I want to share with you everything I've learned from copy trading on eToro these past few years.
Copy Trading is where you automatically copy the trades of a more experienced trader. When they make a trade, your account does too. When they make a profit your account does too.
Copy Trading is one of the best ways to learn more about trading and investing. Here are my top 10 tips for getting started and having success copy trading on 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.
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. While eToro works best as a medium to long term investment, its still no fun to see your money sitting doing nothing. One way to remedy this is to only copytrade frequent traders. I count a frequent trader as anyone who trades a few times per month.
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.
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.
You can find out more about copy trading on eToro here.
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.