January 5, 2024

How to Start Copy Trading With eToro

Nick Investing reviews 5 Comments

In my post today I’m focusing on the trading and investment platform eToro. I originally reviewed eToro in this post.

eToro is a global fintech company with its HQ in Israel. The company has registered offices in Cyprus, the UK, the US and Australia. It is a hugely popular platform with 25 million customers from over 140 countries across the world. They offer a range of share trading and investment services.

eToro is regulated and authorised in the UK by the Financial Conduct Authority (FCA) and is covered by the Financial Services Compensation Scheme (FSCS). That means if eToro were to go bust any cash deposits with them up to £85,000 would be protected. Of course, the FSCS doesn’t protect you if you lose money simply due to your investments performing poorly.

What is Copy Trading?

Copy trading is a very popular feature of eToro. As mentioned, it allows you to automatically copy the trades of established eToro investors and benefit from the profits they (hopefully) make.

eToro has hundreds, probably thousands, of approved ‘popular investors’ whose trades you can copy automatically on the platform. They each have a profile page where you can find out more about them and their investment strategy.

On a trader’s profile page you can see various stats about them, including how many copiers they have and how many people are following them. You can also check their profits over various timeframes (though of course this is no guarantee of how successful they will be in the future).

eToro operates in US Dollars, though that isn’t an issue for UK investors (see tips, below). There’s a minimum investment of $200 (around £165) for copy trading. However, many approved traders recommend a higher minimum than this. That’s because, when you sign up to copy a trader, eToro automatically duplicates all of that person’s trades in proportion to the size of your investment. 

eToro has a minimum investment size of $1 and if a trade would work out less than that pro rata it won’t be executed. It follows that traders whose strategies typically involve placing large numbers of relatively small trades generally recommend a higher minimum starting investment.

One of the biggest attractions of copy trading is that no charges are payable. The traders in question receive commission from eToro for the business they bring in for the company. So in effect you are getting privileged access to the skills and expertise of these people at no cost to yourself.

You are allowed to copy up to 100 different popular investors, though you can of course start with just one.

How to Copy a Trader

Before you can start copy trading, you will need to register for an account with eToro and deposit some funds with them. I talked about this in my original eToro review.

Once you have done this, you can check out popular investors on the platform by clicking on Discover in the left-hand menu of your dashboard when logged on, then clicking on CopyTrader near the top.

A new page will open showing the most popular copy traders and also those whose copier numbers are currently growing the fastest (probably due to good recent performance). Here’s a screen capture showing part of this page at the time of writing:

.

You can also use the search facility to search for popular investors according to where they are based, what they invest in, and how much profit they have made within a certain period.

Once you’ve found an investor you want to copy, click on the green ‘Copy’ button on their profile page. A pop-up box such as the one below will then appear. Enter the total amount you want to invest at the top. 

You also have to choose whether you want to copy all existing open positions as well as new ones. ‘Copy Open Trades’ is the default, and if you want to do this you should leave the box in question ticked. If you uncheck the box, only new trades opened after you start investing will be copied.

One drawback with copying all open positions is that you’ll be investing in these trades at the current price, whatever it is, instead of the price when the trader concerned opened their position. If the price has gone up since then, the profit potential may be less. On the other hand, if you opt only to copy new trades, it may be some time before your money is fully invested. There are pros and cons either way, but ultimately the longer you stay invested, the less difference this decision is likely to make.

Another choice to make here concerns the CopyTrader Stop Loss (CSL). If your copy value falls by that amount, the CSL will automatically terminate the copy relationship and return the remaining money to your eToro balance. You can set this figure anywhere between 5% and 95%. My advice is not to set it too high, as even a brief ‘wobble’ will then trigger the stop loss and crystallize your losses (see tips, below).

• If any of the above sounds at all daunting, note that everyone on eToro also gets a $100,000 virtual portfolio to practise with. You can copy trade using this virtual money to see how the process works and what returns you make.

