eToro was founded in 2007. The company claims to serve more than 3.5 million customers in more than 152 countries worldwide, making it one of the largest players in social trading.
Resident customers in Europe trade with eToro (Europe) Ltd, based in Limassol, Cyprus. The responsibility of the Cypriot regulator, as with many other local brokers, is one of the reasons for the doubts that some traders have about the integrity of the company and raises the question of whether eToro is legitimate or fraudulent.
But are these doubts justified? Is eToro the real deal or just another fraud? We took a close look at the social trading broker.
Facts about the eToro Broker
- Based in Limassol, Cyprus (EU)
- Active in the market since 2007
- Legal form: Ltd.
- Regulatory Authority: CySEC (Cyprus)
- Market model: market maker
Content of this article:
- Trading offers
- Trading Conditions and Minimum Deposit: Deposits starting at $500
- Trading Platform and Mobile Trading: Webtraders and Apps
- Demo account: Free and unlimited in time
- Bonus Offers: Refer a Friend program
- Step by Step guide to opening an account at eToro: Quick and easy
- Service, Support, & Education: Monday to Friday
- Some Tips
- Conclusion: Our eToro experience
1.) Trading offer
At eToro, clients can trade CFDs on different underlying values. This includes, for example, a selection of international stocks of large companies such as Apple and Facebook. Even the most important global indices such as the Dow Jones can be traded in the form of “Contracts for Difference.” 19 currency pairs are available and thus at least all major currencies are present. Also some raw materials like oil, gold, and silver are also available.
In addition, the focus is, of course, especially in the field of social trading. The principle behind the novel commercial innovation is simple, similar to Facebook, and Twitter, users can follow other users or in eToro’s case, traders follow other traders. In contrast to the social media, however, traders do not receive trivial videos or latest updates on their whiteboard, but the trading decisions of the other traders. This can not only be followed, but it is also possible to copy the trades directly/automatically.
Of course, these copied trades can be customized according to your own needs, especially regarding the leverage used and the size of the contract itself. The possibilities in this area are enormous and eToro is one of the absolute market leaders in this regard. As a general rule, you must invest at least $ 100 in another investor. A maximum of 20 investors can be followed at the same time, so in principle a deposit from other traders can be put together.
The system automatically takes over the creation of all positions, so that no loss of time arise. The follower receives exactly the same trade that the “main trader” used. After all, the price is an important criterion when deciding whether or not to open a position; deviations in the range of just a few pips can lead to significantly higher profits or losses.
Of course, investors can intervene in the system at any time and override it. If you do not want to follow a specific position, you can close it manually. It is also possible to influence the origin of this position. In addition, similar to traditional automated trading, rules can be created. Then, for example, only certain base values are followed or other stops are built in.
Conclusion: eToro offers its own traders CFD trading. Underlying values include instruments such as stocks, indices, commodities, and currency pairs. In addition, the focus is clearly on social trading, where eToro is the absolute market leader. The return opportunities for traders are enormous and the capital can be spread widely to a maximum of 20 traders.
2.) Trading Conditions & Minimum Deposit: Deposits starting at $500
There is usually no evidence of actual, demonstrable overreaching of traders by Market Makers (MM.) The fact that other market models are suggested to very high-turnover traders, is due to the cost structure. While ECN and STP brokers generally use a degressive fee structure, MM’s cost curve is typically constant, because MM only generates its margin above the (usually fixed) spread and does not require commissions.
eToro is a market maker and this means that when trading contracts for difference, fees are charged in the form of spreads. The eToro spread is fixed and is at 3 pips for the EUR/USD currency pair. The price of indices is a lot more expensive and the spreads for the Dax are for example 300 pips. The minimum deposit at eToro is $500 and there are eight payment methods available for an eToro deposit. There are also limits and these depend on the chosen payment method.
Since eToro advertises offensively with social trading applications, a critical view must not be missed. Is eToto legit or fraud? It is conceivable that eToro presents the results of other users in a particularly positive way, thereby leading other traders to higher sales. The all-clear signal can also be given on this point: the option of a cost-free and risk-free demo account also includes the social trading platform OpenBook.
