eToro CopyTrader Review [2021] – How Does It Work & Is It Worth It?

eToro CopyTrader Review [2021] – How Does It Work & Is It Worth It?
eToro CopyTrader Review [2021] – How Does It Work & Is It Worth It?
eToro CopyTrader Review [2021] – How Does It Work & Is It Worth It?
Regulated and safe to use
A lot of traders to copy
Rich educational resources

Where is eToro based and who’s the CEO? 


eToro has registered offices in Cyprus, Israel, UK, the USA, and Australia. They are led by the innovative co-founder and CEO Yoni Assian.

Is eToro Safe or a Scam?


eToro is not a scam. But there’s a lot of bad rep around this company and for good reason. Like we said before eToro is based in the UK and in Cyprus, they chose Cyprus because of their loose regulations regarding online brokerages. In most countries, brokerages and financial services companies are required by law to have a spread between the BID/ASK ratio of a maximum of 1%. Well in Cyprus investors are less protected so eToro gets away with charging sometimes up to 4.5% for some altcoins which is, as you guessed, huge. 

Etoro

On top of that, there’s another elephant in the room. On February 12th, 2013, the CySEC (Cyprus Security and Exchange Commission) disclosed that it had reached a settlement agreement with eToro that obliged them to pay €50.000 for not following Cyprus laws. They broke the requirements of sections 18 and 36, which is very extensive so it could be a lot of different things. Unfortunately, that’s all we know, CySEC has not disclosed anything else. There was something wrong, how serious? that’s a difficult question. We have no idea whatsoever if it was a malicious intent of eToro to take advantage and harm clients for their financial gain, or just an innocent mistake.

So always keep this in mind when considering eToro. Better be safe than sorry, it is possible that they had and maybe even are working behind the back of clients. Investors that are thinking about joining eToro should first consider all of the other brokers with stronger legal records.

What is copy trading?


Copy trading is a service offered by some online brokers including eToro, that allows for retail investors to automatically copy and open a position managed by another trader.

So all action made by the trader we are copying such as buying, selling, setting a Stop Loss or a Take Profit will also happen in our portfolio to the funds allocated to copy-trading of course. 

The copying trader can also decide to manage their fund themselves whenever they please, even ending the copying altogether. Investors that allow themselves to be copied are usually compensated with a flat subscription fee or paid directly by the copying trader.

A new type of investment portfolio developed from copy-trading called “People-Based Portfolios” or “Signal Portfolios”. They’re different from traditional investment portfolios in that all of the invested funds are reinvested in other investors, instead of more traditional market-based instruments.

Copy-trading in between different platforms varies in how much is the minimum amount you can invest, the minimum number of copy trades, and more. Some online brokerages also enable traders to set a Stop Loss order so to manage their risk. 

Etoro CopyTrader

What is social trading?


Social trading is a sort of social media platform integrated on online brokerage platforms that allow traders to see the positions of their peers. It excels at making trading more accessible even to beginner investors that lack the knowledge and experience, the World Economic Forum has defined it as a great alternative to more traditional forms of wealth management.

And one of the first brokers to integrate the social trading system was eToro in 2010. An innovator in this field, they paved the way for all the sectors. It provides an alternative way of analyzing financial data. Thanks to this new trading method traders cannot only base their moves on technical and fundamental analysis but also social indicators. It has done a lot to close the learning curve for beginner traders.

Read also:

Social trading was a game-changer more specifically because of these four main factors:

  • Information flow. It allows for individual investors to gain access to information regarding the functioning of financial markets. This is game-changing, and it’s easy to see why there was once not so long ago were only investing institutions had access to this information.
  • Cooperative trading. A whole world of new opportunities is available because of social trading, investors are now able to work together by pooling funds, sharing research, tips, and information.
  • Transparency. Social trading offers investors the possibility to see other traders’ performance, positions, and most importantly gives the possibility to analyze the market sentiment. 

Etoro’s Popular Investors


To be a copied investor you have to become what is known as a “Popular Investor” and there are steps to do that:


  1. Create an eToro account
  2. Deposit at least $1000
  3. Be an active trader for minimum 2 months
  4. Have a maximum risk score of 7 or less for at least 2 months
  5. Follow the restriction on leverage
  6. Have a risk score on average 7 or lower for at least 2 months
  7. Have the full name displayed on your profile with a description of at least 150
  8. Be active on the feed

There are 4 levels to the Popular Investors Program, depending on your skill and experience, Cadet, Champion, Elite, and Elite Pro. The better results you have, the higher you will climb, attracting more and more copying investors.

The process of copying traders on eToro


1. Finding the Best eToro Traders


If you decide to get into copy trading, make sure you do it right. Choosing a random trader or just looking at his profile superficially could result in big losses. So here’s a quick checklist on what you should look out for:

  • Consistent profits. Make sure the trader you are picking has a long history, ideally a year or more of consistent profits. 
  • Low historical drawdowns. Nobody likes losses, that’s obvious, isn’t it? And that’s why you should be concerned about drawbacks. Drawbacks are unrealized losses from a current high until the stock reaches the next high. To minimize risk it is always better to look for low historical drawdowns.
  • Look out for huge percentage gains. Before setting for a trader with a huge percentage gain make sure he wasn’t just lucky looking for investment amounts, the number of trades, and percentage of winning trades. 
  • Choose an adequate risk score. To make things easier for us eToro provides investors with a risk score on the profile of every trader you can copy. The goal is to find the highest returning copy trader with the lowest risk score. But as we all know with bigger risk comes higher potential returns, if you decide to go with a higher risk score.
  • Avoid newly created accounts. Any trader with an account created less than 6 months ago, and big gains could just be on a lucky spree. 

