Is eToro Right For You?: Commission Free Brokerage Review


eToro, founded in 2007 with the goal of making trading more accessible to every day users.

At the same time, eToro wanted to reduce the dependence on banks and other traditional financial institutions for investing. They wanted to make a cheaper option for beginners so they could get started without massive upfront investment and fees.

They started off with a simple online trading platform with graphs representing financial instruments, and now there have developed a full portfolio management system that can be used online or via an iOS/Android application.

Pros

  • Free stock and ETF trading in Europe
  • This is the easiest brokerage to open an account with
  • eToro is the best platform for social traders & cryptocurrency traders
  • Available all over the world
  • You can open a demo account to practice before trading real money
  • Robust charting and extensive research tools available
  • Free education videos and courses available for account holders
  • There is a strategy called ‘Copy Trading’ or ‘Copy Portfolio’ where you can copy to top 50 most profitable traders/investors

Cons

  • There is very little customisation available on the platform
  • No streaming news on the platform, you have to go elsewhere for news alerts
  • High forex fees with a spread of 2.45% per trade
  • Only one account base currency (US Dollar), a 0.025% fee will be charged upon conversion of your currency to US Dollar
  • $5 withdrawal fee and $50 minimum withdrawal which can take up to 7 days
  • The platform is not built for long term investors, there are better options out there such as M1 Finance or Trading 212.
  • Minimum initial investment of $200, which increases to $500 for those in Russia, China, Hong Kong, Taiwan, and Macau, then increases to $10,000 if you are from Israel.
  • Inactivity fee of $10 per month after 1 year of no trading activity.

Overview of eToro

eToro is a key player in the world of CFDs, forex, and cryptocurrency trading. The company does offer stock and ETF investing but the eToro app lacks certain features that are needed for stock analysis and portfolio management, so there are better options out there for stock investing.

Because eToro appeals to social and retail traders and more than 79% of these types of investors lose money, the company has gained a bad reputation for allowing inexperienced investors to gamble masses of money without support. But for a strong minded person with investing knowledge or at least the sense to learn before investing, this platform is more than safe and perfectly fine.

Today, over 6 million people have active accounts with eToro, securing its status as an industry leader in online investing. We will talk more about the safety of the broker, extra features they offer, user experience, and what to look out for.

Finally, I would only recommend eToro to those who invest using strategies like day trading, spread betting, or cryptocurrency trading. There are not many stocks and ETFs available and you can’t hold assets for an extended period of time because you will be faced with inactivity fees.

Safety when investing

The broker is authorised through Cyprus Securities & Exchange Commission (CySEC) and is compliant with the European Securities and Markets Authority (ESMA) regulations. The company that owns eToro is domiciled in Cyprus which could raise concern for some traders who remember the republic’s financial crisis in 2012.

Those concerns should be squashed as eToro is also licensed by the UK’s Financial Conduct Authority (FCA). The FCA requires a more thorough risk disclosure and protects account holders money up to £85,000 against illegal action.

Stop losses on trades can not be moved, which for new traders is a good thing. The risk involved with investing is sometimes overlooked and the fact that eToro is protecting it’s inexperienced clients by managing risk is great.

The last thing you need to be aware of is that in the fine print of eToro’s terms and conditions, there is a clause that allows the broker to hold client funds in banks outside the account holder’s country of residence. This increases the risk of banks defaulting on payments, but you are provided with the eToro’s for up to £50,000.

User experience

eToro has both a web platform and a mobile app. Both platforms are geared towards ease of use and lack some more complex features that some investors rely on to perform their analysis. The mobile app is available on iOS and android and is well organised. However, it has even less feature than the web version, the indication menu has been shrunk, the watchlist doesn’t include client positioning data, and the overall application has limited amount of customisation. I would only recommend the app for setting price alerts, because it is easy to get the notifications.

eToro is definitely for beginners or unconfident traders because it offers educational videos on basic investing, and with the CopyTrader feature, you don’t even have to do your own research (but you should).

The customer service also has things to be desired. The online web platform and the app host live chat, which is only available during your countries trading hours. eToro doesn’t have any phone support, but if you have a complicated query you can email the support team and their response in usually within 24 hours. The only other way of getting answers is through the FAQ section on the eToro website, it is extensive and thorough so you should be able to find what you’re looking for.

You can visit eToro to get a full walkthrough of their product.

How does eToro stack up against the other market leaders

The 3 market leaders we will be looking at are eToro, Plus500, and MarketsX. These are the most popular brokers for forex, CFD, and cryptocurrency trading.

The markets and products eToro offer are highly geared towards spread betting. The platform is not built to hold assets or build portfolios. If you are investing with eToro, you should plan to become a day trader not an investor.

