How does eToro make money? Here’s the answer
Many people wonder how does eToro make money through the Social Trading service on its platform.
The reason is simple.
Before start investing with eToro, many want to know how this society (one of the best in the copy trades sector) generates its revenues in order to have a clear picture of the background and understand if they can trust it (to do that you have also our detailed eToro Review).
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.
In reality, the way eToro produces its revenues is quite simple compared to other companies in the Social Trading panorama (eg ZuluTrade) that have a more complex model.
EToro is a financial broker in the most classic sense.
Every new user who wants to use the Copy Trading and Social Trading service has to simply open a trading account with the broker eToro.
So, how does eToro make money in practice?
EToro simply earns through the spread it applies on each trading operation opened on each user’s account.
To offer the Copy Trading service, eToro simply connects all its Live account users with one another.
When a trader or Popular Investor opens a new position, a commission is also paid automaticallyin the form of spread.
Similarly, on all the accounts of the other investors, that are replicating automatically the operations of that trader, the same operation will be open, and another commission (always in proportion of course) will be paid.
So, in one fell swoop, eToro will gain both from the spreads of the trader or Popular Investor that generated the signals, and by all those who have replicated it.
Now you should have figured out how eToro makes money.
But above all, you should have guessed why all Social Trading company (not only eToro) slightly tend to give more visibility to those traders who usually open many positions on average.
With this I just want to reiterate the concept that, in order to choose a good trader to copy, you must only rely on your own knowledge, and avoid to simply rely on the visibility or popularity of a trader.
Better to understand by yourself, analyzing his data and his performances, whether a trader is truly deserving.
And this is precisely why we have created all the material you can find on InvestinGoal.