For most people just starting out in the trading world, the sheer amount of charts, market data and analysis can feel overwhelming. That’s where copy trading steps in. Instead of building your own strategy from scratch, you can follow traders who already have a proven track record.
eToro has earned a name when it comes to offering the copy trading feature. Not just for how simple it is to use, but also for how widely trusted it is among retail investors.
Whether you’re dipping your toes into investing or just looking for new ways to diversify your approach, eToro’s copy trading system (CopyTrader) gives you a chance to mirror the moves of experienced traders. This, of course, is without doing all the hard work yourself.
So, if you want to learn more about this broker’s CopyTrader feature, let’s break it all down in this eToro copy trading review. Besides exploring how copy trading actually works, I will take you through what to look out for and the benefits/risks associated with it.
Copy Trading Definition
Copy trading is a method offered by online broking firms that allows traders and investors to automatically replicate the trades of another investor in real time. These investors have experience in this field and a good success history in managing profitable positions. When the investor you choose buys or sells an asset, your account does the same. It’s as simple as that.
The idea behind copy trading is to rely on someone else’s experience rather than your own. This is while you learn the ropes or just save time. At eToro, the traders available to copy are called “Popular Investors”. They are usually part of a larger community where performance stats, portfolio breakdowns, and risk levels are all made visible. That openness is part of what has made the platform stand out.
Simply put, you do not need to be guessing the direction in which a market or an asset’s price will take. eToro’s CopyTrader makes things easier by allowing you to choose someone who has enough experience and is confident in their skills. Their strategy and track record put them in a much better position to execute profitable trades.
So in a way, copy trading on eToro lets you benefit from someone else’s brain while you keep full control of your money. I find it to be an excellent tool or service for beginners, especially those who are just getting started with online trading.
How Does eToro Copy Trading Work: Technical Side
From a technical angle, the eToro copy trading system is fairly straightforward, though there’s quite a bit going on behind the scenes.
First, you’ll need to open a trading account and verify your identity, which is a standard procedure for all FCA-regulated brokers. Once that’s done, you can click the CopyTrader feature and browse through the “Copy People” section on the platform.
This is where you’ll find traders who are part of the broker’s “Popular Investor Program”. Their profiles are packed with information such as returns by month and year, risk score, portfolio allocation, and even how long they hold assets.
Now, when you decide to copy someone, what actually happens is that a portion of your funds gets allocated to mirror their trades. You set the amount you want to invest, which for eToro, the minimum is $200 per trader. Once done, your account will start replicating all their open and future positions proportionally.
The best thing about eToro’s copy trading feature is that you can stop copying at any time. You’re not locked in. And while your trades are mirrored, you can still close them manually on your end if you feel like stepping out early. That means control remains in your hands, even when the strategy isn’t.
eToro’s CopyTrader platform updates trades in real-time. That means if your selected trader opens a new position, let’s say at 9:15 am, your account opens the same position right then. All trades are executed at market rates and with no delays. This helps keep the experience as close as possible to the original trader’s intentions.
Additionally, when your copied trader adjusts their stop loss or takes profit, those settings carry over to your account too. But again, you can override them if you prefer.
How to Choose the Best eToro Copy Trader
Picking the right trader to copy at eToro isn’t just about performance. In fact, blindly following someone with sky-high returns can backfire fast if they’re taking on too much risk. Here are some useful things to watch out for:
Each eToro copy trader is assigned a risk score ranging from 1 to 10. This score is calculated based on the volatility and leverage of their portfolio. A lower score might indicate a more conservative trader, while a higher score suggests bigger swings. If you’re new, sticking with someone around 4 to 6 could be a balanced choice.
It’s easy to get dazzled by someone who made 50% in the last month. But instead of looking at one good run, check their consistency. eToro allows you to see performance across multiple months and years. That gives you a clearer picture of whether their gains are a fluke or a pattern.
Some traders go in and out of positions quickly. Others hold for weeks or months. Depending on your style, you’ll want to match up with someone whose trading rhythm fits with how you want your money managed.
You might prefer someone who trades mostly stocks or ETFs, rather than cryptocurrencies or forex. Fortunately, eToro lets you filter traders based on asset classes. Diversification can also matter here. Traders who balance between sectors may reduce exposure to sudden shocks.
While it’s not always a dealbreaker, a trader with a large following might have a more stable approach. That said, don’t just go with the crowd. Read their bio, look at their strategy notes, and think carefully.
