eToro Copytrader, the extension of the Openbook, was launched in 2011. This trading tool is absolutely revolutionary. With Copytrader, you can follow other traders and copy all their future trades with just a single mouse click. To copy other FX traders, you launch the eToro OpenBook and check the rankings of other traders. If you think that a person is quite successful (and should continue to be so in the future), then you click on it and can bet an amount up to 20% of your assets on him or her. If you allocate $ 1,000 and that trader opens a position with 15% of his assets, then you will almost simultaneously and automatically bet $ 150 on the same position. You can follow up to a maximum of ten successful traders.
This sounds very enticing. Instead of constantly reading news and trying to draw conclusions, and spending much time with the technical analysis of price movements, you just copy successful traders. So your task is reduced to identifying successful traders and then copy their actions with eToro Copytrader. So this sounds almost as if you could copy the best chess player in the world and win every game.
The problem is that “if something sounds too good to be true, it probably is“. There are no risk-free profits and no tools will make you rich while you are sleeping. Continue reading to learn more about the experiences we have made with the eToro Copytrader.
Can you Earn Money with eToro Copytrader? Our Experiences
As maybe yourself, we were absolutely thrilled when we first heard about this social trading platform from eToro. Simply copying successful traders seemed to be an easy way to make lots of money without any real work involved. Due to bad experiences in the past, we didn’t deposit real money to test the eToro Copytrader. Instead, we just opened a free demo account with eToro and used the $ 10,000 play money to make our own experiences with Copytrader. In the beginning, we spent a lot of time to find the really successful traders. We felt it important to choose not those traders with the highest profit, but to copy those traders who have earned continuously money over a long period of time. So we ended up with copying 10 traders. We have allocated them amounts between $ 500 and $ 2000, and we only used three-quarters of our $ 10,000 altogether. The result of several months of following other great traders was a loss of nearly $ 2,000.
In spite of the careful selection of the best traders we experienced a loss of $ 2,000, that is minus 20% of the total capital in a few months. Based on the capital invested, the loss was as much as 27%. How is this possible? We show you some reasons why our test with eToro Copytrader was not successful (and probably we were not the only ones to lose money, even though it was just money from a demo account). But let’s first have a look at one of the most copied traders and talk about a well-known financial market theory later.
NMarijus 2’500 Copiers and 15,800 followers
Now, in February 2012, NMarijus still has more than 2,500 traders who copy his trades using the eToro Copytrader. And when we chose him, he seemed like a very good choice to earn easy money while sleeping:
Looking at the chart, you can see that the Lithuanians managed to achieve a gain of 450% over a period of five months. And this was not with a few lucky trades where which he risked a lot of money, but with continuous small trades adding up to a nice profit. This is why he looked like the perfect trader to copy.
Unfortunately, shortly after we copied his trades, he started losing money:
His whole gains of five months were completely lost after a few weeks. And yet still NMarijus has 2,500 copiers. We hope that many of them are people not risking real money. Because those who started following him in the wrong moment and didn’t stop to copy him lost a large portion their assets.
So how could this happen? Read more what the potential reasons are.
Losing Money with eToro Copytrader – Reasons and Explanations
Based on experience with the copied traders, we see the following reasons and explanations for why the eToro Copytrader didn’t work for us (and probably for many other as well).
This is a well-known phrase from the analysis of mutual funds. Especially in the hedge fund industry, this is a common problem. What it means is that that there is a tendency to watch only the performance of “survivors”. This is the so-called “survivorship bias”. For example, hedge funds make risky investments. Some of these funds make huge losses. The result is that investors sell their shares and the fund will be closed eventually. If such a fund is liquidated within three years, it will not appear in a performance analysis of hedge funds over a period of five years. Thus, the performance for hedge funds appears to be better than it actually is.
And the same happens when copying other traders. eToro has hundreds of thousands of customers. All their results are evaluated. And even if none of those traders has any idea of Forex trading, a certain percentage of them will succeed – just out of pure chance. Such traders will appear in the leaderboards of eToro and will be copied diligently. Other traders may not know whether such persons have been successful because of their experience, their sharp analytical skills or their instinct, or whether they were just lucky.
