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eToro is one of the most prominent brokers and fintech companies in the world. Established in 2007, it provides services in different jurisdictions, including the UK and Australia. Its proprietary platform stands out due to its strong social features and navigation tools adapted from social media. You can trade hundreds of financial assets in a virtual environment used by 23.2 million people worldwide! But is eToro good for beginners? Find out in our guide.
Is eToro Safe for Beginners?
First, is this company safe to trade with at all? Absolutely yes, thanks to strong regulation in top-tier jurisdictions. The company is based in Israel and includes several branches, which are licensed by the FCA, the CySEC, and ASIC. You do not need to worry about security or protection of your rights.
Therefore, the question “Is eToro safe for beginners?” should not bother you at all. What’s more, this broker is well-suited to the needs of aspiring traders with little or no experience. Now, let’s take a look at the key benefits it offers.
Overview of the Advantages
eToro has quite a few features and services that come in handy for a beginner. You will have no difficulty creating an account and navigating this social digital environment, as it is very welcoming. Thanks to the focus on interaction, news feeds, and followers, the system is intuitively understandable for any social media user.
1. Easy to Get Started
The account registration process is seamless and quite fast. The procedures are fully digital, and the size of the minimum deposit is modest (just $50 in most countries).
2. Well-Designed Software
Social media users find many features of the platform familiar, which simplifies navigation. The interface is user-friendly and suitable for traders of all levels. The system is also very secure, as it uses two-step authentication. Finally, you will appreciate the clear fee report, so the cost of every decision is transparent.
eToro provides mobile access, too. Its proprietary app is well-designed, and just as secure and user-friendly as its desktop counterpart. The search function works flawlessly even on a smaller screen. You will find that all of the necessary features are always on hand.
3. Competitive Fees
Every trader must keep track of the costs, as they can eat into their profits. Here, eToro also shines. Its $5 withdrawal fee is a drawback, but you will find the rest of the conditions quite competitive. For example, you can access:
- modest trading fees,
- zero-fee stock and ETF trading, and
- average fees on forex and CFD trades.
4. Plenty of Educational Resources
Like every reputable broker, eToro will let you start with a free demo account. It offers a detailed tutorial to help you get used to the trading environment, and a plethora of educational videos. Overall, this broker is a strong educator, not merely an intermediary between you and the global markets. It is interested in your long-term success.
Things to Consider
To evaluate a broker, you need to use over a dozen criteria, from the range of accessible markets to withdrawal. All of these details are important. If you are a beginner, the most vital aspects of the trading experience include:
- A license from a reputable industry watchdog
- Excellent software for trading on desktop and mobile devices
- Competitive fees
- Diverse educational content
- Easy account opening procedures
- Modest minimum deposit requirement
- Excellent customer service
Does eToro tick all of the boxes? Generally, it is highly competitive, but our analysis has revealed a few areas for improvement: customer service, withdrawals, and strategy support.
Support Is Not Always Available
While you are guaranteed to get relevant answers from highly competent employees, do not expect them to work around the clock. Phone support is unavailable, and Live Chat is only accessible for Club members. Unfortunately, on the basic level, you have to make do with email, the FAQ section and other free resources.
Withdrawals Are Not Free
The banking pages are user-friendly and offer a sufficient choice of methods. For example, you could top up your account using your credit or debit card, e-wallets like PayPal, Skrill and Neteller, or bank transfer. The modest minimum deposit requirements and low cost of transactions are undeniable benefits.
At the same time, the deposit and withdrawal processes could be polished. You can choose only one base currency for your account. Every withdrawal will cost you $5, and deposits in any currency other than the USD entail a conversion fee.
Not All Trading Styles Are Accepted
eToro is tailored to the needs of swing traders, intraday traders and investors. You will not see any scalpers or day traders on this platform. If you are looking for a day trading broker, eToro does not suit you. Here, users may even get banned if they trade too frequently!
Social Trading Requires a Strategy, Too!
One of the biggest strengths of eToro is its social trading functionality. You can copy other users easily, but learn to narrow down your search first. This is difficult to do when you are only a beginner.
What further complicates analysis is that high-risk traders may temporarily improve their results, so they may look like attractive candidates. To find a reliable trader, pay attention to the history of their risk and return. Find out more below.
2. Cap Your Losses
One of the most important tools for every trader are Stop Loss and Take Profit. They work as triggers for automatic trades. With the former, you limit the maximum amount of loss per trade. Take Profit lets you have a position executed automatically once the desired price is reached.
Do not copy the most popular investors blindly. It is tempting, but you should do your own research and ask the right questions. Here are the top tips for independent trading and copy trading on eToro.