My Experience of Copy Trading

In June 2022 I invested $500 (then about £412) copying a Netherlands-based eToro trader called Aukie2008 (real name Mike Moest). I chose him for various reasons, including his eToro profit record and the number of followers he had already.

On his profile page he came across as a likeable, straight-talking individual, as well as being an experienced and knowledgeable trader. He posted regular updates on his strategies and on investing generally. I also liked the fact that he always took the trouble to answer questions posted by his followers. His recommended minimum starting investment was $500.

Unsurprisingly in these volatile times, my investment has been up and down, but it is currently (after 18 months) about $125 (25%) in profit. All things considered I am very happy with that.

In due course I may top up my copy trading investment with Aukie2008. I may also diversify my investments, either by following another approved trader or perhaps via another themed smart portfolio. As regular PAS readers will know, a few months ago I invested $500 in the Oil Worldwide smart portfolio. As the screen capture below shows, this has done okay, though not as well as my copy trading investment. It’s still early days, though.

Top Tips for Copy Traders

Here are some top tips to help you make the most of the copy trading facility on eToro. These are based partly on my own experiences, but also on other comments and advice I have seen.

1. As mentioned above, check the minimum recommended investment for any trader you are thinking of following and be sure to invest this amount of money or more.
2. Note also the risk score assigned by eToro. Each approved trader is allocated a score between 1 and 10, with 1 representing very low risk and 10 the highest. Scores are based on the number, size and type of trading activities they engage in. If you are just starting out you might prefer to begin with someone relatively low risk (say 5 or lower) and work up from there as you gain experience on the platform.
3. Other things being equal, when following a trader I recommend choosing ‘Copy Open Trades’. This will ensure all your money is put to work immediately. As mentioned above, it does mean some positions may not have the same profit potential as when they were opened, but the longer you remain invested, the less this will matter overall.
4. Also, as mentioned earlier, don’t set your CSL too high. Doing so will mean even a slight wobble may trigger your stop loss and crystallize your losses. Personally I wouldn’t set this figure any higher than 70%, but it’s your decision, of course, based on your tolerance for risk.
5. To keep currency conversion costs to a minimum, I strongly recommend opening a separate eToro Money account. This will allow you to deposit instantly to your eToro account without paying currency conversion fees or charges.
6. Remember one key principle of successful investing is diversification. You should therefore consider copying a number of traders with different investment strategies rather than just one. In addition, eToro offers a range of other investment opportunities as well, including individual company shares and themed portfolios.
7. Even though you’re following an approved trader, you should still monitor his/her results carefully and be prepared to switch if it seems they are losing their touch.
8. I recommend reading all the updates on the trader’s profile page too. Not only do these provide valuable background about their strategies, you can also learn a lot about the thought processes of professional traders.
9. Finally, don’t forget that everyone on eToro also gets a $100,000 virtual portfolio to practise with. You can use this to try out copy trading or any other type of investment without risking any real money.

Closing Thoughts

If you’re looking for an interesting (and somewhat unusual) investment opportunity, copy trading on eToro is certainly worth considering. 

In effect, your portfolio is managed on your behalf by an experienced professional trader, whose expertise you get access to at no direct cost to yourself. There are plenty of approved traders to choose from, and you can study their past performance and personal updates via their profile pages before picking one (or more) to follow.

For more information about eToro, please see my original eToro review. Alternatively you can sign up directly on the eToro website via this link [affiliate]. I will continue to update Pounds and Sense readers about the performance of my eToro investments in my monthly updates (such as this one).

As always, if you have any questions or comments about this article, please do post them below.

Disclaimer: I am not a qualified financial adviser and nothing in this blog post should be construed as personal financial advice. Everyone should do their own ‘due diligence’ before investing and seek professional advice if in any doubt how best to proceed. All investing carries a risk of loss.

Note also that this post includes affiliate links. If you click through and perform a qualifying transaction, I may receive a commission for introducing you. This will not affect the product or service you receive or the terms you are offered.

This is a fully updated version of my original (2022) blog post about copy trading on eToro.