Trading Strategy no Longer Works
A similar explanation is that the trading strategy no longer works. This might be the case with Nmarijus. You probably know the statement often seen in disclaimers and risk warnings: “The past performance is no guarantee for future profits.” The Forex market can change quickly. A strategy that worked until recently can suddenly lead to high losses. It may be that you follow a trader with a working strategy. But if you follow him for too long, the strategy might not work anymore because of changed market conditions.
Influencing the Market
It is almost impossible that a few market actors can influence the currencies in the global foreign exchange market, simply because of the huge volume traded. But what if a trader such as NMarijus is copied by 2,500 people who make the same transactions almost at the exact same time? We cannot answer this question for sure. But if some of the Copytraders have lots of capital, then an order of NMarijus might be bloated within in seconds (or fraction thereof) by a factor of 10,000 or more. This is why we cannot rule out an influence of the market per se.
What Should You Do? Our Recommendations
We are still convinced that eToro has launched a really ground-breaking innovation. However, we recommend the following:
Be Careful Who You Copy
Spend lots of time analyzing who to copy. For example, strong fluctuations in the chart show that a trader uses too much of his capital on individual trades. That may be fine for some time, but carries the risk that at some point, a large part of the capital will be lost in a single trade. In addition, we recommend following traders who have been successful for a longer period of time.
Guru Finder – Use the Advanced Search Function
The newly launched Guru Finder from eToro is a great tool to find the really successful traders. You can use different filters when searching for successful traders:
Average Position: This shows the average size of a position in relation to available capital. As you perhaps know from the rules of money management, a maximum of 1 to 5% of the assets should be risked in a single trade. The default setting of 50% from eToro is much too high. Change the filter to 10% or below in order to find the traders acting less risky.
Leverage: These percentages do not show the leverage, but show how often the trader enters into positions where he had a leverage of 100 or higher. This is another measure of the risk involved.
Weekly Drawdown: This value indicates the highest measured loss within a week over the observed period. Again, the lower the value, the lower the risk is.
Winnings Weeks: The percentage of weeks closed with a profit for a certain time period. If a trader has made profits in 20 of 25 weeks, then this value is 80%.
Win Ratio: This is the number of trades with profit divided by the total number of trades. A trader who closed 70 out of 100 trades with a profit has a win ratio of 70%.
Gain: This is the income (including unrealized gains or losses) calculated as a percentage.
Min. Number of Trades: Here you can search for traders who have completed a minimum number of trades in the period. The higher the number of trades is, the more meaningful are the other analyzed values.
Avg. Trade Duration: Here you can set how long the average holding time should be at least. The scale ranges from one hour to 30 days.
Exposure: Here you can search for traders investing a certain amount of their total assets. If a trader uses only 5% of his capital, then you can assume that only a maximum of 5% can be lost during a certain amount of time. On the other hand, the profits in relation to capital allocated might be very low. It seems to us that the first value in the Guru Finder, the “average position”, is more important than the exposure measure.
Portfolio and History
In addition, you should have a look at the portfolio and on the trading history before copying a trader. In the portfolio you will see what types of trades that person performs, divided into the categories foreign exchange, commodities and indices. An in the trading history you can see the last 100 executed trades.
Important: In the history you can also see if the person has also copied trades from other people. You do have to consider this in your risk management. Your risk is higher if you follow people who follow other traders that you already copy directly by yourself.
eToro Copytrader Experiences: Summary
The Copytrader is a leap into another world of Forex trading. Thanks to the transparency, you can easily find and automatically copy successful traders. We have shown that this tool is no guarantee for easy and risk-free profits. It is important that you invest a lot of time in the selection of suitable traders to copy and to check these persons regularly.
Copytrader is definitively worth a closer look. We recommend you to make your own experiences.
Sign up for a free demo account immediately in order to test Copytrader by yourself
(Trading involves risk)
Things you should know about eToro
The eToro Trading Platform has matured and many traders feel that this platform is the perfect trading platform for traders of all skill levels, from novices to professional traders.