1. Don’t Rush into Independent Trading
Trading always has a learning curve, and you should gradually develop your own competence by following the best examples. Begin with a free demo account, which will give you $100,000 of virtual money to practice any strategies and trades. Switch to the live mode when you have confidence in your own skills, and stick to low-risk investments in the beginning.
Take time to learn from the eToro experts, too. After all, this system was built around social trading. Be patient, choose the right investors, and copy their methods to watch them work in practice. Many traders fail to give their strategies time to work, as they leave after a month at a loss.
3. Keep Calm
In the financial markets, things do not always go as planned. Losses are always frustrating, but do not let your emotions get the best of you. One of the worst mistakes is chasing losses. If a trade fails, it does not justify deviating from your strategy. Whether you are an intraday trader, a swing trader, or an investor, stick to your plan. Otherwise, you will make irrational decisions that are almost guaranteed to backfire.
4. Compare Realized Profit
When you search for someone to copy, use the level of Realised Profit as your primary criteria. It shows how much they have earned from their closed trades. High profit means that the trader has made wise decisions in the past, and their strategies have paid off. You may be surprised to discover that some of the highest-rated investors have negative realized profits, which means they closed trades at a loss.
To check this information, open the Portfolio tab in the trader’s profile, and choose the “History” view from the drop-down menu under the trader’s name. For example, a realized profit of 45% means that the user has closed trades into a 45% gain into the portfolio.
5. Keep an Eye on Diversification
One of the prerequisites for balanced trading is diversification. When you follow several users, you may discover that they are following the same strategy. This will mean that you are not getting enough diversified exposure.
To prevent this, check the information in the Bio section of their profiles, and pay attention to the Stats tab. You can see how long their trades lasted, and what assets they chose.
6. Learn to Deduce Strategy from Trade Length and Assets
Sometimes, you will see a detailed description of the strategy in the profile. Unfortunately, not every trader bothers to provide it. Here is how to identify style based on duration.
- Trades lasting less than a week are a characteristic of intraday trading.
- Trades lasting from a few months to a year are used by swing traders.
- Trades lasting over a year mean that the user is an investor.
Some traders focus on currency pairs, others prefer stocks, ETFs, commodities, or other instruments. By looking at the trade duration and the assets, you can understand what the general strategy is like. For example, you may conclude that the user is an intraday forex trader or a swing trader in the commodity markets. Long-term trades in the stock exchange mean that the user is an investor.
7. Understand eToro Risk Score
This is a great feature to know, as it lets you assess your risks without profound analysis. Every trader gets a score on a scale from 0 to 10, where 10 stands for the maximum risk, and 0 means no risk. Low-risk traders get 0-2, the highest risk is anything above 6, and scores between 3 and 6 indicate medium risk.
You can also deduce the risk from the color. Green, yellow and red indicate low, medium, and high levels, respectively. The highest risk score (10) is marked with black.
eToro will not let you copy a trader with a score of 7 or higher. However, high-risk traders may temporarily decrease their score, so they are found in the medium-risk category. To stay safe, do not copy users with 6 or more points on the risk scale.
8. Adhere to the 80/20 Principle
Trading is one of the many fields where the Pareto principle works. Entrust lower-risk traders with 80% of your funds, and let traders with a medium-risk profile manage the remaining 20%. You need to understand that higher risk is not always bad, as it can bring higher returns.
If the riskier traders have bigger draw-downs, you will still be able to compensate for the losses. However, it is natural for humans to be averse to losses. In fact, most of us would rather keep 10% than gain 10% more. When an investment fails, it is natural to feel panicky. Try to look at the bigger picture.
9. Accept Your Losses
Every trainer experiences ups and downs. Any financial strategy may backfire, as the market is always changing. Learn to regard failures as an inherent part of the game and an opportunity to get better at trading. You will have good days and bad days, and this is perfectly normal!
10. Review Results Regularly
Whether you trade through eToro or another broker, it is vital to conduct regular reviews. Evaluate your performance at the end of each week and month. Make conclusions about what works and does not work for you. Do not give up too early — as long as your strategy is solid and you copy only competent investors, profit will come sooner or later.
eToro is an attractive broker for beginners who want to trade currencies and CFDs. While it has a few shortcomings (like the $5 withdrawal fee), the pros clearly outweigh the cons. This is a safe trading environment with an abundance of educational support and peculiar social trading features that let you learn from the best.
Licenses from top-tier jurisdictions guarantee the protection of your rights. eToro is a renowned provider with over 23 million active traders. Remember that every financial expert has their ups and downs, and do not expect spectacular results from the get-go. Always follow a strategy and select your copied traders wisely.