eToro CopyTrader

What is eToro CopyTrader?

CopyTrader is a great tool provided by eToro which allows you to observe the actions of other traders in real time, choose a trader that suits your outlook and strategy the most and immediately replicate their investments.

How does it work?

With the CopyTrade option you are able to see the performance of other traders within this collaborative and supporting community, check their statistics, portfolio compositions, risks assessments and so on. When you decide to copy a preferred trader on the platform, you can exactly replicate their trading positions i.e. the actions and investments they make in relative proportions to the funds on your own account.

Requirements

Since CopyTrading is quite advantageous to traders, there are certain limitations and requirements that must be met before one can use this option; those are however relatively generous for the industry.

• The minimum amount needed to be invested into a trader of your choice is $500, while the maximum is limited to as much as 2 000 000$. Each replicated position amounts to a minimum of 1$. Some Copy traders make require additional funds deposited to be copied, which you can check once clicking on the investor of choice.

• The number of traders you can invest into at the same time is limited to a maximum of 100.
• Another requirement must be met within your profile assessment. eToro ensures that your objectives, trading and financial capabilities are in line with the amount of risk you are taking on by assessing your profile and the questions you answered during registration. In case your profile doesn’t fully satisfy the conditions for the risk to be taken with the CopyTrader option, there is a chance you will not be allowed to open new Copy positions, but this would not affect your currently open ones. These restrictions can change once you update your profile or access platform’s support team.

Fees

Using the CopyTrader option does not in fact entail any additional hidden costs or management fees. So how does the platform and the copied traders benefit from this then?

As with other trades, eToro makes gains out of the bid-ask spread from the trades open under the investments made by the Copied trader or from the transaction fees in case such are applicable to the performed trades. The traders who are being copied earn their profit from the the Popular Investor Program, where they are being paid for providing such a service.

Deciding who to copy

eToro allows you to copy nearly any other trader on the platform. The only limitation applied is not being able to copy traders with an exremely high risk rank, such as a 9 or 10. Choosing which trader to copy exactly depends on your personal preference as you can decide based on a trader’s performance, the type of assets they hold in their portfolio, their level of risk and so on.

You can see all of the above data by clicking on the trader you want to copy and looking at their statistics, portfolio and chart data, with an overview of their monthly returns, risk ratings, trading statistics such as profitability ratios, investments into asset types and so on. Below is a list of some of the things you might want to consider.

• Persistence of performance over time and the degree of fluctuation in a trader’s returns over time is an important factor to consider. Perhaps their outstanding performance was coincidental with the book of a certain market, for example the rapid cryptocurrency market growth in 2017 or other market-specific booms that were well-timed by the trader. It may thus be a good idea to compare investor returns to the the overall performance of the market over time.
• Associated risk. Looking at a trader’s risk assessment is one of the most important aspects to consider before choosing a copied trader. Riskiness of a portfolio depends on many factors but primarily on the volatility of the assets held, as some instruments or stocks’ returns vary to a greater extent. The choice here boils to your willingness to accept risks in exchange for potentially higher returns, but potentially higher losses too, as greater volatility may offers higher gains (when traded skillfully) while less risks investment tend to be more stable and offer less returns. You could likewise examine trader’s average monthly risk score. eToro helps you with this process by limiting the traders with too high of a risk ranking to be copied.
• It may also be useful to consider the surrounding market conditions in relation to the portfolio of the chosen trader to be copied. It is great when a trader is able to time potentially profitable market trends or patterns as well as demonstrate a potential for returns’ growth. So for example you may consider investor’s performance to the general market index returns, such as the S&P 500.
• Personal preference of the traded instruments and the trading style. This may depend on your personal liking of certain markets in which the chosen Copied Trader operates in, for example an emphasis on stock or on cryptocurrencies.

In fact eToro updates its own selection of top-ranked traders to choose from, based on several selection criteria, including the overall returns over a period, the relative proportion of successful to loosing trades as well as the number of highly leveraged trades or duration of positions held open. You can also choose your own filters to select from, including geographical locations, risk rankings, types of markets the investor is operating in and so on.

