eToro Review – Should you go for it?

Abstract

We have put this eToro review up for you so you will know what eToro is, how it works and if this trading platform is right for you.

eToro was founded in 2007 in Cyprus. It is well known for it’s extreme and detailed attention to social and copy trading, a strategy that has earned them rapid growth and over 10 million trading customers globally. This focused service is also enjoyed by cryptocurrency traders on eToro.

One of the main advantages of this trading platform is how easy it is as a trader to make use of their copy trading system. eToro is notorious for it’s many traders who allow their trades to be copied by others whilst following risk control rules.

This feature on eToro, this accessibility, makes it able for account holders to copy strategies and trades of successful clients, both in real time and automatically.

Although there are other brokers who do the same, not many have pulled it off quite as well as eToro has also in the USA. Copying trades from others does not necessarily guarantee any gains or losses.

eToro might have weaknesses when compared to other forex brokers, but it’s trading platform is well catered for traders with an average understanding of crypto and forex trading.

When trading on eToro you might either like the platform or not like it at all, especially because of it’s high forex trading fees or it’s customer service which is offered online only.

Trade issues, account enquiries and various problems are handled through a ticket and chat system. Additionally, they have a FAQ database to support and add extra help. The one drawback of eToro is that it doesn’t provide any hand-holding or real time contact, a factor that could rise their customer complaints.

To open an eToro account, you need $200 (only $50 for Australia and the US). Withdrawal fees are quite high, higher that most other brokers at $25, and that is exclusive of banking costs.

Although paying high withdrawal fees is pretty annoying, a bigger annoyance especially for more experienced traders is lack of proper connection.

eToro does not provide for ways to hook up third party software or algorithms like Metatrader 4 onto their datafeed, because they do not have an API interface and no VPS hosting.

Their lack of an extensive range of products, coupled with wide spreads, is likely to send off prospective experienced traders to other brokers.

Pros & cons of eToro

Pros

Cons

  • They have an impressive crypto catalog
  • Very little customization
  • They allow copy trading
  • Their software is not standalone
  • Their charts are robust
  • They have no news streaming

eToro – Pros & Cons of eToro

Security

Pros

Cons

  • Most of clients belong to big financial institutions
  • No banking license
  • Protected negative balance
  • Not on any exchange
  • Very well known in fintech world
  • No publicly available financial information

What are the regulations of eToro

eToro is compliant with ESMA (European Securities and Markets Authority) rules, and is authorized through CySEC (Cyprus Securities & Exchange Commission), a fact that could be a problem for the broker as the 2012 financial crisis of the Cyprus Republic might still be fresh in their memories.

How safe is eToro?

Other licensing that eToro holds is that of the UK’s FCA (Financial Conduct Authority), which has more thorough risk disclosure requirements. eToro admits through the fine print of their legal documents, that they can hold funds belonging to clients outside the EEA (European Economic Area), which might increase risk in the event of a bank default. However, they do provide UK and EU brokers default protection in the range of €20,000 or £50,000.

And how secured are you?

There is no stop-loss protection or extra covering with insurers, while their order entry interface seems inadequate as it has no proper risk management features except the common trailing loss and stops. A further negative is that for cryptocurrencies stop losses can not be lower than 25%, a fact which might increase investor risk.

  • With the ESMA rules that came into effect in August 2018 regarding negative balance protection, clients enjoy protection as they cannot lose more than 100% of the value of their account.
  • eToro offers two tier phone-based authentication as well as standard SSL encryption.
  • With well-written documentation on the best way to execute trades as well as policies on conflict of interest, it builds clientele confidence in the company.
  • Their fully disclosed fee structures create transparency.

Desktop Experience

eToro review - web trading platform
eToro review – web trading platform

The eToro trading platform is entirely web-based and offers a completely complex-free interface that is easy to use. This is a major plus point for the company as both experienced and inexperienced traders can easily scroll through and use the features. Their charts are fully featured, including a number of drawing tools and 66 indicators.

eToro review - charting tools
eToro review – charting tools

There is no backtest function but there is extensive CopyTrading and CopyPortfolio data. Their news link is very disappointing as it opens up onto a social forum with a number of client posts but no substantial information. You can customize and save a watch list on eToro, but their order entries lack risk management.

Every watch list you save will allow you to view buying and selling percentages of clients in real time, for quicker sentiment analysis. Both CopyTrader and CopyPortfolio features can be automated to see positioning in real time.

Mobile Experience

eToro review - Mobile trading platform sample
eToro review – Mobile trading platform sample

eToro’s mobile versions of their trading platform allows you to easily sync data between both Android and iOS devices. The menus on mobile are well-designed, although having fewer charting features and not that much customization. The menus of indicators are smaller to five basic types and the order entry system looks similar to their web version.

Although the watchlist has no client positioning data, users are able to set customized price alerts while getting notifications about account issues and market events.

