eToro is one of the most popular copy trading platforms in the world. I've been using eToro for the last few years to invest in a portfolio of stocks and also for copy trading. I think copy trading is one of the best ways to learn more about investing.
Here are some of of the tips I've picked from my experiences with copy trading over the last few years.
Only Copy Investors with 12+ Months History
My number one tip for copy trading on eToro is to only copy traders who have built up a history on the platform. Anyone can get lucky making a few trades, but it takes skill to be able to trade profitably over the long term.
Before copying a trader, I make sure to check they have at least 12 months of trading history. The longer the better!
Take a look at long term investors
I've noticed something new on eToro in 2021 – eToro has begun highlighting traders who are focused on long term stock investing rather than short term profits. I think this is a really smart move and this type of trading will appeal to many investors.
Diversify Your Portfolio
Copy Trading doesn't need to make up 100% of your portfolio on eToro. You can use Copy Trading alongside more traditional investing. For example, you could build a portfolio with 80% ETFs and 20% Copy Trading. It's also possible to add crypto and stocks to a portfolio. eToro isn't just copy trading. I do consider copy trading to be riskier than just holding an index ETF. So make sure you build a portfolio that aligns with your risk tolerance and goals.
You Can Start with a Virtual Account
Did you know that all accounts on eToro get a free virtual trading account? If you want to try out copy trading, to see how it works, you can do so without risking any money. You can copy trade using your virtual account and it's a great way to test things out and see if copy trading is right for you.
Look at what a Trader is Trading
This seems obvious but some people get distracted by huge profit numbers without really digging into whats going on. Before copying a trader, check to see what they are actually trading. This isn't always the case but historically stocks and ETFs are less volatile than Forex, Commodities and Crypto. So if a trader has huge profits, but only trades crypto then this could be a red flag. While they may have made profits over the last year, it doesn't mean they'll be able to keep that up. Crypto can be hugely volatile and you don't want to be stuck copying a trader during a market downturn.
Look out for unclosed trades
One thing I avoid is copying traders who don't know how to lose. All traders make losing trades. The best traders know how to close a losing position so it doesn't do much damage to long term gains. I avoid copying any trader who has positions in the red that are over 12 months old. I do break this rule for stock traders – if they are looking for long term gains and have a diversified portfolio, this might not be a red flag. But I'm very suspicious of forex, crypto or commodity trades that are very old and in the red.
Disclaimer: eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
Please note that 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.
Past performance is not an indication of future results.
Cryptoassets are volatile instruments which can fluctuate widely in a very short timeframe and therefore are not appropriate for all investors. Other than via CFDs, trading cryptoassets is unregulated and therefore is not supervised by any EU regulatory framework.
eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro.