Beginner’s guide to eToro Copy Trading strategy

Etoro has one of the most interesting features available on any investing platform out there.

Copy trading.

At the heart of it, copy trading allows you to copy the moves of seasoned, successful investors on the etoro platform, replicating their every buy and sell of everything from stocks, to crypto, to currencies. You don’t even have to pay attention to what is going on, etoro’s very cool software is capable of carrying out all of the trades in real time just as the investor you are copying, executes their orders. 

One the surface, it looks like sure fire success. Set up your account to copy verbatim the trades of the most successful investors on the platform. There are large numbers of people with successful trading histories on the platform and some of the best are taking part in etoro’s popular investor program. 

The popular investor program is beyond the scope of this particular video, and not a prerequisite for copy trading but essentially, etoro rewards investors who grow and successfully invest in the program over a long period of time while not exceeding a particular level of risk in order to try to look amazing from a couple of lucky punts… The more successful these investors are, the more copiers they will attract and the combination of lots of copiers and lots of consistent success is what will ultimately drive their position on the popular investor program.  

Anyone who follows this blog will know I’m a long term investor with long term goals, Often, Etoro and the word “trading”, conjures up ideas of day traders shooting from the hip, throwing their cash around on risky bets and letting it all hang out.

I’m here to tell you investing with copy trading doesn’t mean you have to sacrifice your own investing strategy and principles to get in on the action. There is plenty available in copy trading for the long term investor and I hope to show you in this video how copy trading is a viable and feasible option for any investor to consider.

How does it work?

Well, one of the things I love about etoro is the social aspect of the platform and it occupies a fairly pivotal role in copy trading as I will explain. 

You can post information about yourself in a public profile and update your news feed, interact with other users on the platform and so on. 

I’m sure we all have our favourite discord groups, message boards, facebook groups, twitter groups and instagram pages where we like to get involved in the conversation and share ideas about investing. Etoro has this right on the platform.

So pretty much anyone who has a public profile on etoro can be copy traded. It doesn’t matter what their risk rating is or how long they have been on the platform. I’ll talk about risk ratings shortly. However, Joe Bloggs who has no idea what a stock even is, who has been on the platform for 5 minutes, and who thinks the only Amazon out there is in south america, is probably not the person you want to manage your investments for you.

Rather it’s probably wise to look toward the most popular investors already operating on the platform.

In fact, etoro themselves advise you to start your research for finding someone to copy in the Editor’s Choice section of the Copy People functionality.

And that’s what copy trading is, essentially. It’s a modern take on putting your funds under management by someone else with a few differences. It’s often pointed out that the majority of fund managers can’t beat the market on a consistent basis. 

That said, it CAN be done, and with dramatic volatility in particular sectors like tech and clean energy for example, there are opportunities to zero in with specific knowledge and try to take a chance, responsibly of course, in particular areas on the stock market. 

Coupled with the current bull cycle in crypto and it’s easy to make a case that investors who are blending their investments across stocks, commodities, and crypto could be in a position to outperform the stock market as a whole. I would even hazard a guess that as information becomes more readily available and investing as an idea begins to encapsulate more than just stock markets, we are going to see increasing numbers of people beat the market.

Indeed, in 2020, the top 50 most popular copy traded investors returned over 83% on their investments vs 16.26% on the S & P 500. Quite a difference I’m sure you would agree, but to be fair, it’s unrealistic to think that that could carry on forever. 

Further if you have done any research at all, you will know all about that stat where investment managers, on the whole, are not able to beat the market. But that doesn’t mean you will be hung, drawn and quartered for daring to reach outside an index tracker for your investments. The majority of my investing is done with ETFs and and index funds, but I also like to invest in companies and products that I believe in on an individual level as well.

Anyway – I have gone off slightly off topic here. My point is if you are thinking of copy trading and want to invest in other people’s skills, then jump on to the Copy People section of the etoro app and browse through some of the profiles listed there. In fact, let’s just visit the application and have a look at what’s on offer there.

• In the same way if you are selecting any other stock/share or etf you would carry out your own research. You would look at the financials, past performance, future projections and press releases. You can do the same with traders on etoro.
  
• It’s probably worth pointing out that ordinarily there is a minimum of a $200 investment required to copy traders, but this has been temporarily raised to $500 at the time of writing. At first I kind of raised an eyebrow at this, but when you consider traders could be opening and closing multiple positions with varying frequency it is just common sense that you would need a certain amount committed to make this work. Copied trades that would work out as less than $1 aren’t executed and that is actually currently at $1. 
  
• All your trades are executed proportionally so if a trader commits 5% of their funds to a particular position then you will also have 5% committed. 
  
• So, back to browsing traders to copy. 
  
• You can drill down with the filters to find people that match up to your kind of investing style
  
• You can read their feeds and see how they interact with their copiers and see how they deal with queries or tricky questions.
  
• No extra fees to copy trade
  
• It’s in everyone’s interests to make trades that are profitable. Etoro makes money on commission, the trader makes money and the copier makes money. Everyone pulling in the same direction!
  
• Unlike utilising the services of traditional investment managers, you can call time whenever you want on trades you don’t like the look of, or are uncomfortable with at any time. You can reopen them if/when it suits. If you go down this route too much, then you might as well ditch the copy trading. It’s my opinion if you want to do some copy trading then trust the guys and gals you picked and don’t try to second guess what’s going on.

As with any investment I would make, I would definitely be looking for a long term outlook and I would definitely seek to diversify.

No profit graph is ever going to take a straight line. As long as that long term direction points north then I would consider that a success.

At the moment, as I said, I’m copying seven or eight different traders on my Virtual Portfolio to get a feel, over a few months, just what copy trading is like. I’ve geared my choices towards folks with a sensible attitude toward risk and who are investing across a range of different markets, including crypto where I don’t really have any kind of expertise. I think this is where copy trading can be useful, because you can lean on the experience of others to get involved in investing opportunities when you aren’t an expert in that field yourself.

Just be mindful that things like 100% returns in a month or two are not sustainable returns. Anyone who says they are making 3% a day minimum guaranteed or any wally who says something like “thanks for copying me – welcome to the millionaires club” or anything cringy like that should definitely be avoided! In saying that, don’t forget their monthly trading history is recorded and the stats are available to see at any time, so people who are telling porkies here, aren’t going to get very far.

There are traders to copy for all kinds of investing styles and all kinds of markets. I would suggest you spend some time going through the profiles, history and social feeds of those you are interested in… even ask them some questions. They are real people on the end of these profiles after all, many of them with long histories and verifiable proof on the platform of their performance. 

Summary

Definitely use the virtual portfolio of $100,000 to try it out and get a feel for what works for you. It’s a kind of “try before you buy” sort of thing. There is no difference between how a virtual portfolio works vs a real life one, with the obvious exception that there is no real money at stake. But the mechanics are the same, the results are the same, the trades are the same and in every aspect of the copy trading software you can have the same experience as you would with real money.  

eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.

Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of
losing your money.

Past performance is not an indication of future results. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision.

Copy Trading does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk.

Cryptoassets are highly volatile and unregulated in the UK. No consumer protection. Tax on profits may apply.

eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro.