75% of retail CFD accounts lose money.
Founded in 2007 and based in Cyprus, eToro’s narrow focus on social and copy trading has underpinned rapid growth that now boasts more than 10,000,000 clients worldwide. The platform also offers these services in the cryptocurrency space.
The key feature of this unique proprietary platform is the ease in which an individual client is able to implement copy trading. The eToro platform features many traders who want to be copied and who follow risk-control rules. This accessibility then allows retail account holders to mimic the trades and trading strategies of the most successful clients, automatically and in real-time. While other brokerages have a similar capability, none have integrated it with social media communication quite as well as eToro has. Copy-trading in and of itself is no guarantee for either gains or losses.
Though the brokerage shows its weakness in comparison to some other forex brokers, its platform is well-tailored for those with a basic understanding of forex and cryptocurrency trading. The platform’s higher than average trading costs for forex trades and an online-only customer service portal create an environment where the customer either likes the platform as is or moves on. Clients use a ticket and chat system to fix trade issues, make account inquiries, and solve other problems. Adequate help and an FAQ database supports those efforts. Still, when traders need an occasional hand-hold or real-time contact to sort out a trade, the eToro platform does not provide this option. This is likely a big factor driving customer complaints.
Opening an account requires just $200 ($50 for U.S. and Australia), but withdrawal fees are higher than average, at $25 plus banking costs.
While a withdrawal fee may be annoying, lack of connecting technology may be a much bigger problem for more advanced traders. eToro doesn’t provide services for customers to hook up third party software or algorithms (such as MetaTrader 4 Expert Advisors) into the data feed because they offer no API interface or VPS hosting. Combined with wide spreads and a relatively small product catalog, this lack of customization could send higher-skilled clientele to other brokerages.
Impressive cryptocurrency catalog
No standalone version
No streaming news
The broker is authorized through Cyprus Securities & Exchange Commission (CySEC) and is compliant with European Securities and Markets Authority (ESMA) rules but the Cyprus domicile could be a matter of concern for some traders who remember the republic’s financial crisis in 2012. eToro is also licensed by UK’s Financial Conduct Authority (FCA), which requires more thorough risk disclosures. The fine print admits the broker can hold client funds in banks outside the European economic area, increasing risk in case of a bank default, but they provide EU and UK broker default protection up to €20,000 or £50,000.
They offer no guaranteed stop-loss protection or additional coverage through private insurers while an inadequate order entry interface lacks risk management features other than stops and trailing stops. Stop losses for cryptocurrencies cannot be lower than 25% of exposure, further limiting customization while increasing investor risk. ESMA rules that went into effect in August 2018 dictate negative balance protection so clients can’t lose more than 100% of their account value.
Security features include phone-based two-tier authentication and standard SSL encryption. Extensive documentation on best execution and conflict of interest policies builds confidence but the broker acts as a market maker and counterparty in all trades. Fee disclosures are extensive and easy to read increasing transparency, but a marketing blurb stating that client funds are held only at tier-one institutions appears flawed, given fine print disclosures.
The eToro social trading platform is web-based and geared for ease of use over complexity. Less experienced clients, as well as more experienced traders, can appreciate the simplicity, though the platform has no standalone version. Charting is surprisingly full-featured, with 66 indicators and numerous drawing tools. The charting platform does not feature backtest functionality, though the platform does have performance data from CopyTraders and CopyPortfolios. The News link is disappointing, opening into a social forum, with client posts but not much in the way of current or streaming news. Watch lists can be customized and saved while order entry lacks risk management capacity. The broker offers no MetaTrader or other third-party alternatives.
Each watch list entry shows client buying and selling percentages in real-time, allowing quick sentiment analysis. CopyPortfolios joined the CopyTrader program in 2017 and both venues can be automated to mirror positioning in real-time.
eToro mobile versions for iOS and Android allow easy syncing between platforms, with well-organized menus but fewer charting features and limited customization. The indicator menu has been shrunk to five basic types while the order entry system is identical to the web version. The watch list includes no client positioning data, unlike the web version, marking an odd omission given eToro’s business focus. Users can set custom price alerts while also receiving push notifications about market events and account issues.
Research is bare-boned and disorganized, accessed through a blog that included many general articles, and not all were timely. A Research button in the mobile app produced a message indicating that analyst research is only available in funded accounts. A few blog topics like cryptocurrencies were covered in greater detail than forex or market analysis, highlighting 2017 crypto-mania more than current events, while few articles covered instrument-specific fundamental or technical analysis.
