Overall, having carried out an extensive eToro review it is our opinion that eToro has a strong reputation as a very well trusted and reliable broker for very good reason. They are extensively regulated by the top-tier bodies in financial regulation and have built a strong rapport among customers.
Their offering of social trading in combination with one of the most user-friendly trading platforms in the industry has attracted many loyal traders and been something of a first for the sector. The low minimum deposit of $200 is very positive for new traders looking to get involved in the industry and the steady customer support makes it a great place for all levels of forex traders.
The offering of real asset trading on a 1:1 basis is something that is also not often seen and this may offset the fact that some CFDs trading through eToro can be highly priced along with some high fees.
The only slight drawbacks of the platform come from the fact that fees are generally higher, US trading options are limited to crypto trading only, and some trading techniques like hedging and scalping are not allowed. Besides this, eToro does a lot to justify its position as a top forex broker in the industry.
eToro Pros and Cons
- Great social and copy trading features
- Broker regulated by 3 top-tier regulatory bodies
- Low minimum deposit
- Unlimited demo account
- Commission-free Fractional stocks are available
- Wide choice of cryptoassets
- User friendly trading platform
- Limited trading features in the USA
- Spreads are relatively high
- Limited amount of languages for customer support and educational features
Can you make money on eToro?
Yes, I know. You are looking for a magic formula for making money on eToro. Sorry to be direct but … there’s no magic formula.
Earning and making money with eToro is certainly possible, and there are various testimonies to prove that.
However, there is no secret formula that will make you earn money on eToro in one day.
Do you know what the real problem is?
On the internet there are many, too many “resources” trying to convince you of the contrary, that making money on eToro is a child’s play. Unfortunately, a lot of new investors have been convinced by these false promises and have followed the various “magic formulas” on how to earn money from eToro quickly.
Lots of them regret that. But here’s the best part.
In this post, as first thing, we will discuss all the false promises, misleading information and magic formulas found on the Internet about investing money with eToro.
The first step will be to get rid of all these false beliefs and give you a realistic picture of the true potential and opportunities that await you in eToro.
Finally, for you to get the best chance to earn money with eToro, we will show you our formula. Not a magic or unrealistic one, but a real “professional investment formula” with eToro, replicable by anyone.
The fake myths about making money with eToro
“Investing with eToro is a child’s play”
Let us immediately clarify that.
Making money with eToro is possible, it can be very rewarding, and it is definitely easier than retail trading “by yourself” on the financial markets.
After this, diminishing the matter and claiming it’s a child’s play cannot help but mislead potential investors.
Social Trading with eToro involves investing on very volatile financial markets (forex market, stocks, indices, commodities, bitcoin) with derivatives such as the eToro CFD (Contract For Difference, or Contracts for Difference), with the possibility to use financial leverage.
As everyone should know, the financial leverage is an ally, because it allows you to invest in the financial markets even with small capitals, but it is also a possible enemy should it be used too much and without knowing how to manage and control it.
It’s not difficult to learn how it works, provided it is done.
“You can double your capital every 1/2/x months”
Although it’s true that with Social Trading you can get very high yields, much higher than with any other investment instrument, to reason in terms of doubling cannot help but cause potential risks.
Those who try or are convinced to be able to double their capital in a short time, then they should take into account the possibility of losing it completely, in the same short period.
Making money with eToro is a marathon, not a sprint.
Small yields, for example 5%, but obtained constantly, every month and with little risk, can bring, in something more than a year, a performance of 100%, the famous “doubling” of the capital indeed.
The more you are good and prudent in the choices, the more you will increase the monthly percentage of return while maintaining the risk low. You can do it, it is possible, but it’s not an activity as simple as they want you to believe and it should not to be taken lightly.
“Just pick the top traders in the rank and it’s done”
Entrusting the choice of the traders to follow to the eToro automatic ranking, without knowing what you are doing and who you are choosing, it’s absolutely not a recommended choice.
From our experience, we have seen too many times how eToro have highlighted traders who had achieved great performance but with an excessive risk, if not fatal.
In addition to this, you should consider that the best time to begin replicating a trader is not when he has had a set of wins (the reason for which he probably climbed the rank), but rather when he is in a period of loss, the so-called Drawdown of eToro (always provided that has been verified the historical strength of the strategy applied by the trader).
