By Adam Hayes | January 11, 2018
The brokerage eToro offers a unique way to invest, leveraging the concept of social trading, which uses sentiment and idea generation from both industry experts and everyday investors to provide insights into the markets.
The company is a leader in social trading, which leverages the analysis and opinions of experts as well as ordinary investors to help clients generate trade ideas and gain insight into the markets. Founded in 2006 in Israel, eToro now has offices in Cyprus and the U.K. Its proprietary web-based trading platform gives clients access to a range of markets, including stocks and ETFs, currencies, commodities, and now cryptocurrencies such as Bitcoin and Ethereum. (Note that eToro is not currently available to customers in the U.S. or Canada.) Users can copy the portfolios or trading ideas of other participants and also trade contracts for differences (CFDs) and spreads on a variety of products. With more than 4.5 million user accounts in 170 countries worldwide, eToro falls under the regulation of CySec and the National Futures Association.
Trading fees are built into the bid-ask spread that you'll see when you buy or sell a security. This simplifies the fee structure but can also obscure just how much you'll be paying for execution as opposed to other costs that are also included in the spread. Compared with other CFD brokers, eToro's fees seem a bit high. For example, the EUR/USD spread is 3.0 pips, while the industry average is just 0.80 pips, and the spread on the German DAX30 is 200 pips, with the industry average being just 15 pips. Clients are also charged fees for withdrawals, currency conversion, and inactivity if they don't log in at least once a year.
* Varies by region; $10,000 USD for residents of Israel. ** A pip represents 1/100th of 1%, or one basis point. *** Applies if no login for 12 months for depositing accounts (four months for non-depositing accounts). The content provided herein is for informational purposes only, and expressly does not purport to provide investment advice or recommend in any form or manner any particular investment product. Without limiting the generality of the foregoing, Contracts for Difference (CFDs) are high risk investments that are structured as leveraged products where your losses can exceed your investment. cFDs are highly speculative and carry a significant risk of loss to some or all of your capital. This may occur rapidly due to the use of leverage. For example, if prices move against you, you may be required to make additional payments (beyond your initial investment) to keep any trades open. CFDs have been the subject of increasing scrutiny, and new regulations governing CFDs recently went into effect. CFD trading may not be appropriate for everyone. You should fully understand the risks and seek independent professional advice before deciding whether to start CFD trading, including about the new regulations.
While eToro has received negative feedback from users frustrated by platform outages, very long withdrawal times, and poor customer service, it falls under the regulatory regimes of many of the regions it operates in, so you can be sure that your money is safe and your privacy is secure. Brokering services are provided by eToro (Europe) Ltd., a registered Cypriot Investment Firm (CIF), and regulated by the Cyprus Securities & Exchange Commission (CySec). In the U.K., eToro UK is authorized and regulated by the Financial Conduct Authority (FCA); eToro (Europe) Ltd. and eToro (UK) Ltd. both operate under and comply with the Markets in Financial Instruments Directive (MiFid). Though it is currently not active and does not accept clients from the U.S., eToroUSA is operated by Tradonomi LLC, which is regulated by the National Futures Association (NFA).
CFD and cryptocurrency trading are inherently speculative and carry with them a large degree of risk. Still, your money is protected from fraud or malfeasance by the regulatory agencies that monitor eToro. The company operates with a best execution policy, and it keeps client funds in a segregated account, so that they are always separated from company assets. The separation of accounts is supervised both internally and externally.
A few special features give eToro an edge against the competition. In particular, its focus on social trading offers individual customers access to the knowledge and opinions of a diverse set of minds, which they may find useful in formulating their own trading and investing strategies.
At eToro, special features revolve heavily around social trading and investing. CopyTrader makes it possible to copy the best traders on the eToro trading network quickly and simply. All you need to do is open an account and then search for the top social investors. CopyFunds extends that concept to create a diversified portfolio for long-term investing. You can also join the Popular Investor Program and earn rewards if other users copy your trading strategies; you'll receive up to 2% of the assets under management in those strategies, depending on how many people copy you and how much they invest.
eToro relies on a single-page web interface. Its clean design and flexibility make it easy to navigate and enter trades. The web platform is available in multiple languages, including English, German, Spanish, Dutch, Norwegian, Swedish, Italian, French, Russian, Polish, Chinese, and Arabic.
The eToro desktop interface is simple and clean; with just one page for controlling everything, you don't have to worry about getting lost on the site. Support is available in more than a dozen languages. The site also provides professional charting tools - just click on a ticker symbol to see real-time interactive charts.
On the downside, the website is all you get with the eToro desktop platform; there is no dedicated professional trading platform or MetaTrader integration. Moreover, if social trading isn't really your thing, you won't be maximizing the platform's usefulness.
The eToro mobile app is available for iOS and Android. The app features much of the same functionality and design elements as the desktop web version, while also incorporating functions unique to mobile devices, such as push notifications and the ability to swipe your finger to open trade tickets or charts.
- The app is easy to navigate. Tabs on every screen offer quick access to your account summary, watchlists, research, and the trade order interface.
- Commercial-free live streaming news from CNBC TV is available 24 hours a day, every business day.
- Options traders will enjoy Idea Hub, a tool that lets you explore options trading ideas.
- The Trade Calculator shows the potential profit or loss for your options strategy.
- With Mobile Deposit, you can use your smartphone to quickly deposit checks anytime
Since regulatory issues prevent U.S. or Canada-based customers from using eToro, the app is unavailable in those regions.
Web-based customer service is available 24 hours a day, Monday through Friday, using an online form. However, customer feedback indicates that response times and quality of support are less than stellar. No phone or email support is listed. In general, it appears that eToro's support services have not been able to scale as the company has grown, especially with its introduction of cryptocurrency trading in 2017. The brokerage has a Twitter account, @eToro, although that does not appear to be a customer support account.
Web-based customer service is available 24 hours a day, Monday through Friday. Response times and quality of support are not always ideal. eToro's support services have not seemed to be able to scale as the company has grown. eToro has a twitter account but they do not have a devoted customer support account.
Overall, research is not one of eToro's strong points. The company has teamed up with several third-party research providers to give clients access to basic equity research, analyst recommendations, and news headlines. These research features are available only for a select number of stocks and are absent for most currency pairs, indices, and commodities. While that sort of traditional research is lacking, however, eToro makes up for it with social and investor sentiment indicators.
A unique focus on social trading allows eToro clients to learn what other investors are doing and see how well their strategies are working for them. Clients can copy those strategies and even share their own. The momentum indicator shows what percentage of users are buying or selling in given markets, for clients who either want to avoid the herd or to join it.
Traditional research is not eToro's strong suit. Its third-party research is basic and limited to select stocks. The platform also provides little in the way of market-level research, as most of the social investing data involve individual securities or user portfolios. Fundamental analysts may also be disappointed by the lack of pre-calculated financial ratios.
While its research resources may be lacking, eToro does provide some general investor education along with advice to help clients become accustomed to its trading platform. The education center offers both text and video resources, including access to live webinars and online courses. Still, these tools are not as thorough or thoughtful as those found at some competing brokerages.
The eToro brokerage has made some effort to educate its customers and help them become familiar with CFD trading and other trading and investing strategies. The online e-courses, while somewhat basic and bare bones, could be useful to all levels of traders, from beginners to the more experienced, with progressive learning, engaging lessons, and interactive quizzes.
Adam's expertise lies in the social studies of finance and technology. He writes about the influence of FinTech on society, including innovations such as Bitcoin & blockchains, RoboAdvisors, and InsureTech. Adam has also written on topics such as behavioral finance, personal investing, financial risk, and derivatives. His past expertise includes more than a decade of professional work on Wall Street as a derivatives trader and private wealth manager. Adam is currently pursuing a PhD in sociology where I study economic sociology and the social studies of finance.
Adam received his Bachelors from Cornell University, his Masters from The New School for Social Research (MA in economics) and is currently attending University of Wisconsin-Madison for his PhD in Sociology.
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