Inexplicably, a Trading Academy link has been placed in the footer rather than the top menu. A Live Webinar link, also at the bottom, produced a page with no programs or archives. The education portal is disappointing, with just 11 basic programs in a PowerPoint-type presentation. The “Advanced Technical Analysis” course opened into a listing of simple candlestick patterns, with “bullish” and “bearish” designations. No written educational materials were found at the site, other than platform and instrument descriptions in the FAQ and help databases. eToro maintains a YouTube video library, but the tutorial section only contains platform how-to presentations.
eToro is narrowly focused on its strength, namely social and copy trading, in-platform social sentiment data as well as automated client and portfolio copy trading. They provide negative balance protection to professional clients as a voluntary incentive because it isn’t required under ESMA rules. The lack of a volume discount program keeps the platform from being less costly, though the company does offer an eToro Club program that provides some discounts and extra services based on account size. Head-to-head comparisons between the most popular forex brokers and eToro may give an unfavorable comparison if you are not considering this platform’s primary strength.
Even so, there are a few things the platform could improve on. Order management and guaranteed stop-loss protection would go a long way to reducing the risk of large losses, especially with cryptocurrency coverage that has limited stop-loss functionality.
These weaknesses could also be addressed by an API interface or VPS hosting on platform alternatives, but these options aren’t available. The platform is therefore strong for those looking to rely primarily on piggybacking the portfolios of advanced clientele (in the CopyTrader program) or on proprietary algorithms (robo-advisor in the CopyPortfolios program).
As of March 7th, 2019, eToro has launched their blockchain wallet for both Android and iOS, which will now be available in 31 U.S. states. The platform offers up to 15 different cryptocurrencies in the U.S. and 16 in other countries. Available cryptocurrencies range from Bitcoin (BTC) to Stellar Lumens (XLM). This new feature broadens their offerings to U.S. traders but makes their focus on crypto evident. It's important to note that in the U.S., eToro only provides its customers with access to cryptocurrencies. Those outside the U.S. have the ability to trade forex, CFDs, stocks, and cryptocurrencies.
The broker’s product catalog is relatively small, with 47 currency pairs and 19 commodity/index CFDs. It also covers 1,500+ shares as well as an impressive 77 cryptocurrency CFDs. All instruments can be traded on the long or short side but users should read the fine print because each venue and order type incurs different overnight and weekend holding costs. CopyPortfolio extends the product catalog because the algorithms can access markets not directly available as CFDs. And, although the broker maintains an aggressive program to avoid conflicts of interest, they act as a counterparty, setting bid and ask values that may not match consolidated market feeds.
Commissions and Fees
Minimum forex, commodity and index spreads are high, with EUR/USD at 3.0 pips and S&P 500 at 75.00 pips. The fine print also notes that spreads can widen significantly as market conditions change. Overnight and weekend holding costs are above average as well and can greatly reduce profitability. The company offers a competitive spread per side for shares, and has recently introduced commission-free stock trading, but weekday overnight holds currently cost 24 cents per $1000 of leveraged long exposure. This fee triples over the weekend but no overnight fee is charged for non-leverage long exposure.
The broker charges a $25 fee in addition to possible bank or credit card charges for withdrawals, one of the highest among European brokers. No withdrawals smaller than $50 are permitted. Withdrawal and other fees are fully disclosed on an easy-to-read fee page that contains few omissions. Inactivity fees will digest remaining account balances quickly, charging $10 per month after 12 months of no trading activity. The company does offer an eToro Club program that provides some discounts and extra services based on account size.
The contact page refers to 24/5 support but there are no phone numbers listed – except for the Australian branch. A Help Center link leads to an FAQ and help database as well as a login gate to a low-tech ticketing system, a type of support abandoned by most businesses in the last decade. A phone number link on that page leads back to the contact page, inviting client frustration. There is live online chat for existing clients. The platform-based customer service link leads back to ticket and database menus. eToro maintains active Twitter and Facebook accounts, which are used primarily for marketing and analysis entries.
What You Need to Know
eToro offers a good fit for lesser-skilled traders with limited time who want to piggyback on the performance of a robot advisor or the broker’s most successful clients. This can be a risky enterprise because few strategies work in all market conditions. On the other hand, more advanced traders and professionals wishing to allocate resources to alternative copy-based strategies are more likely to understand the risks and take defensive action when required. Retail and professional customers seeking a broader range of brokerage services, prompt customer service, and competitive costs should probably look elsewhere.
Those looking for an impressive catalog of cryptocurrencies can find what they need with eToro. See how they compare against other online brokers we reviewed.
eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
Please note that 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.
Past performance is not an indication of future results.
Cryptoassets are volatile instruments which can fluctuate widely in a very short timeframe and therefore are not appropriate for all investors. Other than via CFDs, trading cryptoassets is unregulated and therefore is not supervised by any EU regulatory framework.
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