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eToro Official Review 2020 – Pros and Cons

4.8/5

Co-Founder

Graduated in Economics of Financial Intermediaries, after having worked for several years at one of the main financial brokers in Europe, he decided to make available to investors the knowledge gained over the years. On QualeBroker.com he deals with reviewing the stockbrokers, making sure that the highest standards of safety and transparency are guaranteed.

Graduated in Economics of Financial Intermediaries, after having worked for several years at one of the main financial brokers in Europe, he decided to make available to investors the knowledge gained over the years. On QualeBroker.com he deals with reviewing the stockbrokers, making sure that the highest standards of safety and transparency are guaranteed.
 
 Pros:   Cons:
Commission-free trading.     Telephone assistance not provided.
Ability to copy other traders with social trading.     Book-depth at 1 level only.
User-friendly platform and app.     Maximum allowed leverage 1:30.
Minimum deposit of 200 USD, by cards as well.     Conversion costs for non-USD deposits.

 

Pros:

Commission-free trading.
Ability to copy other traders with social trading.
User-friendly platform and app.
Minimum deposit of 200 USD, by cards as well.

Cons:

Telephone assistance not provided.
Book-depth at 1 level only.
Maximum allowed leverage 1:30.
Conversion costs for non-USD deposits.

"62% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money."

eToro trading review: pros and cons uncovered

eToro is an Israeli online broker founded in 2006. Calling eToro just a broker is however an understatement, since it has been one of the leaders of the Fintech revolution. Over the years eToro has turned the tables in the investment world, bringing social trading to the fore and attracting millions of customers all over the world.

eToro offers a multi-asset platform who allows investments in stocks, ETFs, cryptocurrencies and CFD trading.

In this review you will find our unbiased and in-depth judgment on eToro. We have tested the services offered, analyzed the costs and evaluated the platforms and trading tools. Can trading with eToro be the right choice? Here's what we found out with all pros and cons uncovered.

Final rating: 94/100

How do we assign rates?

» Check out our methodology

Safety: 91/100
Fees and Costs: 94/100
Products and markets offering: 97/100
Platform and Research: 90/100
Mobile trading: 98/100
Ease of use: 100/100
Tax regime: 70/100
Customer support: 65/100
Education: 72/100
Banking services: 25/100

Safety

When we must choose a broker, the first thing we should do - as responsible investors - is to ensure the intermediary's full reliability and transparency. Besides, it is our savings that are at stake and we would like them to end up in the hands of a serious broker.

How to evaluate the reliability of a broker? We should first make sure that the broker holds a regular license and that it is supervised by a rigid regulatory body.

Secondly, we should evaluate the way in which clients' funds and financial instruments are held, especially if a negative scenario occurs (for instance if the broker defaults).

In this review, we thoroughly analyzed the legal and corporate structure to determine how safe eToro can be. Here's what you need to know and what our views are on how safe eToro is.

European traders who intend to open an account with eToro will use its branch eToro (Europe) Ltd. It is an investment firm based in Cyprus and through which eToro offers its services to European clients.

Being based in Cyprus, eToro Europe is authorized and supervised by the Cyprus Securities & Exchange Commission (CySEC) with license number 109/10.

Cyprus-based brokers have the MIFID 2 directive as the regulatory reference point. MIFID entails a series of obligations, guarantees and transparency from brokers to customers. The latter are therefore offered an adequate level of protection which - in the case of eToro - we can summarize in the following points.

  • eToro adheres to the Investor compensation scheme (ICS). This is a sort of insurance that compensates customers for any credits in the form of money or financial instruments entrusted to eToro if the broker is unable to return them to the legitimate owners. This scheme compensates each customer up to a maximum of € 20,000.
  • Client funds and financial instruments are separated from eToro's assets. This segregation allows that the clients' assets cannot be attacked by any eToro creditors, for example in case of the broker defaults. The assets of eToro's customers are preserved by some of the main European investment banks.
  • Each account is protected against a negative balance. It may happen that under certain market conditions, they can cause a negative balance on our trading account. Upon the occurrence of this event, eToro undertakes to absorb this loss so that the customer cannot risk losing more than what he has deposited.

On the basis of the above points, therefore, it emerges that eToro is a broker in possession of the right safety requirements (thanks to the European regulatory reference point) and that its structure guarantees a high level of protection to customers.

eToro account

eToro offers two types of accounts: a demo account and a real account.

