EToro CopyTrader Review

by | Jun 18, 2015 | Reviews | 0 comments


Please note that this eToro CopyTrader Review is part of the reviews written for the old eToro platform, which has been totally changed in November 2015.

You can consult our eToro Review to find out the news characteristics of the new platform and our opinion.

However, you can still read this post to discover in more details how Copy Trading with eToro works, since the functionality has remained the same.

In our eToro OpenBook review, we observed and gave a feedback about the the social network in which the investor is catapulted as soon as he signs up with this broker, even if just for testing.

Being a real social network you don’t need real money to use it, and in fact every user has the potential to interact as long as he like with the community without ever having deposited a single dollar in his account.

The ultimate goal of those who use eToro is, nevertheless, to invest real money, and with this broker it can be done in two ways:

  1. by trading in first person through the WebTrader and taking advantage of the Wisdom of the Crowd of Social Trading;
  2. or by copying directly and automatically on your account the transactions executed by other investors and traders.

If in the previous review we focused on the first option, now we will discuss the second, i.e. the eToro CopyTrader functionality.

EToro CopyTrader Review by InvestinGoal

The procedure to start copying the operations of other traders consists of three phases:

  1. Searching for potential traders
  2. Analysing their statistics
  3. Entering the selected traders in the portfolio

This review will therefore follow this logical order.

etoro copytrader review

eToro CopyTrader

1. EToro Discover People tool

Previously called the “Guru Finder”, this eToro tool now is called Discover People, and we can start by saying that it is much improved compared to the previous version.

As in the past, eToro still proposes pre-set “popular searches” you just need to click on to display the results.

Once inside the real research tool, with a simple click on “Clear All” the investor can cancel any filter and start his research from scratch.

By default the traders are displayed in a list, with their names, photos and, subsequently, 5 data on their performance. You cannot add other columns, but it is possible, using the pull-down menu of every value, to change one or more of these standard data and replacing them with those available.

Therefore, the overall traders data we can have access to are:

  • N° of Copiers
  • Weekly Drawdown
  • Daily Drawdown
  • Profitable Weeks
  • N° of Trades
  • Win Ratio
  • Velocity
  • Exposure
  • Average Trade Size
  • Active Weeks
  • Copiers Change
  • AUM (Amount Under Management)
  • Risk Score

For each of these values, you can order the trader from best to worst, selecting a time period:

  • Last 30 days
  • Last 3 months
  • Last 6 months
  • Last Year
  • This Month
  • This Quarter
  • This Year

Apart from this, the investor has at his disposal quite a number of filters to restrict the search field.

You can filter the trader by country of origin, by the performance obtained, the instruments used (currencies, shares, indices, commodities, or other people), and clicking on “More Filters” you can access the complete instrument, where you can work with more precision using eToro pre-set values or your custom values (in our eToro course we treat this search tool in more detail).

As mentioned above, this tool is greatly improved compared to the past, when you could only use predefined searches, there was not even the option to order the traders according to the desired data, and eToro used by default Win Ratio to do that, i.e. the winning percentage.

This always put in evidence those traders with winning percentages of 100%. If to an untrained eye it may seems a good percentage, because it seems that the trader never does anything wrong, the InvestinGoal reader instead knows very well that these high percentages are the riskiest of all, because they don’t indicate that the trader never loses, but that he does not close operations that are at a loss, hoping that sooner or later they will come back in profit, which sometimes does not happen at all.

Today, investors can sort traders at will, and filter them in depth. Despite this, the only important absent among all these new data is definitely the Max Open Trade, that is the maximum number of trades kept open simultaneously. It’s a fundamental data to understand the level of risk of a trader, since the more operations are opened at the same time, the more the money invested at the same time increases, with all the dangers that this entails.

Unlike ZuluTrade, that uses only pips for the calculation of performance, eToro bases its calculations on the actual amount of money in its clients’ accounts. When calculating the performance, it takes into account also any new withdrawals or deposit of capital; to do this calculation eToro in the past used the modified Dietz formula, which, however, made the procedure more complicated.

Today, the calculation has been simplified, making the formula more simple, although the main problem remains: not knowing the actual capital in a trader’s account, we cannot personally make the calculations. We have to trust eToro on this point.

To see the performance calculation in action we have to use our own account, because in that case we are obviously aware of the actual amount.

2. Analysis of the Trader Stats

After having searched and filtered several traders or professional investors, it’s necessary to deepen the study on the most promising. To do this you can enter the personal OpenBook profile of each of them, which is something like entering their public profile on FaceBook.

– The Review Section

Here you can first observe the Summary section, which provides the data of the traders, some statistics on his performance, but above all the board with all the feed of his social activities on eToro. Here you can see if he has commented or made like in other post, if others have commented or made like in his, and in general if he’s a person who interacts and shares a lot with his audience and with the community in general. The more he’s active, the more it means he will answer direct questions or requests for clarification.

– The Stats Section

To get to the heart, however, you must go to the Stats section. Surely this is one of the section that has improved the most in the recent major eToro updates, starting from the first performance block.

Now you can view the monthly performance details of the last years, and not only of the last few months as it was in the past. As we said, the computation of the performance has improved, passing from a confused modified Dietz formula to a more simple:

etoro performance formula


E1 – is the equity at the end of the month

W – is the total withdrawals made within the month

E0 – is the equity at the beginning of the month

D – is the total deposits made within the month

In this respect, eToro has finally solved another of his major problems related to the system of traders or professional investors remuneration, connected indeed to the performance calculation. In the past the copied traders received compensations in the form of bonuses that were directly deposited on their trading account, and that only after reaching specific trading volumes could be unlocked and collected.

