Another really common question I get is whether or not eToro is a scam. I've had years of experience copytrading with a real money account, so I thought I would share my experiences to help you get a better idea of the platform.
First off, there is no doubt that etoro is a reputable broker. I don't want the post to be about that. They are fully regulated and i haven't heard any complaints from people regarding payouts. What I want this post to be about is whether or not their platform is a legitimate trading platform.
First let me explain how eToro works….
How the eToro platform works
There are two types of traders on eToro. Traders and copytraders. Trader are the people who actually make the trades (such as opening a long position in aapl (apple)). Anyone can manually open a trade like this. That's just a term I use to differentiate the traders.
Then there are also CopyTraders. These people don't know that much about forex or stocks, and are relying on the traders to make the actual trading analysis and trades. As a copytrader you “copy” other traders using a portion of your account funds. When a trader then makes a trade, that trade is copied in your account. Trades are done proportionally. So for example if you have $100 allocated to a trader, and that trader then makes a trade with 5% of their balance, a similar trade will be opened under your account with $5.
Why eToro is better for new traders
What I hate about most forex brokers, is they make it seem that forex and stock trading is something that anyone can jump into. They are only concerned about how many people they can churn through their system. That's why I don't recommend many forex brokers, and when I do, I only recommend the traditional brokers to experienced traders.
eToro has attempted to solve this problem. Instead of encouraging you to open trades on your own, they want you to copy trade.
Furthermore eToro also puts limits on how much you can invest in each trader. They want you to put around 20% or less per copy trade, that way, if a trader suddenly has a string of losses, only a small percentage of your account would be affected.
eToro looks to be getting better and better
eToro has been rapidly changing over the past couple of years. They've completely redesigned openbook to make it easier to see how traders are performing and how they have performed in the past. And they have added additional search tools so you can filter out traders that don't match your risk profile.
One of the best and most important features that I think has been added to eToro is the automatic stop loss for copy traders. This means that if a copytrade loses a predefinied amount you will automatically stop following that trader. This will stop a copytrader from make a series of bad trades and wiping out your account balance.
The best way for you to decide if eToro is a scam, is to actually look through the site. The great thing about etoro is that everything is open. You can see all the trades made by every trader and see if they are actually making or losing money.
I encourage you to join the site for free. Explore, see the results other people are having and make up your own mind.