The Forex Broker eToro is the leading broker in the area of “social Trading”. In 2011, the eToro OpenBook was launched. With this free web-based tool, registered traders are able to see in real time what trades are exactly carried out by other traders. And the OpenBook gives even more insights. You can see exactly how successful (anonymously, as everybody is trading with a pseudonym) the traders were in the past. To our knowledge, similar data is not available at any other FX broker. As this database is extremely insightful, we have already used the OpenBook to measure how successful FX traders are on average.
By the summer of 2011, eToro launched an extension to the OpenBook, the so called CopyTrader. This extension makes it much easier to trade foreign currencies online for beginners. And it also helps to learn from other traders: CopyTrader allows you to copy successful trader with a single mouse click. Sometimes, there are over 100 people following successful traders. These followers make nothing else but automatically copying those FX transactions 1:1. Let’s take a closer look at this awesome tool. Note: We have made further tests with a demo account. Here you can read our experiences with eToro Copytrader.
How does the eToro CopyTrader work? First Experiences
Using the eToro CopyTrader is very simple. And you even don’t need a real money account, as you can use it also with the free demo account.
After logging in, click on “OpenBook”. Then click on “rankings” and choose a time period, for example “1 month”:
This gives you a list of the most successful traders at eToro over the past 30 days. Of course, the absolute gains are confidential. Consequently, the gains are shown only indexed. Thus, although this tool offers very high transparency, confidential data is not shared and all traders can continue to trade anonymously.
Because many trading strategies do not work for a long time, it could make sense to use one or three months when deciding on which traders you should copy and to often re-evaluate their present performance.
Under the tab “Stats” you can also see extended stats for each trader:
In our example, the performance is almost +200% in 3 months, which is very good. The continuous increase in profits also shows that this trader has not just made a few lucky trades. Rather, it seems that this German guy is carrying low-risk trades that continuously increase his balance.
Under the “Portfolio” tab you can get more information on the various currency pairs this person has traded in the past.
This trader allocated 94% of his trades to the most traded currency pair EUR/USD.
On the right you can see how risky the individual transactions were. The risk profile is mostly “low” or most “moderate” for this trader.
At the bottom are listed other important characteristics:
- Trades executed: The number of trades that have been carried out
- % Trades result in profits: Indicates how often the trader made a profit
- Average trade holding time: Shows how long the average holding period of a position was
Who to Copy when Using the eToro CopyTrader
Which traders should be copied with the CopyTrader? Copying the future trades of a successful person is no guarantee for achieving a profit. Simply because also in the foreign exchange market, the past performance is no guarantee for future profits. Nobody knows if the successful strategy will still work in the future, as you might probably know by yourself from your personal experiences.
Thus, it is first important to use only as much money as you can easily lose. And you should carefully analyze the traders before you start following their actions with the eToro CopyTrader. A few criteria you should watch are:
- Realized profits and share of successfully closed positions
- High number of trades carried out: rather chose a trader who earns small but steady increments of money than someone who once or twice made huge profits (this guy might just have been very lucky)
- Steady upward trend in performance: The same applies to the graphics where you can see the past performance. Avoid to copy a trader who seems to be a gambler and who has experienced high profits, but also high losses in the past
- No big losses: Avoid copying someone who had very large losses. This person does not appear to follow the basics of money management
- Time horizon: If someone successfully traded currencies over a long period of time, it seems that he has been successful in different market phases. This is better than if a person made his profits only in a few days or weeks
- Risk Profile: More cautious investors choose to copy traders whose risk profile is low
eToro CopyTrader – Frequently Asked Questions
Is it possible to try out CopyTrader without risking real money?
Yes. You can use CopyTrader also with a demo account. Here you can register a free demo account and start trading with virtual money within minutes.
How are the rankings calculated?
eToro uses several criteria to ensure that the results are balanced. They use elements such as
- Number of traded positions
- Odds of winning
- Trading activity over the time
- Holding period of positions
- Leverage / risk
- Amount of money invested in the trades
in their formula for determining the rankings. Of course, you can also copy traders outside the top-100 list with one single click.
Is CopyTrader free to use?
Yes it is. Using OpenBook and CopyTrader at eToro are completely free. It is sufficient to open an account with eToro to use this fascinating trading tool.
To which extent are trades copied?
CopyTrader copies trades proportionally. If someone you follow is using 5% of his assets for a particular position, then you will also use 5% of your capital allocated to this trader. This means that you will thus use the same money management as the copied trader.
How many people can I follow using CopyTrader?
Currently you can automatically copy ten other traders. If you already follow ten traders, you will first have to click “close” in the WebTrader nearby the name of the person you don’t want to follow anymore. This will automatically close all open positions copied from that trader.
How quickly are trades being copied?
According to eToro, positions are copied extremely quickly and you should get the same prices as the trader you are following. Exceptions may occur particularly during periods of high volatility.
Is it good or bad if there are many people copying a specific trader?
Very successful traders have hundreds of followers who copy their trades. This is generally a good sign. Hardly anyone will want to copy a trader who is regularly losing money.
Because the Forex market is the largest market in the world, it is hardly possible to influence the exchange rates. If a trader who is followed by lots of people opens an exotic position, it might happen that this transaction will influence the exchange rate of that specific currency pair.
Is the eToro CopyTrader secure? Is my data kept confidential?
Yes, it is completely anonymous and secure. This tool only displays the pen name and the performance in percent. So no confidential data is made public to other traders.