When you want to try something new like investment trading, where do you start?
You could read up on the subject, take a course or you could follow successful people and understand everything they do.
When you want to be really good at something, it’s always good to have a group of people around you who you can learn from and bounce ideas off.
So if you want to get into the world of investment trading the eToro trading platform could offer you just that. A social network of successful traders where you can see everything they do, learn from them and even copy them.
What is investment trading?
Before I talk about eToro it might be worth me clarifying what an investment trading platform actually is.
An investment trading platform is basically a website that allows you to buy and sell shares in listed companies. Some trading platforms also allow you to buy and sell currency and investment funds like ETFs.
So for example, if you wanted to own a tiny piece of Netflix, you could buy some shares in Netflix through a trading platform.
The trading platform will store all the details of your trade and will tell you how many shares you own in each company you trade on, and what the current value is. This is called your portfolio.
Now most trading platforms are quite boring. They will allow you to search for the shares you want to buy, will have information on the company, will allow you to trade it and that’s about it.
eToro is a very different trading platform.
The eToro investment trading platform
The underlying philosophy of eToro is to make trading more sociable and to use different ways and ideas when it comes to deciding what shares to buy.
Here is a very high level overview of eToro. I will delve into the system in more detail in the coming weeks using videos. So make sure you subscribe to my weekly emails so you don’t miss out.
Who are eToro?
eToro was created by 2 Israeli brothers back in 2006.
They came up with the concept of social trading, using technology to power different ways of trading stocks and shares never before seen.
They have offices in Cyprus, London and Tel Aviv.
eToro has over 3 million users and is fully authorised and regulated by the UK Financial Conduct Authority.
How does it work?
Just like any other trading platform you open an account online.
You can start off using a virtual account which is basically a practice account where you use pretend money to trade. This helps you get familiar with eToro and how the website works. It also gives you a chance to practice you trading strategy.
Once you are ready to trade properly, you deposit your cash into your trading account, search for the company you want to buy shares in and hit buy.
Unlike normal trading platforms, as well as setting up a watchlist of companies you want to keep an eye on, you can also keep an eye on other traders.
This is the big thing about eToro. It is a very open and transparent site that allows you to see what other traders are doing, what trades they have made, companies bought and sold and how successful or unsuccessful they have been.
These are not investment professionals, these are other traders who are in a similar position to you and have all sorts of trading strategies to try and make money.
eToro has some really interesting features.
As well as being able to see how successful other traders are, eToro takes it a step further and allows you to copy what they do.
They call this CopyTrader. By selecting to copy a trader the system will automatically carry out the same buy and sell trades as the trader you are copying in real-time.
If there are a few traders you like the look of then you can also use Top Trader CopyFunds which group together some of the most successful traders on eToro and allows you to copy their trades.
For those of you who are perhaps more experienced in trading and have had success doing it, you might want to check out eToro’s Popular Investor service which allows you to earn a separate fee depending on how many people copy your trades. It’s a bit like being a fund manager!
More recently eToro has added the ability to trade cryptocurrencies.
What does it cost?
One of the good things about eToro is that their costs are easy to understand, especially if you only trade in shares as opposed to currencies and other types of assets.
eToro do not charge any management fees for holding money on their platform. Their fees are built into the price you buy and sell your trade at.
Overall their fees make them very competitive when compared to other brokers.
There are a few other fees for withdrawing money from the platform and inactivity.
What’s good about eToro?
If trading is something you are keen to get into then eToro could be a really good place to start. It’s a bit like a social network of trading where you can read lots of different views and styles. Plus the virtual practice account is really handy to get you started.
It feels like you are joining a club on eToro.
eToro are constantly coming up with innovative ways of trading which makes them massively different to any other trading account. They are changing the world of trading.
Longer term, if you are really successful there is the realistic prospect of earning money from eToro by being a Popular Investor and having other people follow you.
What’s bad about eToro?
It’s important to understand the difference between trading and investing.
Trading is very short term, meaning you may only hold shares in a company for a few days on the basis you are trying to make a quick profit.
You will see lots of traders on eToro who have made massive gains in the space of a year. But this is very high risk and you could just easily lose big and ultimately lose all your money very quickly.
Investing is much longer term, usually 10 years plus. You are making a long term commitment into a company on the basis it has great long term prospects and you think it will grow your initial investment significantly.
eToro definitely falls into the ‘trader’ category and therefore you will be expected to trade on a regular basis and commit significant time to coming up with your trading strategy. In fact eToro will even charge you for periods of inactivity.
I really love the innovative features of eToro and I love the way they are constantly pushing the boundaries.
I can’t emphasise enough though how risky trading can be and you really need to do your research if this is something you want to get into.
QUESTION: Have you used eToro? What do you like and not like about it? Please share your thoughts in the comments below.