eToro is a social trading platform and brokerage company with offices in London, Cyprus, and Israel. The broker enables people to invest in a wide range of assets such as Forex, Cryptocurrencies, Binary Options and CFD’s. Their customers are mainly beginner traders with limited knowledge of the markets. Despite having five million clients it’s almost impossible to find an honest opinion. So far I’ve only read fake reviews from websites that post misleading information to earn hefty affiliate commissions. The reviews are overly positive and fail to mention the downsides of using the broker. eToro has a lucrative affiliate program so website owners are generously compensated to write something positive. To be honest, I don’t blame them, but I think it’s ethical to recommend a service they have never used before.
Trading is a tough industry where 90% of traders lose money and not having the right broker means you’re at a severe disadvantage. Movies like the Wolf of Wall Street glamorize stock trading, everyone wants to live the trader lifestyle but only a select few ever live it. With the interest in learning to day trade rising, online brokers such as eToro have benefited from this trend by attracting thousands of beginners eager to start placing trades. All they require is a minimum deposit of €50, verify your account and boom they are up and running. It’s scary how anyone, no matter their experience level can get access to the stock market and get taken advantage of without realizing.
The company claims their main USP is the social trading tool – CopyTrader, that allows people to automatically copy trades from the most successful investors on the platform. This is a clever tactic to sucker in beginners and eToro earns more commissions if a trader remains active for longer. eToro can’t make worthwhile commissions if a novice signs up and blows up his account in the first month. Instead, beginners accounts stay open longer if they are following alerts from others. It is possible to make money using CopyTrader but you’re a disadvantage because you enter at a worse price because of the spread. Some examples of the best investors to follow on the platform include Aaron Wee Chong En, Alexandru Cinca, Alex Plesk, Jeppe Kirk Bonde and David Giles. If you ignore my advice and end up signing up below are some tips for selecting traders to copy.
Criteria for selecting “Guru’s” to follow:
- Strong record of at least two years of steady profits. Look at the historical performance graph to study their past performance.
- Guru has strong risk management skills with no large losses.
- Spread your portfolio among various investors to strategically divide your risk.
- Avoid those who trade cryptocurrencies due to the extreme volatility. If you want to buy Bitcoin or other altcoins I would wait for a pullback before investing.
- Focus on investors that only follow a few financial instruments instead of those following 10 different instruments.
Is eToro a scam?
Despite the company’s negative online reputation, they are regulated within the markets they operate. The fact their headquarters are in Cyprus should be a warning sign as that’s where most scammy binary option companies are located. eToro is a shady corporation that makes millions every year fleecing inexperienced people. If you check out the latest reviews on Trustpilot, you can read all the complaints new clients are experiencing. Look at their Twitter feed and it’s clear the business is struggling to satisfy basics customer demands. Imagine depositing $5,000 in an account and waiting two weeks to receive verification. Any issues you have will take days or even weeks to resolve due to the lack of staff. Luckily USA has banned CFD trading to protect residents from losing large amounts. This is the reason why eToro can’t accept US residents.
- The biggest complaint is about poor customer service. Expect long delays trying to receive answers and live chat is nearly always full. This is what happens when your customers don’t understand the basics and have trouble placing orders.
- One person said it is “one of the worst trading platforms” he’s ever used. Trade executions are slow and cost people profits.
- Constantly changing the rules, hard for clients to keep up with the changes.
- Expensive fee’s and the spreads are massive. In most cases, the spread is 2% to 6%.
- The process of depositing capital into your account is simple but getting your money back is a different story. The company has the audacity to charge a $25 fee for just withdrawing your capital. The charge previously was $5 but increased the cost to persuade people from withdrawing money.
- Not a suitable penny stock broker, mainly allow customers to trade blue chip stocks. Penny stocks aren’t everyone’s cup of tea but is more predictable than Forex. The same chart patterns consistently repeat themselves so you get an edge.
To cash in on the crypto hype, eToro as advertised themselves as a good platform to purchase bitcoins. Bitcoin has been on a wild ride over the past month in particular. BTC reached a peak of $19,700 but has since dropped to $13,200, so now might be a could a good opportunity to enter a position. When you purchase a Bitcoin on eToro you’re trading it via a CFD, so you never actually own the underlying asset. Some lazy people prefer CFD’s because setting up a wallet can be difficult. eToro recently removed stop losses which annoyed customers because of their exposure to volatility. Who knows, you could wake up in the morning and Bitcoin might be $100 per coin. If you’re serious about investing in cryptocurrencies sign up with a reputable platform like Coinbase or Bitmex.
While no brokerage is perfect, eToro has proven itself not to be reliable or safe. Below is a list of some viable alternatives according to asset classes you may want to invest in.
- FXCM, Avatrade, Oanda – Forex
- Coinbase – Bitcoin and Ethereum
- Etrade and Interactive Brokers – day trading
- ZuluTrade, Ayondo, Tradeo – copy trading platforms
Avoid eToro like the plague unless you enjoy getting ripped off. There are hundreds of better brokers that will charge less in fee’s and treat clients better. Despite all them Forex “millionaires” on Instagram, its extremely difficult to make money in the long-term trading FX. Please leave a comment if you had a bad experience with eToro!