We had the opportunity to try out some trading on eToro with nearly a very high probability of profit if we played our cards right. There was a promotion for a 10% bonus on deposits up to $1,000 USD, plus a bonus $100 AUD in Bitcoin via a NuggetsNews/eToro promotion. The conditions were not exactly clear, but it seems you needed to trade and be up or down $10 USD. We have received the bonus deposit and confirm we have later on received the Bitcoin.
To sign up, you might want to check if the Nuggets News promotion is still available for a good deal. Otherwise you could use our referral link for eToro and we both receive $100 if you make a deposit.
So here are some of our thoughts on using eToro.
Stocks, ETFs, Forex, CFD and Crypto.
Watch the spreads
eToro list the different spreads on this page. We did notice a user complaining about a 5% spread, when it was meant to be 0.75%. They later added another post with an eToro response mentioning the spreads on the fees page are not regularly updated and the spreads shown on that page are only the minimum possible. This seems to mean you need to manually check the spread each time you make a trade. This can be difficult as the buy and sell numbers are often changing quickly. It would be much more convenient for the trader if the actual spread was shown.
Know the risks
As quoted from the eToro website, "CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money."
In some countries, Australia being one of them, you can only trade CFDs and will not own the underlying stocks.
You can leverage or short (sell) your trades. Note that there are fees such as overnight/weekend fees. We are pretty wary of trading margin and stick to non leveraged trades.
Make your withdrawals count, because there is a hefty $25 USD fee per money withdrawal. This will especially hurt if you have small amounts of equity as the $25 fee may be a large percentage of your total.
Foreign exchange rates might not be so great on the way out either.
Opening an eToro account was pretty quick and easy, apart from the questionnaire glitch we encountered as described in the technical issues.
eToro only trades in USD. We found that choosing to deposit in USD and using a 0% foreign transaction card gave us a better rate (about 0.5%) than depositing in our local currency (AUD) and having eToro use their exchange rate (100 pips or 1%).
Credit card, PayPal, Wire Transfer, Neteller, Skrill, UnionPay, WebMoney and electronic wallets can be used to deposit money into your eToro account.
A popular feature of eToro is the ability to copy trades of other users. This can also be lucrative for the most copied traders, as they can earn extra money from eToro for being popular (not directly from you though). This means less confident traders can look at the results of other traders and find someone they feel comfortable with. You can copy up to 100 traders if you like.
There are also some copy portfolios. These will be built around different ideologies, like a market sector, a company using an Artificial Intelligence algorithm, or trying to copy Warren Buffet's Berkshire Hathaway company (based on public SEC filings, which means you might be a bit late to the party?) etc.
You can research who you want to copy by checking annual and monthly performance statistics. There are also risk profiles and a social news feed to see what fellow traders are talking about. You call also trial the copy trades in your virtual portfolio.
Stop losses are configurable for copy trades.
Minimum trade amounts
The minimum eToro trade amounts vary depending on when your account was opened and which country you are registered in.
Minimum to copy a trader is $200 and a CopyPortfolio is $5,000.
Dividends on stock and ETF CFDs
eToro does pay dividends on the CFDs for stocks and ETFs, "there will be dividends paid (for long positions) and charged (for short positions) for every stock trade (leveraged or unleveraged) at eToro. The dividend amount will be credited/debited at the end of each trading day, according to the number of units of stock you are holding, and will be based on the dividend amount announced for each stock".
You can trade via the browser at the eToro website and on mobile apps for Android and iOS. We found them fairly easy to use.
Closing partial positions
We found it useful that we could close a partial position if we were looking to take a profit.
We found the eToro analysis tools and analyst recommendations useful.
Here are some issues I have seen using eToro.
Australians need to pass a questionnaire before depositing money. There was an issue where even if you passed, it made you retake the test. Eventually this was fixed and I could deposit money, but I spent a fair bit of time trying to get around it.
Leverage fees issue
Sometimes when in the buying screen and you change the leverage to x1 (so no leverage), it will show a fee when there should be none. We normally make some changes and it will then show the right amount, which is no fees. When first using the platform, this was confusing us and we thought that maybe fees were incurred because it was a CFD, but it just seems to be a technical glitch.
Crypto and social trading seem to be the eToro strengths. If you are just trading stocks, you will have potentially wider choices and less fees elsewhere.
You might like to try the eToro system by using the virtual/paper trading account. You will be provided with $100,000 USD of fake money to play with and try different strategies.
There is a fee of $10 per month starting after you have not logged into the eToro account for 12 months. We believe this fee will only be taken from your cash balance and positions will not be sold to pay this. Perhaps create yourself a reminder to log in once a year. Once you log back in, eToro will stop these fees being charged for another 12 months.
Be prepared to be spammed with phone calls from eToro representatives to contact you regarding how your account is going.
How did we go?
Well so far our trades have gone well and we are up even before our bonus money. We have not tried to withdraw the money yet and so cannot test whether the comments we have seen on other sites about eToro being a scam are true. So far eToro seem legit though.
eToro Tax Return
On this page eToro let us know they are not collecting taxes for any government authorities and their clients are responsible for calculating and paying any relevant taxes applicable to the countries they live in. It is expected the client will calculate the taxes from the account statements available on the eToro website.
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