In both cases, in order to use the account, you need to register on the eToro website. Can open an account either natural and legal persons.

» Account opening

eToro offers a completely simplified and quick procedure for opening an account. To register an account you need to perform the following steps.

  1. 1. Click on Join Now from the eToro website and enter your personal and contact details.
  2. 2. Upload an identity document and a proof of residence (for example, a copy not older than 6 months of your bank statement or a utility bill).
  3. 3. Complete the "Appropriateness Test", in which your financial knowledge will be established.

eToro allows you to complete your account registration within 15 days. Remember, however, that in order to withdraw from the account, the account must have been verified. We, therefore, suggest completing all the required steps immediately, so that the first withdrawal takes place quickly.

» In which currencies can the account be opened

The eToro account is denominated in USD only. This means that if we deposit euros, eToro will convert from EUR to USD. Since this conversion takes place at a higher exchange rate, we suggest you to directly deposit USD into your eToro account, in order to avoid conversion costs. The ideal thing would be to use a multi-currency card, such as Revolut or Transferwise.

» Deposits / Withdrawals

eToro allows you to deposit and withdraw funds extremely quickly. The accepted payment methods are:

  • Credit / debit card
  • Wire transfer
  • Paypal
  • Neteller
  • Skrill
  • UnionPay
  • Sofort

Deposits are credited instantly unless we use the wire transfer. In this case, the funds are usually credited within 1-2 business days.

Withdrawals are processed within 24 hours, but funds will be available on our card or bank account usually within 3-4 business days.

» eToro minimum deposit

The minimum deposit required by eToro is $200. This amount stands below the average of the industry since other brokers require a minimum deposit of at least $500.

Products and Markets

eToro was historically born as a CFD and Forex broker. Over the years, however, it has been able to listen to customer requests, so as to expand the offer of negotiable securities. To date, in fact, with eToro it is possible to trade not only CFDs but also real stocks, ETFs and cryptocurrencies.

Let’s see what assets are negotiable with eToro. These are:

  • Stocks: more than 1,500 shares available on 17 world stock exchanges.
  • ETFs: 145 ETFs issued by iShares, Vanguard, PIMCO, SPDR etc.
  • Indices: 13 world indices negotiable via CFDs. We can find the CFD on DAX and Nasdaq, while the one on the Italian FTSE MIB is missing.
  • Forex: 47 currency pairs are negotiable: main, minor and exotic.
  • Commodities: 13 commodities are tradable via CFDs, including oil, gold and gas.
  • Cryptocurrencies: 17 cryptos tradable including Bitcoin, Ethereum, Ripple, Litecoin etc. In addition, with eToro, you can also trade on the ratio of Crypto with fiat currencies, commodities and other Crypto, such as BTC / EUR, ETH / EUR, ETH / BTC, GOLD / BTC and many others.

Although Indices, Forex and Commodities are tradable exclusively through CFDs, if we look at stocks, ETFs and Cryptocurrencies, these can be traded by purchasing the real underlying. How? Whenever you open a long and unleveraged position on stocks, ETFs or Cryptocurrencies, eToro delivers the underlying to our portfolio and not a derivative product (such as a CFD).

If, on the other hand, you want to trade stocks, ETFs or Crypto with leverage or you want to open a short position, the underlying is no longer traded but the CFD.

eToro gives access to the following markets for investing in stocks and ETFs:

  • Borsa Italiana
  • NYSE
  • Nasdaq
  • Euronext Amsterdam
  • Euronext Paris
  • Euronext Lisbon
  • Euronext Brussels
  • DAX
  • Zurich
  • Hong Kong
  • London Stock Exchange
  • Bolsa de Madrid
  • Oslo
  • Stockholm
  • Helsinki
  • Copenhagen
  • Saudi Arabia

 

In summary, if you decide to open a long position and with 1X leverage on any share, ETF or Crypto, you will receive the real security. In all other cases, you will trade CFDs.

Choosing real stock / ETF / Crypto is recommended for those with long term investment goals. In this way, in fact, the investor will not meet the broker's bid-ask spread and the rollover costs, typical of CFDs.

For those who have more speculative goals and trade in the short term, then the use of CFDs will be equally in line with its type of operation.

Another peculiarity of eToro is to allow fractional share investing. For example, if I wanted to invest in Amazon shares, with any other stockbroker I would be forced to purchase a share or multiples thereof. In the case of Amazon, I would be forced to invest about $ 2,100 to buy at least one share. With eToro you can buy a fraction of the share, starting at $ 50. In other words, I will be able to invest whatever amount I wish, regardless of the price of the underlying share.