The problem was that they were resulting in any case as incoming money, as profits, so the automatic system were counting them together with profits made with the original trading activity. Paradoxically, if a trader had lost some money trading, but had still had many people copying his signals, he could still be in profit in that month, thanks indeed to the bonus compensation of eToro. You can imagine the confusion and problems the investors were dealing with.

Today the system has been cleaned from this inconsistency, and the performances are actually derived solely from the trading activity. Like I said earlier, we only miss to know the amount of money they actually used to make those percentages.

Below the performance’s one is another important block, namely the Risk Score and the Drawdown.

The Risk Score is a very interesting value, calculated according to a formula owned by Toro, which tries to assess the riskiness of a tool, portfolio, or trader in this case, based on different values, in particular the volatility. Currently, the system only offers statistical past data (month by month, and the last seven days in the “current” risk score), which are in any case very useful, but the real intent stated by eToro is to have also an instant score.

Just below there is an important detail about the worst daily, weekly and annual Drawdown.

To the right of the Risk section there’s that with the number and capitals of the copiers of this trader. Simply put, it’s an indication of his popularity and of how much capital he is managing, i.e. how much capital has been invested in him by the sum of all his copiers.

In the Trading sector you see finally a detail on the performance arisen from the trading activity of this trader or professional investor, so that you can observe the risk / return profile (very useful data) and the instruments traded by the trader.

The Additional Stats sector completes then the performance breakdown by adding data such as the number of transactions per week, the average time duration, the trader’s age, and the percentage of weeks closed with a profit.

– The Portfolio Section

Once observed the trader’s performance in the Stats section, you can go to observe in detail the instruments used to obtain it in the Portfolio section.

Here you can observe the composition and the percentages of the investment portfolio built by the trader over several time periods of your choice (from the last three years to the current one), and which performances he’s been able to obtain with each of these investments. There is no doubt that this section is very useful to study the possible composition of your People-Based Portfolio.

Placing the mouse on Portfolio you can access other two sections.

Open Positions shows us indeed the operations the trader is doing, and since how long. In the presence of traders who average the price down or use martingale techniques, this section is populated by a number of operations on the same instrument, open for weeks if not months, of which the most, obviously, at a loss.

The other section, the History, is, in our opinion, the most deficient of all. Here you can observe the details (very few to tell the truth) of just the last 100 trades, and in any case of no later than the last three months. The comparison with the ZuluTrade trading history here is immediate, since in the History section of this competitor we can access to a full history, with all the details, with even the option to download it in excel to do some further study.

EToro’s policy was and still is geared to simplification and to make life easier to investors. Simply giving a look to the risk score is quicker and easier than studing the history of a trader. However, this lack prevents all those who would like to do so to further deepen the analysis of the trader.

It would not hurt, for example, going to understand in detail, directly observing the operations performed, why a certain month the Risk Score has increased a lot. The investor could really understand how the trader behaves in a particular situation.

There’s no doubt then that, despite the excellent improvements of eToro regarding statistics and performance data, this of the trades history still remains the biggest lack.

3. Putting the traders in your portfolio

After the analysis phase (which should be long and detailed), then comes the time to start copying the chosen trader, i.e. to click the Copy button located under the photo of the trader.

As a member, the user is provided with a demo account for practicing, and in fact, as soon as you click the Copy button, you are given the opportunity to do so on your practice account, with the “Use Virtual Money” placed immediately at the top right.

With virtual or real money, the operation remains the same, and with eToro it’s as simple as possible.

You don’t have to choose leverages, or lots, which are more complicated to handle for a novice investor (such as in ZuluTrade). In eToro you simply choose an amount to invest on the trader, starting from a minimum of $ 100, and the system, based on the amount you chosed, immediately returns the percentage on the total of your capital, up to a maximum of 40%. Therefore it means that you cannot invest more than 40% of your capital on a single eToro trader, and this is the first security tool.

The user must then choose the percentage of maximum loss on the investment he can accept from the trader before eToro to block the replication of his trades (a necessary measure after the EU, in the last MiFID II update, equated Mirror and Copy Trading to the asset management disciplines). It starts from a minimum of 5% to a maximum of 95%.

In other words, you cannot invest more than 40% on a single trader, and you are also forced to decide the maximum percentage of the allocated capital you are prepared to lose, up to a maximum of 95%. Combined together these two systems give then a good level of security for your capital, at least to prevent a single trader to burn all the money in your account, even that invested with other.

It remains to choose, with a flag at the bottom, if you want to open immediately all the trades the trader has opened at that time, and then click on Copy Trader to begin.

EToro Copy Trader Review – Our opinion

For any Social Trader who have used other Copy Trading systems, for example ZuluTrade, or have personally traded using the famous MT4 or 5, not seeing or hearing about lots, levers or margins may seem strange at first, and the same was for us.

That said, it’s also true that, by putting ourselves in the shoes of a new investor, unaware of these concepts of trading and investment, reasoning more in terms of percentages and investments may be easier and quick to understand.

After all, our final judgment on the eToro CopyTrader functionality is just that. There are missing some data, statistics and tools that would be useful for all those investors who would like to really deepen the matter (see the max open trade, a complete history and the option of capital allocation with lots).

On the other hand, for all those novice investors, or those who have adapted to the eToro style after a little practice, this system is certainly easy to understand, both as regards the data analysis, both for the management and allocation of the resources in the portfolio.

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