Steps to use CopyTrader technology

1. Choose which trader you wish to copy, possibly referring to the assessment criteria presented above.
2. Decide on the monetary amount to invest. The total amount of your investment will then be split in proportion amongst the trades of your Copied Trader.
3. Click on the ‘Copy’ button to begin replicating the position of the chosen Trader.
4. Next the positions of the chosen trader will be automatically replicated with the proportional monetary amounts allocated to each position.

Once you agree to copy a trader, you have a choice to either duplicate all of the open trades or only the new trades that the trader of your choice executes. In case you duplicate all of the open trades of the copied trader, all the existing trades will be copied at the current rates of the market, with the set stop loss and take profit rates. Bear in mind that because of the bid-ask spread the opened trades will appear at a loss, which is representative of the real-time amount you would be left with in case you decide to end the trades.

You can also decide to replicate only the new trades opened by the copied trader after you started copying them, in proportion to the realized equity of the Copied trader, which consists of the total amount of invested funds to the total account balance.

In case you decide to manually close one of the copied trades the monetary amount from this position will be deposited back into the copy balance. The copy balance consists of funds that you invested into the copied trader but are not engaged in open positions.

Available Options

Copy Stop Loss Option

The loss of your trades can be, as usual, limited with the Stop Loss option (SL) also available for the CopyTrader technology (Copy Stop-Loss or CSL). In case the positions of the copied trader have surpassed the permitted loss rates, they will be closed automatically. This automated risk management mechanism allows you to effectively control the losses from the copied trades. Copy Stop Loss threshold can be set to any value in between 5% and 95% as best suited to you, but the maximum stop loss is however limited as not close completely the copied relationship.This essentially ensures that you do not set the CSL to a value so small that it ends your CopyTrader deal with all of the trades under it automatically.

Pause Copy

When you don’t want to execute any new trades alongside your copied investor anymore, you can use the Pause Copy Trader option. You will still continue the trades you were already pursuing i.e. with the positions that were already currently open but any new trades will not happen. The already opened positions will therefore also follow the stop loss or take profit (often referred to as simply SL/TP) orders from the trader you are copying.

Copy Dividends

In case the trader you are copying decided to withdraw funds, an amount proportional to their withdrawal will be taken from the amount allocated to the copy trader you and placed into your account balance. In case the copied trader decides to add an amount to their account, you will be notified on the option of whether you want to add more funds too to replicate the additional allocation of the copy trader.

Potential issues

Not all trades have been copied

In case you notice that not all of the trades have been replicated from the Copied Trader, check on wether you have selected the ‘Copy Open Trades’ option to open all of the positions.

Blocking of a Trader

In a rare occasion there may be a possibility of a copied trader being blocked due to them violating a rule or a restriction on the platform, for example reaching an unacceptable risk level or breaking another condition. Usually this issue is solved relatively quickly by both the trader and the platform so they can continue trading.

Becoming a CopyTrader

The Popular investor program allows you to become a Copy Trader yourself, once met certain conditions. Becoming a CopyTrader requires your account to be public, demonstrate a certain consistency by having traded on the platform for at least two month, maintain a relatively low risk rate of under 6 as well as meet certain leverage restrictions. You will be paid as according to the achieved tier every month, given you adhere to the terms and conditions as well as meet the requirements.

Conclusion

Please remember that using the CopyTrader technology and replicating someone else’s portfolio still exposes you to capital loss risks and should be done with caution and risk comprehension. Although CopyTrader essentially provides you with a ready made portfolio solution to replicate, it is still important to understand basic trading mechanisms and strategies and be able to assess such investment’s potential. Do not forget to practice your skills and knowledge before hand and good luck trading!

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eToro is a multi-asset platform that offers both investing in stocks and crypto assets, 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. 68% 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. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision.

Copy trading is a portfolio management service, provided by eToro (Europe) Ltd., which is authorized and regulated by the Cyprus Securities and Exchange Commission.

Cryptoasset investing is unregulated in some EU countries and the UK. No consumer protection. Your capital is at risk.

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.