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How to use eToro’s trading platform to spot potential trading ideas

Most traders go through periods where they feel their idea bank has dried up, which often leads to desperation and that could result in taking positions that do not meet a strict investing criteria.

When that happens, it is often handy to have various alternatives through which you can enrich your idea hub, whether that is by reading articles from seasoned professionals who might bring up potential opportunities within the market or by taking advantage of innovative tools like the social trading feature embedded within the eToro trading platform.

These tools can become a powerful ally to come up with sound investing ideas by leveraging on the power of social consensus to possibly identify opportunities in the stock market primarily.

In the following article, we will share a method through which you can spot potentially interesting investing ideas by checking what other successful traders are doing.

How to use eToro’s social trading platform to identify attractive investments?

The first thing you should know is that eToro has put at your disposal a tool that allows you to take a peek at the portfolio and performance of successful traders within the platform and you can access this feature by clicking the “Copy People” option located in the left panel of the eToro trading platform.

Once you have entered this section, you will notice that there is a panel located at the top of the list of prospective traders to copy through which you can filter your list of potential investors based on multiple variables.

For the purpose of this guide, I will define a criterion that I believe can provide some interesting results when it comes to identifying potential trading opportunities.

That criteria would filter investors by using the following variables:

  • Performance – minimum 10% return in the past 12 months.
  • Risk score – 4 or less.
  • Allocation – 80% stocks or higher.
  • Profitable trades – from 70% to 90%.
  • Country: United Kingdom

The reason why I am only considering individuals within the United Kingdom is that investors in other countries might focus on their domestic markets – which would reduce the chances of finding matches within their portfolios.

After filtering my candidates by using these criteria, the system has found 11 results that meet my standards.

Now, I can further refine this list by sorting the candidates by the percentage of profitable months they have had in the past 12 months and I’ll pick the top ten candidates that result from this sorting to evaluate their portfolios.

My selection looked like this:

/Users/alejandro/Desktop/investor selection.png

Now, the next step is going to involve a bit of hard work but hey! Who said investing was an effortless job?

What you can do now is go through the holdings of each of these 10 traders to possibly spot one or more stock that is popular among them.

You can do this by creating an MS Excel file, assigning a column to each of the traders you have shortlisted. In each of the rows, you will then add the ticker of each of the stocks they hold and then you can check the list for potential matches.

Some recommendations when filling the MS Excel file:

  • Open the individual page of each trader in a separate browser tab so you don’t lose the page in which you have already filtered these investors.
  • If an investor has too many holdings – more than 30 or so – only consider stocks that account for more than 3% of the investor’s portfolio balance.
  • If an investor does not have holdings at the time of your analysis proceed with the next candidate on the list.

Here’s how my list looked like:

../../../Desktop/list%201.png

Now what you can do is create a Pivot table from this data and group the table per ticker so you can see which ticker is being held by the highest number of investors within the list.

According to my analysis, these were the most popular stocks among the eight investors within my list:

../../../Desktop/list%202.png

Does this mean that you will earn money by investing in these stocks?

Not necessarily. This exercise aims to spot potential investing ideas – not money-making trades.

What you can do with this information is conduct a thorough due diligence on the most popular instruments you find after performing a similar exercise, yet you have the freedom to tweak the criteria used to filter your investors so you can come up with your own list.

This method is not a way to spot profitable ideas – just ideas.

The fact that these names are popular among investors who have had a successful journey investing their money in the past 12 months without taking excessive risks means that there could be further upside potential and value in these stocks and although some of these companies are very popular among investors already – as is the case of Amazon and Alibaba – in some cases the results can lead to identifying some hidden gems that not many people know much about.

Alejandro Arrieche

Alejandro Arrieche

Alejandro is a financial writer with 7 years of experience in financial management and financial analysis. He writes technical content about economics, finance, investments, and real estate. His favorite topics are value investing and financial analysis.

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