Think about that:
It may seem an absurd concept, but you should consider the fact that in trading you cannot always win; other than winnings you also have losses, so it’s better to start after a losing streek in order to benefit of future winnings rather than doing the opposite.
Furthermore, we must consider the fact that not all traders are good for all situations, but every investor lives his particular condition. The size of the account, the return target, the risk sensitivity, the presence of a certain number and type of traders or popular investors within your people-based portfolio are determining factors in the process that leads to the choice of a particular trader.
“You do not trust the ranking? Trust the crowd. Choose traders with many followers”
This way of thinking is born with the theory of the wisdom of the crowds in Social Trading.
Although it is certainly valid (Wikipedia and Google are based on these assumptions), this theory is based on several principles, including that of independence. In short, the judge from the participants should be independent, not influenced by the choices of others.
And here’s the problem:
In eToro, as in all the Social Trading companies, users will self-influence each other, the crowd will self-manipulate itself. It’s enough that a trader get good performance in the short term, perhaps quite fortuitous, to get an increase of followers that automatically triggers a chain reaction in which many novice investors begin to follow him, for the simple fact that other are doing so.
The number of followers can be a fact to be considered, but only at the end, after having assesed independently the trader.
“You can start making money with eToro even with minimum capitals without risks”
It is true that with eToro you can start making money with small amounts, but you need to know how the proportional replication system of the trading signals works, otherwise you may not earn but rather lose.
The eToro system is based on a proportional replication of trades, but the proportions have a limit that eToro cannot exceed and in that case the operations cannot be replicated on the investor’s account.
Here’s another problem:
If the Popular Investor already operates with very low percentages of his capital, and you replicate it with a minimum capital, you run the risk of replicating just a part of his signals, or to not replicate them at all.
It is not absolutely necessary to have big capital.
You can even begin with a few hundred Euros, the important thing is to understand the functioning of the minimum capital required by eToro for replicating signals, in order to not get into dangerous or counter-productive situations.
“To diversify just increase the number of traders, select 5 or 10 and assign the capital in equal parts”
Diversifying is certainly one of the most important thing in the investment practice.
Far from contradicting this practice, it’s interesting to hear what a “quite experienced” investor like Warren Buffet have to say:
“Wide diversification is only required when investors do not understand what they are doing.”
I can assure you, but you can image it by yourself, that diversifying by randomly choosing a dozen of traders, assigning to each equal parts of capital, means not knowing what you are doing.
Diversification is an important step, or better say essential, regarding the creation of a portfolio, in this case of a diversified people-based portfolio with eToro.
To make money with eToro is necessary to apply a certain method at this stage, not difficult and certainly not complicated, but for sure not as easy as choosing at random and assigning parts equally to everyone.
Choices have to be prudent, and it is not absolutely correct to increase the traders number without criterion and allocate equal parts to all, but everything needs to be primarily managed according the specific risk of each trader.
“It is important that the trader makes always profit and never losses”
False and nothing more risky.
Losses in trading are more than normal. The good trader knows that the golden rule in trading is “cut losses and let your profits run“.
In EToro is very common to come across traders with high winning percentages, even close to 100%. A figure like that does not mean talent, as you can check by yourself with an eToro demo account, but simply that the trader uses trading techniques such as averaging or martingale.
Essentially, when an operation does not go as hoped, the trader does not close it, but he leaves it open waiting for it (eventually) to come back into profit, possibly opening other ones in the same direction trying to speed up the recovery process of the losses.
And here’s the risk:
Such techniques, since they can lead to having dozens of operations in loss at the same time, if not handled like a professional, are a perfect recipe for bankruptcy.
The truth is that the winning percentage is not enough to declare whether a trader is good or not. First it must be plausible, and next we must consider the risk-return strategy and how many operations the trader opens simultaneously.
“You do not need to look at all the data, just look at the performance of the last months”
Why you should only study the trader’s performance of the last months, and ignore how he behaved in the past?
The track record of a trader should be observed particularly at general level. The more the track record is long, the better it is, because you can see how the trader behaved in several occasions.