Conclusion: As a market maker, eToro charges order fees in the form of fixed spreads. Especially favorable is the trade with currency pairs and here the spreads begin with 3 pips. For social trading, eToro provides the Trader database OpenBook and a free, unlimited demo account. The minimum deposit is $500.
3.) Trading Platform and Mobile Trading: Webtrader and Apps
Whoever trades on eToro, does so via an in-house, web-based platform. This has been specially developed for social trading and supports all necessary features. The trading application is straightforward and clear, and even the inexperienced trader can quickly find his way. Especially popular with users are the professional charts at eToro. These are characterized by the large number of existing technical indicators and by the different chart representations that support them.
An eToro app can also be found, both for the web platform and for the OpenBook. Both on the smartphone and on the tablet, the apps can be used and the traders get everything they need for successful manual trading or for social trading.
In the field of social trading there are enormous opportunities available that can hardly be found in any other provider. Similar to traditional order additions, the copying of trades can also be controlled. At eToro, the following social trading opportunities are available:
a. Copy all trades
As the name suggests, a trader is almost blindly trusted. All his positions are taken over, whereby the position size is pre-set. It is possible to use both more and less capital than the other investor.
b. Copy only new trades
In principle, this model hardly differs from the former. The only difference: With “Copy new trades only,” the system starts copying only from the time of setting. With “Copy all trades” also currently open positions of the trader are taken directly into the portfolio.
c. Copy Stop Loss (CSL)
The order supplement should be well known from conventional CFD trading. It enables clearly tailored risk management. It works as follows: Trader A copies Trader B for a total of $1,000 trade. In addition, Trader A installs a CSL with a simple mouse click, which is 40 percent. Trader B unfortunately has a less good trading day and wins only a few positions. Overall, a return of 100 dollars is made. At the same time, many positions do not end up in the money, the loss is 500 dollars! All in all, of the $1,000, only $600 are left – which corresponds to a loss of 40 percent. At this moment, the CSL comes in and disconnects the trader from Trader B. The remainder of the balance is transferred to Trader A’s account.
d. Copied Trade SL
The addition of Copied Trade SL also serves as a risk management measure. Basically, this prevents copies of individual trades from being copied. An example: Trader A copies Trader B and has a total of $1,000. Trader B has $1,000 in the account and opens a position over 100 dollars, that’s 10 percent of his assets. The system copies this position for Trader A. Now B decides to invest another 10 percent of his assets. This will not be accepted for A. But: It is indicated that 80 percent of its assets are blocked. Say: The additional 100 dollars are not invested, but as additional security deposited.
e. Pause Copy
This relatively new feature is a kind of emergency switch. If the trader presses this, no new trade will be created. This allows for a fundamental review of the current portfolio composition when losses are occurring. However, existing positions are not closed because an abrupt closure would not make sense. Here, as mentioned, the trader has the opportunity to perform manual actions.
Conclusion: eToro provides its customers with a web-based trading application that allows both manual trading and copying the trading strategies of other users. The web application is characterized mainly by the professional charts and it is also available as a mobile version for smartphones and tablets. In the field of social trading, the trading platform is very mature. There are sensible ways in which risk management can easily be handled. For example, all copies can be ended with one click.
4.) Regulation – Trustworthiness
Is eToro legitimate or fraud? A look at the regulation provides valuable information. The responsible Cypriot financial regulator CySEC is in fact not quite up to US or British standards. Nevertheless, investors do not have to sign a blank check. Cyprus is an EU member and has ratified the EU Financial Market Directive MiFID years ago. The EU’s fundamental prudential standards are therefore also mandatory for eToro and all other Cyprus based and CySEC regulated brokers! Some of the allegations that brokers harbor, such as eToro scams, target the underlying market model.
eToro has been operating as Market Maker (MM) since the company was founded. MM do not forward orders from their customers to the market or a liquidity provider, but instead set buying and selling prices and, if necessary, secure larger net positions in the market. This, in fact, creates a potential conflict of interest. if the customer buys, MM sells and vice versa.
There has been criticism of MM market models as long as the models themselves came into being. It is no secret that professional traders with a monthly turnover volume of more than ten million dollars are better off with ECN and STP brokers. However, because of this finding, market makers such as eToro impute fraud is unreasonable suggestion.
Conclusion: As a Cyprus-based broker, eToro is subject to regulation by the country’s regulator CySEC. Like the BaFin, this authority is subject to the EU-wide directive for financial markets. Thus, there can be no doubt about the legitimacy of this broker.
5.) Demo account: Free and unlimited in time
Traders that want to try trading in advance with eToro, the broker offers a demo version free of charge. The account opening is fast and largely non-binding and the trial version of the web platform is available indefinitely. Realistic trading conditions including real-time courses can be found and with one click the user can switch between the live and the demo version. In this way, both beginners and experienced traders can benefit from this offer.
Conclusion: With eToro, it is possible to use a free & unlimited demo account. This provides realistic trading conditions, including real-time pricing, and the full range of the trading platform’s capabilities. The demo account can be used indefinitely.
6.) Bonus Offers
Whether eToro is a legit or fraudulent company, of course, cannot be measured on the bonus offers. However, any bonuses for some traders are an important aspect of brokerage choice. At eToro, for example, there are rewards for frequent traders or rewards in the form of eToro credits for referring new customers/clients. There is a separate section on the broker’s website where all information can be found.
Conclusion: Although the Social Trading Broker offers a conventional bonus, traders can secure additional credits through certain services.
7.) Step by step to the eToro account: quick and easy
Opening an account opening with eToro is very easy to do. The broker creates a new account when the new customer registers via Mail, Facebook, or Google+. Then the web platform can be viewed and also the OpenBook can be studied. If you want to make a deposit, you can do so without the need for a more extensive registration. Only with a disbursement a complete registration becomes necessary and this includes an identity verification.
Conclusion: To open an account with eToro, you only need to enter your e-mail address, or use your Facebook account or Google+ account. A deposit can also be made easily too. A complete registration is only necessary if a payment is to be requested.
8.) Service, Support, & Education
Customer support is available via email and telephone. Live support employees can be found from Monday to Friday from 10am to 3pm. On the website, the broker advertises with a 24/7 support. However, by clicking on the corresponding link, you only get to the FAQ section, where you can type in your own question in a corresponding window. eToro also looks after the education of its own customers. These include, for example, free webinars, e-courses, and interesting trading tips.
Conclusion: At eToro, customer service representatives are available most of the time and the contact can take place by mail or telephone. Those who want to continue their education can visit the in-house training center of eToro and find there, webinars, e-courses, and trade related articles.
9.) Some tips
eToro provides its customers with eight deposit methods. The choice of the method should be done with caution, because the change of the chosen method takes some time. Unverified accounts can be capitalized at a maximum of $1,000. So if you want to deposit higher amounts, you should do a complete registration including the verification procedure. Withdrawals are subject to fees at eToro. Up to $25 will be charged per withdrawal. Thus, it is advisable to make a large rather than several small withdrawal requests in order to keep the fee amount as low as possible.
10) Conclusion: Our eToro experience
The danger that eToro is a scam seems extremely unlikely. The history of the trading platform, which has lasted for seven years, speaks against it.
But the fixed and rather high spreads are probably too high for professional and very active traders.
The demo account option and the eToro Openbook are attractive for newcomers. EU regulation meets important minimum standards, so that a fair offer can be expected.
In addition, several million traders trust the provider, which is mainly due to the offer in the field of social trading. Nevertheless, the broker sets a clear signal, especially when it comes to the question of whether eToro is legit or fraudulent. In social trading, the broker plays out his true class. Investors can follow up to 20 other traders at their own discretion, resulting in both returns, and learning effects. At eToro, this system has become so sophisticated that there are various risk management options available.
Facts at a glance
- Trading conditions
CFDs traded on currency pairs, stocks, indices, and commodities
As market maker, eToro has fixed spreads
Spreads start at 3 pips
Support by mail and via telephone is available
Staff can be reached from Monday to Friday from 10am to 3pm
- Deposit and withdrawal options
Eight payment methods are available
Withdrawals have high fee, up to $25
Broker is well trusted
- CFD Broker Bonus
eToro has a referral program
- Usability of the platform
Professional charts for extensive price analysis
Unlimited demo account available
- Mobile Trading
App available for Webtrader and OpenBook
- Maximum and minimum limits per trade
- Additional options
Specialist article about trading
Regulation is carried out by the CySEC