Copy top-performing investors on eToro

Learn from those in the know with automatic copy trading 

Lockdown turned record numbers of people into self-directed investors, but copy trading could be the key to investment success.

The world’s largest online investment platforms added 11 million customers in 2020, with eToro at the top having added 5 million users, according to Trading Platforms[1].

Giving more individuals the chance to have greater control over their portfolios is important for the democratisation of investing.

But every investor needs investment ideas unless they have the time or the capability to do their research from scratch. This is where eToro’s CopyTrader feature can help.

Expert insight

Deciding which cryptoassets, commodities, currencies or stocks to back can be a difficult decision for new investors.

Fund managers seldom disclose their entire portfolios and never reveal live trading activity, making it impossible for individual investors to replicate a professional.

However, CopyTrader allows users to choose the eToro investors whose portfolios they want to copy, leveraging the knowledge of their peers for their own benefit.

Crucially, your portfolio will copy everything those investors do automatically, in real time, meaning you don’t have to constantly keep watching the markets.

The average yearly profit of our 50 most copied Popular Investors for 2020 was 83.7%, far above that experienced by some of the world’s largest indices, such as the S&P 500 and the FTSE 100.

This shows the benefits of copy trading, but what is important is that you remain in control.

Shared knowledge

CopyTrader works by allowing you to select the investors you want to copy, and then deciding the amount you wish to invest in that investor’s portfolio.

CopyTrader allows investors to duplicate all of the currently open trades of the portfolio they want to copy, or they can simply replicate any new trades that are made by the copied investor from that moment onwards.

Furthermore, investors can also set their Copy Stop Loss limits, which allow them to control by how much they are willing to let the value of their investments fall before terminating their copy relationship.

So, if Investor A invests $1,000 in copying Investor B and sets a 60% Stop Loss, the copy will end once the original copy amount (of $1,000) reaches $600 — equivalent to 60% of the initially invested capital.

The $600 will then be returned to Investor A, allowing them to pursue other ideas.

Investors must be aware that if they increase or decrease the amount of money they have dedicated to copying an investor, the copy stop-loss will be recalculated.

This means that if Investor A invests $1,000 in a copy trade of Investor B’s portfolio, and the value of that copy falls to $700, but Investor A adds another $1,000 — then the 60% Stop  Loss is now calculated on the total $2,000 that has been allocated to the copy trade.

Conversely, Copy Stop Loss points can also be altered, with the range extending from 5% to 95%. Reductions in copy stop-losses can only be made to the nearest 5 percentage points.

For example, if Investor A’s $1,000 copy trade was currently losing $300, and the copy stop-loss was set at 60% (allowing for a $400 loss), the copy stop-loss could only be reduced to 65%, because moving it to 70% in this scenario would lead to the immediate closure of the trades.

It is worth noting that the minimum amount that can be invested in copying an investor is $200, and each copied trade must be at least $1. The maximum a user can invest in one investor is $2 million. A maximum of 100 investors can be copied simultaneously.

An extra level of control allows copy investors to pause their copying, enabling them to stop copying an investor without closing all of their positions.

This means no new trades will be made, however, any changes to existing positions will continue to be reflected in the copying investor’s portfolio, while maintaining stop-loss limits.

Worry-free selection

For those worried about choosing the right investor to follow, eToro has a solution.

Our Smart Portfolios are a pre-constructed mixture of various assets or investors and are constantly optimised by our cutting-edge algorithms.

The Market Portfolios either follow a predetermined market strategy, or focus on a specific market theme, such as technology, while the Top Traders Portfolios group successful investors together.

The holdings in each type of portfolio are overseen by eToro’s financial experts, who harness the power of machine learning to support their decisions.

To give examples of these portfolios, one choice available within our Market Smart Portfolios is our BigTech Smart Portfolio, which groups major companies from the tech sector into one portfolio.

