Control Online Trading Risk

eToro initiated responsible trading to protect traders from emotional decision making that can result in taking unnecessary risks. Novice traders in particular tend to rely more on “gut feelings”, because they don’t necessarily have a lot of experience in financial trading to make rational and informed choices. For example, to a person unfamiliar with the foreign exchange market it may seem like a good idea to start online trading with the highest leverage in order to maximize profits, whereas in fact it exposes their position to maximum risk. This risk taking behavior is not limited to leverage settings, but can also express itself in online trading portfolio diversity, or even in social trading portfolio diversity as it is reflected in the trader’s copy trading activity through eToro’s social investment network.

Responsible Trading

In order to help traders avoid making rash online trading decisions, eToro provides the trader with a safety net:
1. Default leverage settings of 1:100 max
2. Maximum 20% from available balance can be placed in one trade
3. Maximum 20% total balance to copy one trader

The key factors of smart investing are low leverage and portfolio diversity, a fact clearly attested to by the portfolios of the eToro investment network’s top traders. Thus, the eToro safety net provides traders with a responsible trading framework within which they are empowered to make smarter online and social trading deliberations.

Since the launch of our responsible trading policy, we have noticed a significant improvement in online trading results and trader longevity. Furthermore, thanks to the eToro OpenBook investment network, responsible trading has had a trickle-down effect as a result of traders copying other traders who have preferred to trade within our responsible trading restrictions, an effect that has manifested itself in a 20% overall performance improvement.

To be sure, the responsible trading settings are only a prevention mechanism meant to encourage traders to adopt low risk online trading habits. Traders who are not interested in trading within the limitations of these settings can disable them very easily, and gain access to the full range of online trading options that eToro has on offer. Having said that, we sincerely recommend that novice traders in particular keep the responsible trading setting turned on, at least until they know how to factor in higher risk settings into their trading activity.