion of your outstanding equity to an individual trader; however copy trading works best if you diversify your risk across a number of trading gurus with different styles, strategies and risk profiles.
eToro claim a staggering 85% of copy trades are profitable.
If you become a successful trader yourself, you may even attract your own “copiers”. If you become a Trade Guru, you have the opportunity to make a significant income just from commission from your followers.
What about spreads or commission? When using the copy trade you pay the normal spread cost, exactly as if you’d executed the trades yourself. The trader you are copying does receive a cut of eToro’s fees for his/her skills however this is not paid directly by you. It is though reflected in eToro’s total spread and account charges, which are higher than average.
If you’re thinking of using the copy trade system, I’d encourage you to read my separate article on this subject in order to fully understand the benefits and potential risks involved.
I would say that eToro is a suitable choice for beginners to intermediate traders, it has a very easy interface as well as safeguards that prevent the inexperienced from getting in too deep too quickly.
However I expect that most experienced traders will find the extended, downloadable platform will meet their needs better. For guru traders, the possibility of attracting a large numbers of followers and earning an additional income stream is a real possibility at eToro.