» Financial leverage

eToro Europe is a broker based in Cyprus. Therefore, it must comply with ESMA regulations, which require European brokers to offer customers maximum leverage of x30.

In the case of eToro, the maximum leverage varies according to the traded asset:

  • For stocks and ETFs, the maximum leverage is x5
  • For indices and commodities, the maximum leverage is x20
  • For Forex the maximum leverage is x30
  • For cryptocurrencies the maximum leverage is x2

Social Trading

eToro is one of the leading players in the brokerage field. The reason is that eToro has been able to differentiate itself from its competitors by offering a series of exclusive services. Among these, social trading stands out.

Social trading (also called copy trading or mirror trading) stems from a simple idea: copying the operations and strategies of other investors. Once a trader has been chosen to follow, every time he carries out a trade, we will be able to automatically replicate the operation on our account.

» Copy People

Within the eToro account, we will find a section called Copy People. Here we will have access to the list of all eToro traders that allow you to copy their strategies and replicate their portfolios.

The list of traders is quite long; therefore, it would be better to take advantage of the search tool, which allows us to filter the results based on the parameters that we will choose. For example, we will filter the list based on past earnings obtained, the risk level of the portfolio, the assets on which traders invest etc.

Why do successful traders make their strategies accessible to other users? These traders join the Popular Investor program, through which traders are rewarded for being copied by other people: the more they are copied, the more they earn. The good news is that anyone can become a Popular Investor. Just join the program and start promoting your strategy in search of users willing to copy us.

The minimum investment to copy a trader is $200/trade and the operation cannot be partially closed, only total closing is allowed.

When we copy a trader, I recommend activating the Copy Stop Loss option. It is a real stop-loss by which we set the maximum loss that we are willing to bear when copying a trader.

Example: I decide to copy a trader's portfolio by investing $ 1,000. I set an $ 800 Copy Stop Loss. If the trader's portfolio suffers a loss of 20% or more, my position will close with a maximum loss of $ 200.

» Copyportfolios

Copyportfolios is a latest-generation investment product. If the Copy People function allows you to replicate the portfolio of a single trader, with Copyportfolios you can replicate a group of traders (Top Trader Portfolios) or a basket of underlying assets (Market Portfolios).

CopyPortfolios bring together traders or financial assets within a single portfolio.

The aim of the Copyportfolios is to create a long-term and well-diversified passive investment instrument. Copyporfolios are professionally created by the eToro investment committee, which will select both the most deserving traders for the Top Trader Portfolios and the underlying assets to be included in the Market Portfolios.

Copyportfolios resemble, in many respects, to Investment Funds.

How does Copyportfolios work? Although the operation of the Copyportfolios may seem complicated, on the investor's side, the actions to be carried out are essentially two:

  • Choose the CopyPortfolio to invest in among the many available. To do this we will have to evaluate the allocation of assets, the level of risk and other parameters that are important to us.
  • Invest in the Copyportfolio. Being a passive investment, we will only have to select the amount we want to invest (the minimum amount to invest in a Copyportfolio is $ 5,000). At any time, we can divest and liquidate our position without any restriction (nor exit cost), while exit costs are common for Investment Funds.

Trading fees and Costs

How suitable is eToro for trading online? To answer this question, on the one hand, we have to analyze the fee structure, on the other, to quantify the costs related to the trading account. Here's what we found out from our analyzes and what our views on eToro costs are.

 

eToro trading fees

Taking a look at the commissions, i.e. the cost applied by eToro for each trading transaction performed, these vary depending on the product traded.

If you are trading on real stock / ETF / crypto (no CFD), eToro is one of the few brokers that offer commission-free trading. It means that we will be able to open and close positions without paying any fee. There are also no additional spreads, rollover or custody costs. In other words, we can buy and sell these financial instruments without incurring any costs.

Example: by buying and reselling 5,000 USD of Exxon shares with eToro we will pay zero commissions either for opening and closing the position. If we used the broker DEGIRO we would pay €1.58 (€0.79 + €0.79) and with Interactive Brokers €1.64 (€0.82 + €0.82). By multiplying the number of executions over a month, we can realize how eToro allows saving hundreds of euros. For very active traders, savings can be turned into thousands of euros.

