When people talk about social trading there is one name which is always mentioned, and that name is eToro. This is due to the fact that eToro is the worlds largest social investment network, boasting a total of 200,000 active users. eToro recently broke through the 50 million positions opened mark, meaning that eToro is certainly doing something right.
How Does It Work?
The eToro platform allows its users to connect with other traders. Users can then follow these other traders automatically copying their newly opened positions. Users can only assign 20% of their total capital to one particular trader, this measure was introduced to ensure users didn’t put all their eggs in one basket with the aim to reduce some of the risk associated with copy trading. Those who are active on social networks such as Facebook and Twitter, are likely to feel instantly at home on the platform which provides a transparent and engaging community which allows users to easily interact with one another. The design and user interface of the platform is delightful and it shouldn’t take people to long to get to grips with the platform. As with similar products users who have live copiers receive commission for each live trade placed in their copiers accounts. This gives traders a very good reason to share their information with other users of the platform.
Does it work?
Obviously all forms of trading and investment are inherently risky, with eToro’s Social Investment Network being no exception. Many people have had very positive experiences with eToro, and it has been reported that around 80-90% of copied trades ended up being profitable. This is in comparison trades placed manually of which only 55% were profitable. This seems to suggest that eToro has a lot of potential for those interested in Social trading. As previously mentioned eToro has built in a number of mechanisms aimed at reducing risk and actively encourage users to build a diversified people based portfolio. Some of the most followed traders on the network appear to have been very successful, there a number of traders who have made returns which have been pretty phenomenal. For instance a number of eToro’s most followed traders had made a return in excess of 300% in the past year. While past success is no indicator of future performance it does appear that there are some extremely successful traders on the network. This means there is at least some decent potential to make your money work for you.
How much expertise is needed?
With eToro’s platform being such a breeze to use, new users are going to feel right at home. However I would recommend that users of eToro’s platform pick who to follow with considerable caution, as their are a number of traders who engage in quite high risk strategies. Thankfully eToro has made it easy to sort traders into risk categories with their being a number of ways to evaluate traders past performances. Before building a portfolio of traders to copy, you should properly consider a variety of traders on a number of different metrics, but this shouldn’t be too difficult even for those who are not experienced in the trading of financial instruments.
eToro’s Social Investment Network is an interesting and viable product for those interested in trying their hand at social trading. Being the biggest social investment network ensures that there is always considerable trading activity and the overall size of the network allows you to connect with traders from over 190 countries. Those interested in eToro’s Social Investment Network should certainly go and check it out.
What did you think of our eToro review? If you have had experiences with eToro or want to ask any questions feel free to comment below.