How to Copy Trade With eToro
Copying other traders’ positions on eToro is free, but you first need to set up an account to trade. In addition, there are no management fees or hidden costs. If you need help getting started, here are the proper procedures for setting up an account with eToro and starting copy trading.
Pros and Cons of Copy Trading With eToro
Every tool has its upsides and limits, and copy trading on eToro is no different. Here are the advantages and disadvantages to note.
- You don’t need to be a professional trader to participate in copy trading. The platform makes it all very intuitive.
- All trader profiles are detailed, including stats on performance, risk, and even charts on their monthly returns.
- You can choose from thousands of traders, each with different strategies, from long-term investing to short-term trading.
- eToro doesn’t charge extra fees for copy trading. The cost is baked into the spreads, and Popular Investors are paid by eToro, not you.
- You can pause or stop copying anytime. If something feels off, you’re free to step back.
- Past performance doesn’t determine future results. Even top traders can go through a bad run.
- eToro itself is the platform. If the site has technical problems or faces outages, your trades might be affected.
- The minimum amount of £200 required to copy a trader can be high for low-budget traders.
Risks of Copy Trading with eToro
Let’s not sugar-coat it. Like any other form of investing, copy trading with eToro carries risk. Here’s a quick rundown of what to be mindful of:
- Market Risk: If your copied trader makes a poor decision, your account takes the same hit.
- Emotional Distance: Since you’re not making the decisions yourself, it’s easy to become disconnected from what’s happening. That might mean you will not act fast enough when conditions shift.
- Over-Diversification: Copying too many traders can make it hard to keep track. Spreading too thin may dilute your returns or increase your exposure in unexpected ways.
- Blind Trust: Don’t fall into the trap of assuming someone else knows better. Always conduct your own market analysis, monitor your account and stay informed.
- Leverage Risk: Some popular investors may use leveraged trades. This can increase profits, but it also magnifies losses should a trade or market move in a different direction. Understand their trading style before committing funds.
FAQs
Yes. Copy trading is legal since there is no law prohibiting traders from sharing their trading knowledge and opinion. With eToro, you will copy trade securely since the broker is licensed and regulated by world-renowned authorities.
Yes. Many traders with limited knowledge of various asset classes are earning profits through eToro’s CopyTrader feature. However, it is crucial to find the best trader to copy and always be knowledgeable about the markets you trade to easily learn from your mistakes and maximise your potential.
There are thousands of traders on eToro to copy trade, and you can find the best by thoroughly analysing and comparing their portfolios. Some of the elements to consider include risk score, returns, number of trades, assets traded, activity level, etc.
Absolutely. Copy trading is good for beginners and highly recommended. However, we advise you not to blindly dive into copy trading without understanding the asset you are trading. Being knowledgeable about an asset allows you to track your trades’ performance and learn from mistakes in case of losses.
You first need to stop or pause copy trading to withdraw funds. Then, go to your copy trading menu and click “remove funds” to transfer the money to your regular trading account. You will then withdraw your money to your bank account using any supported payment method. Remember to enter the amount you wish to withdraw and in your preferred currency before submitting your withdrawal request.
Starting copy trading is easy if you have a trading account with eToro. Simply click “Copy people” on the broker’s platform to identify the best traders to follow. You will then enter the amount for copy trading and click “copy” to automatically start mirroring the trader’s position. With eToro, you can copy trades of up to 100 traders simultaneously but ensure you conduct market analysis before making a move.
Expert Opinion
Copy trading has opened up doors for newer investors, but it’s not a silver bullet. According to eToro’s own educational materials, the platform is designed to make financial markets more accessible, but users still need to approach it with a solid dose of caution.
In the words of seasoned investors, copy trading should be part of a broader strategy and not the whole strategy. It’s one tool, not the whole toolbox.
If you’re just getting started, take time to study the traders you’re considering copying. Watch them for a few weeks without copying. Ask questions. Read their bios. See how they handle down markets, not just good days.
And always remember, it’s your money. Even when someone else is clicking the buttons.
That is why it is advisable not to rely solely on copy trading, but also consider other approaches like crypto copy trading or bots. Conduct your own research to see the profit potential in a copy trader’s or crypto copy trader’s position before clicking the copy button. Crypto trading bots, on the other hand, can provide additional automation and analysis to complement your decision-making process.
Disclaimer: 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. {etoroCFDrisk}% 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.
This communication is intended for information and educational purposes only and should not be considered investment advice or investment recom-mendation. Past performance is not an indication of future results.
Copy Trading does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk.
Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more.
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.
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