The matter changes if CFDs are used. In this case, eToro applies a spread of 0.09% both for the purchase and the sale. If you hold your position for more than a day, you will also need to consider rollover costs (swap rates). Considering these fees, it is recommended to trade CFDs only for short term transactions, so as to save on overnight CFD costs.

 

eToro trading costs

Let's see now what are the costs related to the eToro trading account, i.e. all those costs not deriving from trading transactions.

Opening, maintaining and closing an account with eToro is always free. However, inactivity costs are applied if the account is not used for 12 consecutive months. In this case, a monthly fee of $ 10 will be charged. To avoid this charge, simply login to your account at least once a month, even without performing any transaction.

Deposits are always free, while withdrawals cost $ 5. The cost of withdrawals was fortunately reduced on February 19, 2020. Up to that date, in fact, the cost of every single withdrawal was quite high, being $ 25. eToro decided to bring down this cost which was too high. Although the cost of withdrawals has decreased, the advice we could still give is to try to minimize the number of withdrawals, especially those not strictly necessary.

Since the eToro account is denominated in dollars, a currency conversion from euro/pounds to dollars will occur if you deposit euros/pounds into the account. The exchange rate used by eToro will be increased by 0.5%. For this reason, we strongly recommend depositing dollars directly into the account. The best would be to use Revolut or Transferwise.

Example: we deposit 1,000 euros into our eToro account. Since the account is denominated in USD, eToro will convert the amount to dollars. The current EUR/USD exchange rate is 1.0854. while eToro will use an exchange rate increased by 0.5%, that is 1.0854 - 0.005 = 1.0804. Our account will, therefore, be credited with $ 1,080.4 instead of $ 1085.4. The difference between 1085.4 and 1080.4 ($5) is the cost of the conversion.

Trading platforms

One of the highlights of eToro is its trading platform. This is an in-house web platform, i.e. internally developed by eToro.

Being a web platform, this does not have to be installed on the computer nor does it request specific requirements to work. All we need is an internet connection. After we have registered an online account, to access the platform we will simply log in from the eToro website.

At first glance, the eToro platform has a modern and clean interface. More than a trading platform, it almost resembles a video game console.

At any time, we can switch from the real account to the virtual account and vice versa. This is an excellent feature as we can carry out test trades and simulations on the demo account at any time.

In the left part of the screen, we find the various sections of the account.

In the Watchlist, we can create our own list with the products of our interest to be monitored. From this page, we can also create price alerts and set up one-click trading, by which we can place an order with a simple click of the mouse.

In Portfolio we find an overview of our portfolio with open positions, transaction history, P&L.

In the News Feed we will find the main financial and macroeconomic news of the day, posted by eToro users. This section is very reminiscent of the LinkedIn wall.

» Research and analysis

The sections under the Search heading are dedicated to product search.

In Trade Markets we will find the lists of negotiable products, divided by assets. Alternatively, we can search for any tool from the search engine located at the top of the platform. 

In the search bar, we can search for an instrument by name, ISIN or Ticker. From here we can also search for a trader or a portfolio to copy.

In Copy People and Invest in CopyPortfolios section we will be able to search for traders or portfolios to be replicated, as we have already discussed in the section dedicated to social trading.

Once we click on the product we were interested in, we will be directed to the product tab. Here we will find the main company information and related news.

In the next tab, we will have access to the product chart. In fact, each financial instrument has its own chart. The standard chart on this screen is basic. If we want to use a more professional chart we will have to launch PROCHARTS.

PROCHARTS allows you to customize the graph and to use a multitude of indicators (67) and geometric tools (13). It also allows you to view multiple graphs on the same screen and save the layout. In PROCHARTS we will therefore find an ideal environment for technical analysis.

The two flaws I found myself in using the PROCHARTS are two: the inability to enter the order from the chart and the offering of a book only 1 level deep.

» How to place an order

Entering orders with eToro is very intuitive. Even beginners will figure out how to open and close positions immediately since the technical terms (typical of the trading platforms) are replaced by more understandable slang.

From the product tab, by clicking on the blue button Trade (at the top-right corner) we will open the order entry form.

From this interface we will be able to set:

  • The type of order: market or a limit order
  • The counter value or the number of securities to be bought/sold
  • The financial leverage to use
  • The stop-loss (or trailing stop) and take profit associated with the main order.

