Table of Contents
- 1 eToro Review
- 1.1 Advantages and disadvantages in the eToro rating
- 1.2 Broker with Social Trading Platform
- 1.3 Market Maker for Forex and CFDs
- 1.4 The conditions at a glance: spreads, commissions and provisions
- 1.5 eToro Test: The broker under the magnifying glass
- 1.6 The Social Trading Platform
- 1.7 Customer service and know-how
- 1.8 Regulation, deposit protection and other information on the company
- 1.9 eToro experiences in the trade press
- 1.10 Conclusion
Network Effect: More than 2.75 million Users worldwide
Situated and regulated withing the EU
Broker and Social Trading under one roof
eToro is an international FX and CFD broker based in Cyprus, and has developed one of the largest social trading networks in the world in recent years. Through the OpenBook platform, users can monitor, evaluate, and copy the trades of other users to their own trading account. Successful traders can earn money with many followers: eToro compensates active traders for generating sales. Among the users who are experienced as traders with eToro are beginners in (social) trading and – with cuts – advanced. Among the signal providers are also professional providers.
Advantages and disadvantages in the eToro rating
– Broker and Social Trading under one roof
– Situated and regulated within the EU
– Network effect: More than 2.75 million users worldwide
– View, track and copy other traders on the network
– Make money as an active trader with many followers
– potential conflicts of interest between customer and broker/signal provider
– conditions in trading and other charges are not always favorable
One of the biggest advantages in the eToro test is as a result of the company’s history: the broker was initially active as such before Social Trading played a significant role. The OpenBook platform was built on the existing trading structure and interlinked with it. Through the combination of trade and network, followers and signal providers can operate under one roof so that neither money nor information has to flow to third parties, as is still the case with many trading networks.
However, potential conflicts of interest also result from close interlinking. Thus, active brokers are remunerated by the broker. This could encourage signaling companies to implement particularly risky strategies, which can be used to achieve strong placements in cross-border transactions, which should be followed by higher sales rebates. The remuneration system is therefore a plus in the eToro valuation: In addition to the number of qualified followers, the performance development over several (!) temporal levels is also a source of remuneration for signal providers.
Market Maker for Forex and CFDs
Trading conditions and the market model must also be the subject of the eToro valuation, as the spreads and commissions are also valid for transactions launched via the network. The broker acts as a market maker and goes into the opposite position to his customers. The license allows trading on its own account: Theoretically, the broker could thus act against its customers. In all experience, however, market makers primarily live off the netting of their customers’ positions; Net positions are externally fused.
The spreads in the trading of foreign exchange and CFDs are in the upper range of the market makers’ usual range. For cost-conscious traders, the fees for withdrawals are also a flaw in the EToro test, such as the inactivity fees, which are already charged in accounts without deposit after four and in accounts with a deposit after twelve months without trading activity.
The conditions at a glance: spreads, commissions and provisions
Minimum payment: No Spread
FX Majors: 3-5 Pips
Spread Indices: 3-10 Points Commissions share CFDs: 0,1% Fee for disbursements: $5-$25
Inactivity fee: $5/month from 4 or 12 months
Compensation for signal transmitter: $ 50 to $ 10,000 /month
eToro Test: The broker under the magnifying glass
The trade offer
There are 17 FX currency pairs, 3 commodities/precious metals, 10 indices and some shares, as well as the virtual currency, Bitcoin. As a result, the underlying catalog is below average in terms of width and depth as measured by other FX/CFD brokers. But criticism of the eToro test is not justified by this: the usefulness of a network depends very much on the number of users who exchange in a certain (!) market. If too many markets are picked out as a central theme in the discussions, the danger of an insufficient grouping of the network effects exists. Careful channeling seems to be useful in the given context.
The conditions in the trade, for traders and signal providers
The conditions in the market are average, initial barriers to entry are extremely low, and the trade-independent fees moderate, but in some cases unusual. Sequential.