Meanwhile, something like our GainersQtr Smart Portfolio groups eToro investors who have shown consistent returns and who are likely to turn a profit over the next quarter, according to predetermined parameters of our algorithm.

eToro has a wide selection of portfolios to choose from, allowing investors to gain access to the trends they believe are most compelling.

Whether it’s investing in the gig economy, drone technology, cannabis, cloud computing, renewable energy or even the pet industry, we have a ready-made portfolio for it.

Helpful tools

Another benefit of eToro is its ability to bring financial instruments that are usually reserved for professionals to individual investors.

This means that even investors with smaller portfolios can copy trade any position.

With electric carmaker Tesla’s share price at more than $650 at the time of writing, a new investor starting out with a $2,000 portfolio might now want to dedicate nearly a third of their capital to one stock.

Investors on eToro can make use of fractional shares. So, in the case of Tesla, our investor with a $2,000 portfolio could buy half a share in the car company, meaning less than a sixth of their capital was exposed to the US firm. In fact, on eToro, investors can invest as little as $100 in a stock that costs $500.

Comprehensive choice

Investors on eToro can use CopyTrader to invest in stocks, crypto assets and ETFs (exchange-traded funds) without using CFDs. All of these asset classes involve investors actually buying the underlying asset.

Commodities and indices (the latter which tracks stocks from a certain market, based on predetermined criteria, such as the US’s S&P 500, the UK’s FTSE 100 or Germany’s DAX 30) are traded on eToro solely using CFDs. It is not possible to invest in an index directly, so a CFD is used to copy the composition of the index.

In the case of indices, CFDs simply allow investors to replicate the basket of stocks that make up an index, rather than buying the stocks themselves.

Currency trading is arguably the trickiest due to the volatility of the asset class, and the short time in which investors open and close positions.

Substantial capital is required to generate profits from movements in currency, which are measured in very small units known as ‘pips’ (0.0001).

For this reason, most trading platforms offer leveraged transactions at a fixed ratio, commonly 1:100.

This means that for every $1 invested by an investor, the platform — such as eToro — loans the investor an additional $99.

This lending is known as leverage, which as mentioned previously can amplify gains, but also losses.

Currency trading is carried out on eToro solely using CFDs, which negates the need to actually buy physical foreign currency.

Due to its complex nature, copy trading could be a sensible way to gain access to currencies, however, investors must ensure they fully understand the implications of a leveraged trade.

Zero commission

Benefitting from the expertise of professional investors involves paying fees, but at eToro, we never charge any management, administration or ticketing fees.

We even absorb Stamp Duty and Financial Transaction Tax for clients where applicable; this saves clients 0.5% in the UK, 1% in Ireland, 0.3% in France, and 0.1% in Italy.

eToro makes money from charging various spreads and fees for some trades, such as short-selling, and withdrawals.

A spread is the difference between the ‘bid’ and the ‘ask’ price of a financial security, such as a stock; the ‘bid’ is the highest price at which you can sell a stock, the ‘ask’ is the lowest price at which you can buy it.

Depending on demand, ‘ask’ prices can be higher than the price of the stock itself, while ‘bid’ prices can be lower.

Importantly though, there are no extra charges levied on investors for copying the expertise of our most successful and qualified investors, meaning whether you choose your own investments, or benefit from the insight of investors with a strong track record, there is no commission.

Registering with eToro is easy and you can sign up here. Plus, those who register can get started with a risk-free account with $100,000 in virtual funds to help you get more familiar with the investment markets and eToro’s functionality.

CopyTrader is a product that may include CFDs. Smart Portfolios is a product that may include CFDs.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% 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 for information and education purposes only and should not be taken as investment advice, a personal recommendation, or an offer of, or solicitation to buy or sell, any financial instruments. This material has been prepared without taking into account any particular recipient’s investment objectives or financial situation, and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Any references to past or future performance of a financial instrument, index or a packaged investment product are not, and should not be taken as, a reliable indicator of future results. eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication.