I want to share with you everything I've learned from copy trading on eToro these past few years.
I believe that copy trading is only going to get bigger and better. I love it when technology helps innovate tired and inefficient industries. And this case, copy trading is forever changing the financial and investment industries.
So that you can the most out of copy trading I've put together 10 tips on how to have success with eToro:
1 – Copy More Than one trader
It is possible to have success by just copy trading one trader. But what many people don't realise is that even the best traders have bad weeks and months. That's why one of the key strategies of wealth creation is diversification. By copying more than one trader you are spreading the risk.
2 – Do lots of research
Don't just copy trade the first people you see on etoro! Sometimes the featured traders aren't the best. Use the filters to find traders. Look at their trading history, holding time, trading frequency etc. I've put together an entire post on how to find traders on etoro. Or use my research as a starting point for your own.
3 – Test out traders
This is a really powerful tool that many people overlook – their practice account! eToro gives you a free practice account which you can use at any time. And you can use it alongside your existing real account as well. You can switch to it with just a click. So if you're unsure about copying someone, then do it through your practice account. This way you can see how the real world performance goes, without risking your money.
4 – Copy frequent traders
I see a lot of people give up on eToro because they don't see results right away. Now eToro works best as a medium term investment – but its still no fun to see your money sitting nothing. One way to remedy this is to only copytrade frequent traders. I count a frequent trader as anyone who trades more than once per week.
5 – Stay away from newbies
Never copytrade anyone who has less than 12 months of stats on the platform. I don't even bother reviewing traders with less than 12 months on etoro. Newbies make a lot of mistakes. They might make a few good trades here and there, but thats probably luck, not skill.
6 – Copy Lower Risk Traders
eToro now shows you a risk score for each trader. I would stay away from anyone with a score over 4. This is because they are using too much leverage or committing a high proportion of funds to a single trade. This is a high risk strategy and in my experience it doesn't play out well over the long term.
7 – Diversify into more assets
Personally, I've seen the best results from traders who invest in stocks and forex. But i've been seeing good signs from traders looking into some of the more upcoming markets such as Bitcoin and Ethereum. While I would never copytrade just one person you trades Bitcoin, as part of a larger portfolio, there are potentials for big gains. Just something to keep in mind.
8 – Reinvest Profits
Although it's tempting and often necessary to withdraw profits straight away, don't forget about compounding. It's a fundamental part of wealth creation. Profits automatically get reinvested back into etoro when you copytrade. This is a great thing as it should increase the size of your profits over time.
9 – Don't be afraid to stop
Sometimes you do need to stop copy trading someone. If things just don't feel right, pull the plug. I like to give traders a chance but I don't let the traders I copy drop below a 20% loss on the overall amount invested. Thats just too much of a drawdown.
10 – Expand into CopyPortfolios
If you really want to diversify and take full advantage of the crowd, then think about expanding into Copy Portfolios. This is the next level of copy trading. Copy Portfolios are groups of assets that can be invested in with a single transaction. For example the Top Trader Copy Portfolio, pools together all the top traders on etoro and lets you invest in all of their trades with just one investment. It takes more capital to invest in a copy portfolio, so this is something you can expand into over time.