One of the reasons so many users prefer the eToro platform is the wide variety of different assets it offers. Below you can find a quick guide on what they are and how they are traded.
(NOTE: Before we continue, we have to give a disclaimer that the trading products offered by the companies listed on this website carry a high level of risk and can result in the loss of all your funds. CFDs are complicated instruments that are never guaranteed to provide you supplemental earnings. In fact, Around 67% of all retail investors experienced a loss while trading CFDs. Make sure to keep this in mind before attempting to use the eToro platform yourself. All the information found on this website is not official trading advice and all practices shown are referenced for the use of the Demo account only.)
Stocks are essentially a small portion of a company, a fraction of ownership, that can be traded on the market. Stock market offers many opportunities for traders and can be used for investing from short to long term. There are many factors that influence prices of stocks, both company and the overall market related changes. For instance, positive company performance in terms of sales, revenues, changes in management and other indicators may increase the value of the stock and vice versa. Traders may employ both technical and fundamental analysis in stock trading depending on their investment horizon and trading style. External economic factors such as the interest rates, inflation or major political events can likewise influence the prices of stocks. When company makes profits it may also choose to pay them out in the form of dividends, which eToro pays out (for long positions that will be an addition to your account and for short positions it will be a deduction).
A long or buy position in stock entitles you with an actual ownership of the asset. Sell (short) positions on stocks on the eToro are offered using CFDs. Additionally there is an option to buy fractions of shares to allow for users with limited available capital on the platform to invest too.
Commodities are some of the oldest assets available for trading and are unique because they actually have a physical representation, and include things like oil and gas, precious metals like gold, silver and platinum. Their prices are affected by market supply and demand as well as major global economic and political events, like in case of stocks.
Trading commodities on eToro doesn’t require you to purchase the actual asset as everything is done using CFDs, which also allows you to take short positions and trade in fractions or use leverage.
Exchange traded funds are complex financial instruments and combine many securities (like stocks, commodities, bonds etc) into a single asset that can be traded as a single unit on the platform, just like any stock. ETFs can operate in multiple industries as well as employ different strategies, but many times these funds track a certain index, like S&P 500. ETFs offer trading flexibility in comparison to mutual funds, which are only traded once a day, and allow investors to diversify through exposure to many markets at once my combining many different securities. They are often added to portfolios as a way to lower the overall risks or as a long-term investment strategy. There are 252 ETFs available on the platform.
ETFs can be traded in both long and short positions on the eToro platforms using CFDs, which also allows you to trade them in fractions.
Currencies are one of the bigest and most liquid global market that can be traded on the eToro platform but it is also one of the most volatile ones. Currency trading is mostly suitable for active high-risk traders because it is very dynamic with constant changes happening all the time. This is because there are many factors that affect these movements such as the interest rates set by countries’ central banks, inflation and other major economic indicators. It may be quite important to monitor news and global events which affect exchange rates and currency pairs greatly.
There are more common or major currency pairs offered, which always have the USD (United States dollar) as one of the currencies in the pair, such as EUR/USD or GBP/USD. There are also cross currency pairs which do not involve the USD, such as AUD/GBP or EUR/GBP and also exotic currencies which trade in quite small volumes, such as the Russian ruble or Singapore dollars, and they tend to be very volatile. There a total of 52 currency pairs on the eToro platform for you to choose from.
Because of the inherent volatility of this market changes in currencies happen in very small units – ‘pips‘, with a value as small as 0.0001. eToro offers currencies for trading only using CFDs, which also allows you to take short position as well as use leverage in your trading. Beware that leverage is an option that bears a lot of risk and can amplify your lossess in the same way as your profits.
Indices track the performance of a basket of many stocks (or other financial assets) related to a certain market segment in a standarized manner. Certain indices capture broad market performance, such as the S&P500 or DIJA, and many times these are used as a benchmark to compare the returns of an investment. Because there are many stocks combined in indices they offer a great degree of diversification. Companies of greater size or market capitalization are assigned a greater weight in the index accordingly. There are currently 15 global indicies available on the platform and are traded using CFDs, allowing for leverage to be used too.
What else does eToro have to offer?
Apart from the traditional assets mentioned above eToro also offer innovative options for CopyTrading.
A great opportunity offered by the eToro platform is its thematic CopyPortfolios, which are a ready-made thematic investment combining a wide variety of assets like stocks, ETFs and commodities with a specific trading style or theme. This a great option for portfolio diversification, long-term investment and also risk reduction; it can also save your time in researching, managing and rebalancing, which is done by the eToro team instead.
When choosing what kind of CopyPortfolio to invest into there is always an option to filter your selection by performance, risks and returns, but also by the type of assets invested into, as shown on the image below. You can do that by choosing the filter option in the CopyPortfolio overview and then choose the kind of criteria you prefer.
eToro platform also offers a ready made thematic investment CryptoPortfolio suited for long-term investment with a combination of many popular cryptocurrencies including Bitcoin, XRP, Litecoing, Ethereum and many others. The portfolio is diversified and includes mostly cryptocurrencies with large market capitalization (over $1 billion), it is constantly rebalanced and managed by a team of professionals.
This popular option allows you to replicate the trades made by other users of the platform in case you do not have the time or knowledge to trade yourself. This is an interactive feature and you can find a trader most suitable for your preference if risks, the type of assets in a portfolio and other performance characteristics available.
How to choose which asset to trade?
Many times this choice depends on your goal for trading, investment style and investment horizon. Certain assets are more suitable for active short-term trading because of their high volatility, such as for example currencies. Other assets may be more suitable for longer term investment as they are considered to be less risky and more diversified, like ETFs. The choice may also depend on your willingness to accept certain levels of risks; for example, although large and widely traded, the cryptocurrency market is considered to be the more risky one. Traders also need to take into account the amount of capital they can use in trading; for example, because currency movements occur in such small units as pips, one may require quite a large amount of capital to obtain profits, given they know how to trade them successfully. You may also choose to specialize in assets you are more familiar and comfortable with. Remember that any kind of trading involves capital risks.
Hopefully this article gave you a good idea about the types of assets available on the platform and how they can be traded. Best of luck and enjoy trading on the eToro platform!
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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.
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.
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