» Two-factor authentication

Two-factor authentication (2FA) allows you to implement an additional level of security on your account. By activating this feature, every time we want to log in to eToro we will have to enter a five-digit code that eToro will send us via SMS. In our opinion, two-factor authentication is essential to avoid any third-party access or hacking attempts on our account.

» eToro app

Alongside the web platform, eToro provides traders with an intuitive and innovative trading app. The eToro app is available for iOS and Android.

Surprisingly enough, the eToro app faithfully replicates the features and design of the web platform.

During our test phases, we found that the same sections and features of the WebTrader are on the app, neither more nor less.

The eToro app is limiting only if we look at the quality of the charts of the tradable products. In fact, if about 80 indicators and geometric tools are available on the web platform, there are only 5 of them on the app. Among the available settings, we have found the possibility to set the timeframe of the graph and change the background colour.

Therefore, for those traders who want to perform a thorough technical analysis, they need to have a PC or laptop, so they can use the eToro PROCHARTS.

Tax regime

Since eToro is a Cyprian broker with headquarter in Israel, for tax purposes it must be considered as a foreign broker. As a result, the funds and securities held by eToro must be considered as financial assets held abroad.

Depending on the country in which you are fiscal resident, there will be taxes eventually to be declared and paid. For this matter, we suggest contacting a tax advisor to fulfil all your tax obligations.

Customer support

Customer support from eToro is overall efficient, although the absence of telephone support could raise eyebrows to some traders.

Customer service takes place through two channels: live chat and tickets. Both are active from Monday to Friday, 24/24.

Live chat is only available to those who already have an account. Potential customers who have questions to submit to the eToro helpdesk will have to send a message from the eToro website, through the Ticket service.

It should be noted that eToro provides a complete and well-organized Help Center on its website. Here you can get answers to your questions by using a bot, saving the time that would otherwise have been spent in contacting support.

In addition to the Help Center, eToro provides through its website a section dedicated to didactics, called Education. Here the user can find a series of video tutorials, a blog and a series of articles aimed at increasing the level of knowledge of the user. To date, there are no seminars or other live events organized by eToro on the European territory.

Final rating

Having reached the end of this eToro review, we can express positive opinions about this broker.

Although not listed on any stock exchange, eToro is a European regulated and supervised broker. This allows us not to run into scams or anomalous behaviours that make us lose our invested capital.

The eToro account is designed for the average investor. Its ease of use and the possibility of adopting social trading make it suitable also for those who are beginners in the world of online trading.

The product offering is good with 6 negotiable assets. For those who choose to trade stocks and ETFs, the possibility of trading without commissions is very interesting.

Beyond fees, spreads, overnight costs and conversion costs can have a negative impact on our operation. For this reason, it is advisable to use eToro for short-term operations if CFDs are used. On the contrary, shares and ETFs can also be held with a long-term time horizon, since these do not present overnight or custody costs.

eToro's platform and trading app look more like a social network, whereas you can access financial news and consult the public portfolios of expert traders. Indeed, from eToro platforms, you can access charts, make technical analysis, develop strategies and much more.

 

eToro Pros, Cons and Reviews

In light of our analyses, our judgement on eToro is positive. We suggest its use for zero-commission trading and for social trading. Beware of spreads and overnight costs for CFD transactions, as well as being careful to deposit euros/pounds into your account. In this case, it would be preferable to deposit dollars directly into the account, to avoid the conversion costs applied by eToro.

"62% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money."

✅ What is eToro?

eToro is one of the most popular online brokers in the world. Founded in 2006, it boasts millions of active customers. Calling eToro just a broker is, however, an understatement, since it has been one of the leaders of the Fintech revolution. Over the years eToro has turned the tables in the investment world, bringing social trading to the fore and attracting millions of customers all over the world.

eToro offers a multi-asset platform who allows investments in stocks, ETFs, cryptocurrencies and CFD trading. You will find all relevant information about eToro in the official review.

Risk disclosure: Investing involves risk of loss

Disclaimer: The main mission of Qualebroker.com is to provide objective and unbiased reviews, comparisons, opinions and analysis. Qualebroker.com does not provide any advice or solicitation for investments. The trading of financial instruments represents a high level of risk in which all the capital invested can potentially be lost. Only those who are aware of this risk should trade in the financial markets. Operating from an online business perspective, Qualebroker.com may be remunerated by third party advertisers. This remuneration should not be construed as an endorsement or recommendation by Qualebroker.com, nor will it affect our reviews, analyzes or opinions in any way. For more information please consult our disclaimer. 
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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