eToro is a social trading platform that allows users to copy the portfolios of other successful traders within the platform to generate similar returns without all the hassle and due diligence required when building a portfolio singlehandedly.
This feature is known as CopyTrading and it is fairly advantageous for beginner investors as it simplifies the process of investing by relying on the individual picks of top-performing investors within the platform.
If you are looking to learn how to copy trade in eToro, the following article will provide a quick step-by-step guide to help you identify and copy the portfolios of these accomplished investors easily.
How to use the CopyTrading function of eToro?
The first thing you should know about copy trading on eToro is that you need to invest a minimum of $200 in every single investor you pick within the list to open a CopyPortfolio.
Meanwhile, there is also a maximum limit of $2,000 per investor and a maximum of 100 investors you can copy at once.
The process of copying an investor’s portfolio starts by browsing through the platform’s selection of featured investors.
The platform offers the possibility of filtering these investors by their geographical location, performance, and market in which they specialize, while eToro also groups them by their popularity (trending or most copied) or by their investment methodology (long-term investors or multi-strategy investors).
Moreover, by clicking on the individual box of each investor, users can get acquainted with their profile, number of followers, number of copiers, and current portfolio.
Additionally, users can take a look at the performance of each investor over the past 5 years – broken down by month – while also checking the degree of risk taken by the investor based on his/her positions through an average risk score developed by eToro.
Interestingly, other stats include the average number of trades per week, the average holding time for the securities the investor purchases, and the percentage of profitable weeks.
How to start copying an investor on eToro?
Here’s how you can get started with copying other traders’ portfolios with eToro.
Step #1 – Go to the CopyPeople section
To start copying an investor’s portfolio the user must go to the Copy People tab located on the left panel of the trading interface.
After that, the CopyTrading hub will open up with the Editor’s selection of the best investors within the platform.
Step #2 – Pick an investor to copy
You can filter your selection of investors to copy by using the filters provided by the eToro platform, which include:
- Geographical location.
- Asset class in which they focus.
- Time frame for their performance.
- Risk score.
- Copy AUM.
- Number of copiers.
- Active weeks.
- Average position size.
- Daily and weekly drawdowns.
To refine the list, the user must click the “Go” button located in the upper right corner of the CopyPeople hub.
Step #3 – Start copying
The last step to start copying an investor’s portfolio is to click on their individual box and then click on the “Copy” button located on the right upper corner of the screen.
Once you click there, a pop-up box will appear where you can choose the amount that you would like to invest in this copied portfolio and you will also be able to add a stop-loss for your copy portfolio expressed as the maximum loss that the entire portfolio can take before the system closes it.
One thing you should know is that eToro uses leverage for opening copied portfolios. This means that if you invest $1,000 in copying a given investor the system will usually take $100 in equity and $900 in leverage to open that position.
Which are the benefits of copy trading with eToro?
Copy trading with eToro facilitates the process of building diversified portfolios by relying on the expertise of seasoned investors who have a track record of producing good results through their trades.
For beginner investors, copying others can be a great way to start their investing journey and they can also follow these investors to learn how they pick some of their individual holdings and which investment methodology they prefer and why through their eToro feeds.
Some of these experienced investors also post videos and blogs that explain the reasons why they have opened or closed certain positions, which would provide amateur investors with valuable insights that should enrich their skills and knowledge.