With a huge variety of features, the eToro trading platform has been developed to provide you with the best and most convenient way to buy or sell in the markets.
With a vast array of eToro trading instruments that range from CFDs (collateralised financial instruments), to crypto and commodities, and a relatively large number of brokers that offer trade ideas, eToro is a leading online broker that you can trust with trading for you.
Although copytrading has been around for a long time, it hasn´t gained traction in the mainstream financial markets like it has with stocks and cryptocurrencies. In the stock and crypto markets, eToro is trying to catch up and catch up with the legacy institutions and clients. In this respect, it has a strong philosophy of being the most technical platform in the space, with heavily sophisticated tools available to make it the best platform for actively trading a variety of assets and strategies. The iTrader platform is a powerful and intuitive trading platform, and, although we feel that there is some inherent instability in this market, we feel that the iTrader platform does offer a good user experience, with a lot of new features that are just starting to come to the fore.
Sector Weighted Index
eToro performs a dynamic trading strategy based on a broad set of assets and indices. The key difference between the Traditional Securities and Forex traders is that they trade on Wall Street, whereas eToro is more invested in Forex markets.
Exchange Traded Funds (ETF)
The eToro Platform stocks some of the best ETFs available, and we feel that this has led to some market stability, as some of the best ETFs remain under a relatively narrow spec-ality range, which is a safety net to keep volatility down. Most importantly though, we feel that the Quality and Suitability Factors of each ETF are well explained, and we feel that this makes for a compelling platform for actively trading in all types of asset classes, including Forex.
What is eToro?
eToro (eToro) is the world’s leading broker and trader trading platform, featuring an award-winning portfolio, vast trading range, and professional customer support.
eToro is headquartered in Cyprus and operates in 25 countries around the globe. Today, the company is recognized as one of the world’s largest real estate trading hubs and a leader in financial trading.
In 2018, eToro and TSX joined forces to create the world’s first digital asset exchange, eToroX. This merger led to the launch of the world’s first Cryptocurrency Broker.
Is eToro regulated?
eToro is regulated by Cyprus Securities and Exchange Commission (CySEC) under the license number FK0093853. The broker is an authorized and regulated broker with an industry code of BB.
Are eToro fees competitive?
eToro is among the most competitive brokers in its industry. Trading fees are low, although eToro does offer some cost-effective trading tools. There is no commission for free trades, but there is a fee charged for every trade when opening up a position.
What is the eToro version history?
In April 2018, eToro changed its trading strategy from a static portfolio to one where each trader only owns a small percentage of the assets. This allowed traders to make more money.
In August 2018, eToro launched a brand-new mobile app that shows you charts in a flexible layout. This helps you see your trading performance in one place.
What is a CFD (contract for difference)?
CFDs are a way to represent the price of the underlying asset on the order book of an online broker. When trading securities for the first time, they are a very popular way to avoid dealing with commissions. CFDs are no different.
In 2018, CFDs were responsible for $65 billion in retail trading volumes and over $36 billion in institutional trading volumes.
When is an order placed in CFDs?
When a buyer places a stop-loss order, the order is placed on the order book and the position is finalized. The order is considered filled when there is a fee for a trade by the CFD provider.
When is an order placed in CFDs not considered completed?
When a trader calls or spreads out a change to an order, the CFD is not settled and the order is not considered closed.
What is a CFD broker?
A CFD broker is a financial trader with or without a physical office that operates with the eToro Platform. The CFD is represented as an open book, which is not reflected on the eToro Platform.
What is eToro eETx?
eToro eETX is a brokerage that offers e-exchanges trading and storage, making it different from other e-traders, since the broker has a history of more than 10 years, as well as an established platform and reputation.
What is eToro ePTY?
eToro ePTY is an e-forex trading platform that enables e-exchanges in the USA, Canada, UK and Australia. It helps e-exchanges achieve a smooth trading experience by offering a wide variety of tools and a number of predefined strategies.
How does eToro eCLX work?
eToro eCLX is a comprehensive e-forex trading platform. It gives e-exchanges a wide variety of tools and a number of predefined strategies.