A minimum deposit is not required for opening an account. The trading account can be opened immediately without waiting time, for example, by making a deposit using a credit card. A full verification check including proof of age and residence can be postponed until the first payment. Somehow incomprehensible, but not a major burden for the eToro rating, are the payout fees (depending on the payout $ 5- $ 25) and the inactivity fee ($ 5/month from four or twelve months without a trade).
The spreads are fixed in all markets and move in the most important FX currency pairs in the range of 3-5 pips. In the indices, the bid/ask spread is usually 3-10 index points; in the case of equity CFDs, a commission of 0.10 percent of the leveraged transaction value is due. Even if the conditions only slightly exceed the market average, a pioneer surcharge is recognized: anyone who would like to use social trading with the market leader has to pay a little more than would have to be from the broker’s point of view.
Thus, signal providers earn money
After at least three months of active trading, users of the platform can apply for the “Popular Trader” program and make money with their own signals. The range of monthly compensation ranges from $50 to $10,000 and depends firstly on the number of qualified followers (qualified followers follow at least $100) and secondly on the performance achieved with the signals. This is measured for four temporal levels (1, 3, 6 and 12 months).
On the more of these four levels that the performance is positive, the higher the compensation system. The remuneration structure is a central plus in the eToro test, because it provides incentives for signal providers to be intelligent: Only long-term and consistently successful strategies reach the highest remuneration classes. It is almost irrelevant for the absolute remuneration of the turnover of individual followers.
The OpenBook social trading platform, as well as the actual trading platform, is completely web-based (and, if required, also accessible as an app for smartphones). The platform is – not quite surprising – structured as a social network and also works the same way. Users can “optionally” subscribe to the trades of other users or automatically copy them to their own trading account. It is possible to search according to various criteria for traders or strategies with specific characteristics: Such as a high hit rate, a low maximum drawdown, or only manually traded systems.
Customer service and know-how
One element of the marketing strategy has remained constant since the foundation of the company. Since eToro’s experience in trading is not assumed and is learned in a playful way, beginners are the primary target group, even if the network has long attracted clientele with many years of experience in trading. The “Trading Academy” offers eCourses, webinars, and videos. It is also an easy-to-use and easy-to-use tool for the retailer.
Customer service is primarily available via mail and live chat. Knowledge of the English language is helpful for communication, because German speaking customer support is not always available. However, Internet access can be reached almost completely in German.
Regulation, deposit protection and other information on the company
The broker is international and has several companies, including one in the US. Retailers from Europe trade with eToro (Europe) Limited, based in Limassol, Cyprus. The company was founded early in the year and has a full brokerage license including authorization to trade on its own account.
The Cypriot Financial Supervisory Authority, CySEC is responsible for the regulation of eToro, which has gained many years of experience in regulatory practice as a result of the increase in the importance of Cyprus as a location for many OTC brokers after the country’s accession to the EU.
eToro experiences in the trade press
The broker only plays a secondary role in financial reporting in Germany, which applies to most internationally-oriented providers. Above all, in the English press, the offer has been subject to more frequent tests over the past few years. Especially since the introduction of OpenBook, one or the other experience report can be found:
– “Best Social Media Trading Product” (MSM Media 2012)
– Trading Platform 2013 (Star Awards)
– Best Use of Social Media (Share Awards 2012)
– New Ways 2012 (Golden Bull Awards)
– “Best use of customer communications and social networking technology” (FS Tech 2012)
Anyone interested in social trading needs to experience eToro – no other platform is more authentic than the market leader. The “post-revolutionary” childhood diseases have largely been phased out: the signaling system’s payment system restricts performance before turnover and puts a stop to manipulations. The fact that the conditions in the trade can not compete with those of an ECN broker can not be surprising in the face of the pioneering performance provided; In the long run, however, the broker will also have to face emerging competition on this point. There is nothing to complain about in the technology and the regulatory environment.