2. Before you start


Once you have chosen your copied trader it’s finally time to start. And here are some things to know before you do:

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  • The minimum investable amount is $200
  • You can only copy 100 traders at the time
  • The maximum amount invested in one trader is $2.000.000
  • All trades have to be of $1 or more
  • If you decide to close a copy trade manually, your funds will be credited back to the copy balance.

3.Replicate Their Trades


Now that all is in order all you have to do is simply allocate the funds to your copy portfolio, select the trader you wish to copy, and let the fun begin. Sit down, and let him do the work if you choose him right he will make you quite a lot of money.

Verified investors to copy


You always want to aim for the best, in particular when it comes to money.  And certainly don’t want to be copying a trader which does not know what he’s doing. So to avoid all that here are some of the most reliable copy traders on eToro:

1) Helloise Greeff (@rubymza)


With almost 20 thousand copiers she is the most copied trader on eToro and the only woman that achieved the Elite Pro level. She has had an average return of 57% in the last year, with a moderate risk level of 5. Her investing style is based on long-term fundamental analysis but is still quite active in managing her portfolio, with an average of 14 trades a week. 92.75% of her portfolio is held in stocks, and the rest works as a hedge from market volatility 4.7% in crypto, 2% in ETFs, and 0.4% in commodities.

2) Richard Stroud (@Richardstroud)


Richard has had an astonishing 61.85% return over the last year and has amassed close to 19 thousand copiers. And what’s best is that he managed to do it by keeping the risk score at 4, making him a trader which takes low risks and has high returns, a dream. He focuses on medium-term investing and on average does around 2.5 trades a week. His portfolio is composed of 73.76% stocks, 24% ETFs, and 2.33% crypto

3) Ed Butler (eddyb123)


Long-term investing is the name of the game for Ed Butler. And as far as we can tell it works wonders. Over the last year, he has had returns of 63.11%, and close 15 thousand copiers have given him their hard-earned money and trust. His portfolio is composed of 75.41% stock, 12.29% ETFs and quite a chunk 8.71% is in crypto while the rest 3.51% is in commodities.

Reward structure


Like we said before there are 4 levels of the “Popular Investor” program, and they all have different reward structures:

Cadet


  • Receive no monthly payment
  • Minimum AUM  $500(assets under management)

Champion


  • Monthly payments of $400 or $800
  • Minimum AUM $50k

Elite


  • Paid 1.5% or 2% of the AUM
  • Minimum AUM $500kk

Elite Pro


  • Paid 2% or 2.5% of AUM
  • Minimum AUM $10M

eToro Review Commissions And Fees


eToro fees look great and cheap at first glance. But once you start looking into it in more detail you’ll notice that well, it’s not all that good at least not in all cases. eToro is one of the few brokerages that offer commission-free stock trading, no management fees, and not rollover fee. The minimum deposit is $50 and there’s no deposit fee, the non-US withdrawal fee of the minimum of $30 costs $5. All good ‘till here right?

Unfortunately, the average spread when trading CDF crypto is by all accounts quite high and ranges from 0.75% to 4.5%. That’s a lot more than other platforms. Another con is the inactivity fee if you have not opened your account in more than 12 months eToro will start charging $10 a month.

So overall eToro does not have the best fee structure, and you might want to consider elsewhere if that was your primary concern. 

Can you be a ‘copytrader’ on eToro and be profitable?


Yes, eToro copy trading can work and make you a lot of money. However, and this is vital to remember, like all investing it involves risk. Even if you are just copying a trader you should have some knowledge of how trading works and what’s happening with your money.

Make sure the trader you are copying is knowledgeable and experienced, don’t just blindly give your fate and trust to just anyone, that’s should go without saying. If you choose the right trader and look at all the criteria you could see big returns, sometimes even over 100% in a year. But be cautious, and keep your eyes open, you should always know the rules of the game. And never invest what you can’t afford to lose.

Are eToro fees competitive?


eToro is among the very few brokers to offer fee-free stock trading, so without a doubt that part of their business model is competitive, to say the least. And even some of the non-trading fees such as the $5 withdrawal fee and the absence of a deposit are in line with the industry average.

What is not so great is the elephant in the room. The huge spread of DFC crypto trades, as we said before, goes from 0.75% – 4.5%. But hold on a minute what does that mean exactly? Well, in short, if you buy a crypto coin for $100 and the spread is 1% you will end up paying $101, and eToro will take that $1 difference. That may not sound like a lot, but putting it into perspective a 0.75% spread on Bitcoin (the lowest on eToro) which today costs around $58000 comes at around $435, that’s not pocket money. 

