To really learn to use eToro, you need to study and thoroughly understand the forms for executing the trading orders (if you want to do it by yourself with Social Trading) and for the automatic replication of other investors (if you want instead to invest with Copy Trading).
(Would you like to find out more about how eToro works? Read our eToro tutorials from the beginning)
You have to deepen this point because, as already said, the operational approach of this broker is not conventional to the standards, and this, for some, at first glance may create some confusion.
Let’s start with the execution form of a classic order.
65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
The eToro form for trading orders
It’s the necessary function to enable a retail trader to trade independently or to manually replicate the transactions executed by those professional investors you’re tracking.
Whether you are in the Market section, or in one of your WatchLists, trying negotiating any instruments (currency pair, share, index, commodity), you will be presented with a form like this.
Within this form you can set all the parameters needed to do the transaction.
The top shall indicate whether the transaction you are about to perform is a buy or sell. If you were wrong and wanted to enter a transaction on the opposite direction, you can do it immediately by clicking at the top of the form.
Immediately below there are:
- the ticker name and the image of the instrument in which you’re doing the transaction
- the current price of the instrument
- the change in price from the previous day, in pips and percentage
On the side you can find a small drop-down menu to set the transaction as a market order (Trade), instantly executed at the current price, or as pending (Order), to be activated upon reaching a certain price.
Selecting Order, in fact, the form will show another row to specify the price at which you want to do the transaction (Rate).
Here you have to set the capital of your account you have decided to allocate to the trading operation. To a person accustomed to the standard forms, the Amount value corresponds in fact to the safety margin blocked by the broker to allow you to open the transaction. Just below that to the right, eToro indicates what percentage of the total of your capital the entered value corresponds. On the left, instead, it indicates how many units you’re actually trading given the multiplier effect, which is the lever (Leverage).
Below, in the middle, you can change the multiplier. The value you set here will be multiplied with the Amount value to determine the actual amount of units invested. Always remember that the higher the multiplier, the greater the leverage applied to the operation will be and consequently the greater the risk too.
– Stop Loss and Take Profit
On the sides of Leverage you can set the values of maximum loss and maximum profit.
You can choose to work in monetary terms or with more traditional price levels. In the case of monetary value, below the amount you have set, you can find the corresponding market price at which the transaction will be closed, to give you a precise indication of the profit or the loss determined by the invested capital and the applied leverage. In practice, given the monetary value of stop loss or take profit that you have decided to set up, eToro also shows you at what precise level of price those monetary values correspond.
In both views, eToro also indicates what percentage of the invested capital the eventual win or loss corresponds.
Below the Open Trade button eToro finally shows how much the Rollover interest will amount, both daily and weekly if the transaction is kept open during the weekend.
As you will notice, since the Rollovers interest are calculated on actual invested units, by increasing or decreasing the invested amount or used leverage, the interest will increase or decrease in turn.
What type of trader are you?
66% of retail CFD accounts lose money
The eToro form for the trader connection
After searching and founding an investor that shows those features that meet and are consistent with your investment portfolio, all you have to do is enable the Copy Trading function on him by clicking the Copy button.
At this point you will open a form.
This form, at the top, shows the photo, the username and the real name of the trader in question, together with an indication of what was gained or lost as a percentage over the last three months.
Here you must enter the amount you have decided to subtract from your account available balance and to be invested in the activity of replication of the transactions executed by the trader in question.
The minimum capital you can allocate per investor is $ 100, with a maximum of the 40% of your available balance, or $ 50,000. If your account balance is less than $ 250, then you can also allocate all the capital, without limitation, to an individual investor.
After setting this value, eToro will calculate and show you very important information, which are:
- what percentage of the balance of your account the invested amount represents.
- the Average Copied Trades Size, i.e. what amount you’ll invest in each trade replicated by that investor on average.
The last value is vital to understand what chances you will have to replicate all his transactions. To be sure, the value must be more than 1 $ (the more the better), but considering that, below 1 $, eToro doesn’t allow the opening of the position, and therefore not even the replication of the trade executed by the investor you are copying.
If, by investing more capital, you still cannot reach the Average Copied Trades Size of $ 1, and should you allocate a capital likely to compromise the diversification of your portfolio to reach that value, then our advice is to look for something else. In the lessons of the eToro Advanced Course we will explain in detail all these things.
– Stop losses
Below the section of the capital to invest, you can set a maximum loss on that capital, at which the replication activity will be stopped automatically. By default, the limit is set to 40%, but of course you can decide to change it by clicking on the corresponding button and setting a new limit or a new capital.
As indicated, you can vary from a minimum of 5%, very narrow, to a maximum of 95%, which means almost all of the capital. As an example, if you invest $ 2,000 in an investor and set 40% of protection, if that trader will make you lose $ 800, it would be disconnected automatically.
– Copy Open Trades
If you activate this feature by entering the flag, when you will start copying, eToro will open on your account all the positions the trader has in his account at that time, but obviously at the current market prices. It’s a function that deserves to be seen in detail, because you have to make some considerations. In some cases it is good to use it, in others it’s not, and that’s why we’ll talk about it in detail in the Advanced Course.
The eToro “inverse” method
We have already said it several times, EToro has a very particular way to manage the opening of trading orders, very different from the standards that can be found in almost all the other operators in the sector, such as the MetaTrader company’s platform.
In the classic platforms, to open a trade, the user has set upstream the leverage that should be used for all the trades, and then he choses the units he wants to invest (lots, mini-lots, micro-lots). According to the capital in his account, these factors determine the amount of capital that the broker will block (making it unusable until the closing of the transaction or until the opening of an operation of equal size but of opposite sign) as a safety margin.
EToro, instead,turns the whole thing around. Being margin a blocked part of the capital, which means that is no longer usable until the closing of the related trade, the margin can also be considered as a invested capital, which indeed it is.
So, the user must decide what capital he wants to invest, then choose from time to time the lever he wants to use, and this will determine the units that will be actually invested in that transaction, or in that investor.
Having said that, in this lesson we gave you a smattering of all the necessary information to execute the opening of a trade or start replicating all the transactions of an investor.
With the lessons of the eToro Advanced Course, instead, we will talk about how, when and why it is useful to copy a transaction of an investor, or directly replicate all his strategy on the basis of his operational features, and how these can work in a wider portfolio composed by more investors.