Research Tools and Insight

eToro’s research feature is not that well-organized and appears to be very bare boned. This feature is accessible through blog articles that are in themselves not timely at all. Through a button on the mobile app there was an indication that analyst research tools were only available to funded accounts.

They do have a few well-written cryptocurrency articles, written in greater detail than those on market analysis or forex.

Education

The tools eToro offers are quite limited, their educational videos are amed solely to investing and are of questionable quality.

Pros

Cons

  • Introduction manual to eToro platform
  • Poor educational video courses
  • Free practice / demo account

As part of their education efforts, eToro has placed a link to their Trading Academy as well as a Live Webinar link in the footer of their website. The Live Webinar link led to nowhere. The educational section of their website is quite disappointing with only 11 programs in a Powerpoint type of presentation.

They have an Advanced Technical Analysis course which opens up into a couple of candlestick patterns. There is no further educational material available on the platform, other than instrument descriptions and help databases. Their Youtube video library only have a number of how-to presentations.

eToro review - learning lab
eToro review – Learning Lab

Special Features

eToro cleverly focuses on its main strengths, which are social and copy trading, social sentiment data and client and portfolio copy trading which is automated.

They also provide protection in case of negative balance for all their professional clients, even though it is not required by the ESMA.

eToro does not offer volume discount, making their platform a bit more costly than others. However, they do have an eToro Club that offers a few discounts plus some more services based on the clients account size.

Improvements would be welcome

When looking at broker-to-broker comparisons you might look unfavourably towards eToro if you do not consider their primary strength.

There are a couple of things eToro could improve on, like:

  • guaranteed stop loss and order management protection, especially with cryptocurrency trades that have limited stop-loss control.
  • Another improvement they could introduce is an API interface coupled with VPS hosting.

Thus, the strength of the eToro platform lies primarily in a trader’s ability to piggyback on portfolios of more experienced traders where the CopyTrader program is concerned, or on branded algorithms where CopyPortfolios are concerned.

Crypto trading

The platform launched a blockchain wallet on the 7, March 2019 for both iOS and Android, available in 31 U.S States. eToro offers over 15 different crypto currencies in the USA alone and over 16 in other countries, inclusive of popular ones like Bitcoin and Stellar Lumens.

Available cryptos:

  • Bitcoin
  • Ethereum
  • Ripple
  • Bitcoin Cash
  • Ethereum Classic
  • Litecoin
  • Binance coin
  • Cardano
  • Tezos – Tezies
  • IOTA
  • TRON
  • ZCASH
  • Dash
  • Stellar Lumens
  • EOS
  • NEO

Please note that in the USA, eToro provides customers only access to cryptocurrencies and not other instruments. Those outside the United States of America have access to trading on forex, stocks, CFDs as well as cryptocurrencies.

Investment Products

With only 47 currency pairs and about 19 CFDs, their product catalog is quite small in comparison to other brokers, but it covers about:

  • 1500 shares,
  • over 77 cryptocurrency and
  • CFDs.
eToro review - Investment Products - Crypto
eToro review – Investment Products – Crypto

Although each instrument can be traded long or short, it is best to read all the fine print first, as each order type does incur an overnight and weekend holding cost.

The CopyPortfolio feature adds quite an extension to the features available as it has the ability to access markets that are not directly available as CFDs.

Commission And Fees

Fees

Fees at eToro are a bit high in comparison with many other brokers. EUR/USD spreads stand at 3 pips and S&P 500 at 75 pips. These spread prices can also increase as market conditions change.

Commisions

The company has recently introduced commission free stock trading but still maintain a weekday overnight cost of 24 cents per $1,000. Over weekends this fee triples.

Apart from these fees and the charges you’ll incur at your bank, there is an additional $25 fee charged for withdrawals, which is the highest among European brokers.

Withdrawals

eToro review - how to withdraw funds
eToro review – how to withdraw funds

eToro does not allow withdrawals lower than $50. Another fee eToro charges is the one for inactivity. They charge $10 per month after an account has not been active for 12 months.

Customer Support

eToro review - customer support
eToro review – customer support

Although the eToro contact page mentions 24/7 support, they do not list a phone number, except for one in Australia. There is a help center link that leads to an FAQ plus a help knowledge base. They also have a low-tech ticketing system, a type of support not used by businesses anymore.

They do have a phone number on that page, but that only leads back to a contact page, another dead end. There is online chat for clients and there is active Twitter and Facebook communication.

Bottom line

eToro is a great fit for amateurish traders who’d rather ride on the performance of well-skilled traders and copy their trades to mimic. This in itself can be very risky as good performance alone does not guarantee a winning trade.

However, those who are more advanced may understand better the risks involved and may have in place defensive actions to counter any losses.

For those seeking a broader scope of services, better and more prompt customer interaction or competitive costs, another broker might be a better alternative.

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