The industry average for centralized crypto exchanges on a global scale is 0.25%, so if you are serious about trading crypto you might be better off also considering other options.

eToro Copytrader Experiences and Review: Is it worth it?


It all depends on how you decide to use it. Copy trading is a tool, and all tools can be used well or not so well. There’s a wide array of copy traders to choose from, good ones as well as bad ones. It’s pretty obvious that giving your trust and money, maybe even a lot of it, to a total stranger without doing your research first in well, totally irresponsible madness. Unfortunately, there are a ton of people who fit that description more than you think really. The key is, simply don’t be those people. Common sense ain’t all that common.

So in other words and I cannot stress this enough, do your research. Don’t just copy a random trader, make sure he knows what he’s doing. How do you do that? You have to know at least a bare minimum to analyze the data that eToro so kindly provides. It does, fortunately, give us the average monthly and yearly returns or losses, years active, portfolio allocation, average weekly trades, risk level, and much more. Make sure nothing is out of order and everything is in line with your investment goals and risk tolerance. On top of that you can also decide to play it even safer and only copy traders with an Elite or Elite Pro level so you are sure that he is both competent and experienced. And you can even set a manual stop loss to further minimize risk.

Most of all, do your research and never leave anything to chance, and you could see average yearly returns that beat the S&P 500, consistently averaging 30% a year or even more. And please remember, with all trading tools copy-trading in particular there is always a risk. So please, do not invest more than you can afford to lose. That’s the golden rule.

What are some other crypto copy trading platforms worth knowing?

Other popular solutions for copy trading that offer crypto are PrimeXBT Covesting and Coinmatics.

FAQs


Is eToro regulated?


Yes, eToro is regulated by the CySEC (Cyprus Security and exchange commission) in the EU, authorized by the FCA (Financial Conduct Authority) in the UK the FinCEN ( Financial Crimes Enforcement Network) in the US, and the ASIC (Application-Specific Integrated Circuit) in Australia. A lot of online brokerages and financial service companies choose to be regulated by the CySEC due to how loose regulation concerning this sector is in Cyprus.

How does eToro copy work?


eToro excels at making copy trading accessible and easy to use for all traders, even beginners. All you have to do is open an eToro account and search for the top social investors. When you spot a trader you’d like to copy, allocate your portfolio funds for copying him and you’re good to go.

Are eToro profits taxable?


Yes, they are. It’s the traders’ responsibility to calculate how much he owns depending on his country of residence and of course, report it on his tax returns. Different countries have different laws, regulations, and rates regarding taxation so you’ll have to research it yourself. eToro may be required to provide your tax information to your local tax authority, with guidelines of the Foreign Account Tax Compliance Act (FACTA) and the Common Reporting Standard (CRS).

Is copy trading a good idea?


Copy Trading is an investing tool. And like all tools, it all depends on how you use them. It can be a good idea if you chose the trader to copy based on their competence instead of gut feeling, eToro provides you with objective criteria and all the data you need to make the right choice.

Is eToro copy trading worth it?


It can certainly be worth it, but the keyword is knowledge. You have to know how to choose the right investor to copy. If you choose the right investor, by using the data that eToro offers then yes, you will have good, steady returns sometimes even 30% a year.

Is eToro good for beginners?


eToro is a good platform for beginners, it’s easy to use and offers a friendly interface. The fee-free stock trading also makes it affordable to people with not that much money to lose.  And thanks to the integrated social and copy trading option the learning curve for beginners is greatly diminished. Although it may not be ideal for more experienced stock traders and crypto investors due to the high spread.

What’s the catch with eToro?


Well, like most things the catch is there, unfortunately. Although eToro does offer fee-free stock trading and cheap forex trading which is great, you will still have to pay non-trading, fees, inactivity fees, and the extremely high splits on crypto CFD trading and other commissions and hidden fees. 

Is eToro really free?


No eToro isn’t free. It’s a business like any other and it has to create revenue somehow. It does this by charging non-trading fees, such as the 5$ withdrawal fee, high inactivity fees of $10 a month if you haven’t logged into your account in more than a year, high CFD crypto spread ranging from 0.75% to 4.5%, and other commissions and hidden fees. But it is one of the few brokerages that offer fee-free stock trading and also has a low forex spread.

8.8 Total Score
eToro

Ease of use
9
Fees
8
Supported assets
9
Features
8.5
Reputation
9
Security
9
Customer support
9
PROS
  • Regulated and safe to use
  • A lot of traders to copy
  • Rich educational resources
CONS
  • Higher fees
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CaptainAltcoin's writers and guest post authors may or may not have a vested interest in any of the mentioned projects and businesses. None of the content on CaptainAltcoin is investment advice nor is it a replacement for advice from a certified financial planner. The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of CaptainAltcoin.com

Torsten Hartmann

Torsten Hartmann has been an editor in the CaptainAltcoin team since August 2017. He holds a degree in politics and economics. He gained professional experience as a PR for a local political party before moving to journalism. Since 2017, he has pivoted his career towards blockchain technology, with principal interest in applications of blockchain technology in politics, business and society.

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