Here are the different markets you can trade with on our 3 brokers:

eToroPlus500MarketsX
Currency Pairs477055
Stock Index CFDs133311
Stock CFDs1,9001,8002,000
ETF CFDs1459242
Commodity CFDs62217
Bond CFDs4
Cypto-currency17145
Data gathered from brokers terms & conditions

Although eToro hosts more stocks and ETF’s than its immediate competitors, they are no means a stock broker, they are still very much focused on forex and CFDs.

The research facilities on eToro are nothing to be desired, they do have extensive charts, trading ideas, and analysts recommendations. But there is no fundamental data available, and there are no news alerts. On most other brokerage websites they will offer news alerts or some sort of data analysis.

I think eToro is a great option for beginners as they offer loads of education and support, also the copy trading options you have make it a lot easier to find trading opportunities. Finally because eToro is a very user friendly platform, it makes the beginners experience better than most others.

Extra feature available

Copy Portfolio/Copy Trade

The CopyTrader and CopyPortfolio features in eToro are pretty unique to this brokerage, mainly because you cannot guarantee results, and if you wish to copy another trader or investor, you have to understand that just because they have done well in the past, doesn’t mean to time this time they are correct.

For social traders and beginners this can be an appealing feature, but if you want to really start investing, you need to become responsible for your own traders. You need to learn what is a good trade and what is a bad one, so you can build your investing career to last long after eToro becomes obsolete.

Finally the risk disclosure associated with CopyTrader is very extensive. eToro scores each trader with a risk level, so you can make decisions with more confidence, but as we all know the market is very hard to predict, and everyone can make mistakes.

The profiles are set up like a Facebook page, so you can easily find someone you like. You can copy up to 100 traders simultaneously, the minimum amount you can invest in one trade is $200. But you can only close a full position, not a portion or one.

Copy Trader eToro Platform
Copy Trader Platform from eToro

The CopyTrader feature is for those who day trade on the forex and cryptocurrency markets.

Copy Portfolio Platform
Copy Portfolio Platform form eToro

Whereas the CopyPortfolio is for longer term stock investors, people who want to build portfolios. You can either pick one investor to copy, or choose a couple of ‘start’ traders to build your portfolio around. There are also crypto CopyPortfolios.

Education centre

First things first, you can open a demo account for free and practice your strategies before you invest money, you will be given a virtual account with up to $100,000 in for you to use to your pleasure.

After this you will have access to the video library that goes into how to use the platform and the basics of fundamental and technical analysis. They are basic videos, but like I’ve mentioned before, eToro is geared towards beginners and social traders, so they are good to get you started.

In the trading academy, you will also have access to live webinars where traders go through their live decision making when picking trades to make.

eToro Trading Academy Platform
eToro Trading Academy for Clients

Price alerts

If you use the mobile app, you can set unlimited price alerts on all currency pairs, stocks and crypto currencies. This is the only thing I would use the mobile app for, I would not be placing trades on the app.

eToro Fees

The trading fees on eToro are among the highest compared with other brokerages. However, they don’t charge fees on stocks and CFD trading in Europe, and generally have low fees when trading CFDs’ regardless.

The forex and crypto currency fees are a 3 pip spread, and they have a withdrawal fee of $5 per withdrawal.

Because eToro offers leverage to traders that can be up to 30:1, these are the fees associated with a forex trade worth $20,000 at a 30:1 leverage.

eToroPlus500MarketsX
EUR/USD Benchmark Fee$19.6$17.9$24.5
GBP/USD Benchmark Fee$16.2$14$25
AUD/USD Benchmark Fee$12.4$12.6$25.1
EUR/CHF Benchmark Fee$11.8$9$22.1
EUR/GBP Benchmark Fee$19.9$14.6$20.5
Data gathered from brokers terms & conditions

These fees are the highest on eToro, the other fees charged on crypto currency, CFDs outside Europe, and ETF trading are similar to other brokerages, or lower in the case of CFDs and ETF’s.

The Verdict

EToro loves variety. Looking to help beginner and social traders by teaching them to use research tools and advanced analytics. For traders and investors that are confident in their own ability, there are better brokerages out there. To name a couple, I would check out our reviews of Trading 212 and M1 Finance.

As a trading platform I give eToro 4 stars out of 5, because it is very easy to enter and exit trades. But overall the platform has too much of a beginners feel. As a more advanced investor, I feel more confident with an advanced platform.

If you want to find out more about eToro you can open an account using our affiliate link and receive free access to the Trading Academy!

Chris Race

I am an accountant from the U.K. specialising in Management Accounting, Personal & Business Tax, Financial Analysis, and Wealth Management. My passion for learning is what lead me to creating this blog. Stock market investing has always been a interest of mine, and since I was 18 years old... This interest has become a source of income for me and my family.

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