eToro Review 2021
What’s the catch with eToro?
eToro is a broker that was established in 2007 and hosts stock, ETF, Forex, CFD, and cryptocurrency trades. At this time, eToro has over 13 million users that span across 140 countries, including Australia and the UK. Unlike many of the other platforms and brokers that we’ve reviewed, eToro is available for US citizens. However, access to the broker is only available to 41 out of the 50 states in the US. A broker’s availability in multiple countries is typically not enough to make users feel comfortable, and they may ask, “is eToro trustworthy?” eToro is regulated in Australia, Cyprus, and the UK under FCA, ASIC, and CySEC, which can give peace of mind about its security.
The most noteworthy feature of eToro is that it is considered a social trading platform and is equipped with a Copytrader and Copy Portfolio, which allows users to copy the trading portfolio and execute the same trades as more experienced traders. Traders whose portfolios are copied can also earn extra money by being an “influencer” in trades. This sounds like a huge perk, but what’s the catch with eToro? Read our eToro review to find out so that you can make the most informed choice about your trades
There are various eToro fees; the fees associated with trading are low, but non-trading fees can be considered a con. Trading stock and EFTs are free through eToro, but there are fees associated with Forex and CFDs, albeit low fees. For example, an S&P 500 index CFD trade would acquire $1.70 in fees for a $2,000 long position that was held for one week. An example of a Forex trading fee is $8.70 for a EUR/USD $20,000 long position held for a week
These fees are lower than competitors such as Plus500 and MarketX.
As prefaced, there are non-trading fees that could be considered a turnoff. For example, there is a $10 per month inactivity fee after the account has been inactive for a calendar year. Also, there is a withdrawal fee of $5, which means that users will need to strategically plan withdrawals so that those fees don’t add up. While inactivity fees are standard across brokers and platforms, withdrawal fees are less common. Another non-trading fee that isn’t explicitly stated is the conversion fees. eToro operates with USD currency, which requires everyone else in the world to convert their currency. eToro does convert currency for its users within the platform but be prepared for a fee that’s .46% of your deposit amount if you are using a bank transfer as your dominant method of deposit. Credit card deposits will be charged a higher fee. A way to get around these fees is to check out your local banks’ conversion rates and determine if that would produce lower fees. Regardless of whether your bank converts or if eToro converts, you’ll be paying those additional fees. Keep in mind that other platforms have the capacity for multiple forms of currency, so eToro only allowing USD is a significant downfall.
Account opening is quick and easy; users are required to register with an email, Facebook account, or Google+ account. Once they’ve registered, they are granted access to a free demo account equipped with $100,000. We like this feature because the demo account allows users to experiment with the platform prior to making any deposits. Should users wish to execute live trades, they will need to confirm their identity with either their passport or government-issued ID and provide proof of residence through either a bank statement or utility bill. Before granting access to a live account, this added layer of security ensures that users are who they say they are and are given allowances in line with their country’s regulations. Once the account is authorized and funded, traders can execute trades – the minimum trade amount is $25. While this minimum trading amount is acceptable because it allows many trades under that initial hefty deposit amount, it still may be a little too high for novice traders to feel comfortable with.
Deposit & Withdrawal
There are different eToro deposit requirements depending on where one lives in the world, but in most cases, the minimum deposit is $1,000. eToro reports that the high deposit requirement is temporary due to the current volatile market and used to have a different structure. Previously, the minimum deposit for those living in Israel was $10,000; Australian and US citizens were required to make a minimum deposit of $50, and the remaining eligible users were held to the minimum deposit amount of $1,000. The current high minimum deposit may spark a user query: Is eToro good for beginners? Answering this question from the eToro deposit requirements along would cause us to lean more towards no because beginner traders often don’t have the capital to make high initial investments, and if they do, then they would likely feel some anxiety about investing that much upfront. Another limitation that may deter beginners is that the initial deposit requires a minimum bank transfer amount of $500, meaning initially, users must deposit funds from their bank before they can use alternative deposit methods.
Alternative deposit options include major credit cards, PayPal, Skrill, Neteller, China UnionPay, and Klarna/ Sofort Banking. Bank deposits take 4-7 business days to reflect on the account, which can stall trading. For reference, these deposit requirements differ from most of the other brokers and platforms we’ve reviewed to date, as they require a much lower initial deposit that provides more accessibility to beginner traders.
As mentioned previously, withdrawing funds is associated with a $5, but that isn’t the only downside. Withdrawal requests take up to 8 business days to process. However, the most common range for processing is one to two business days. The length of processing time will depend greatly on your chosen withdrawal method, with PayPal, WebMoney, China Union Pay, and Netteller taking the least amount of time and a Wire Transfer taking the most amount of time.
Trading & Platform
eToro offers a mobile-based trading platform and does not offer a desktop-based platform. This means that all of your trades will be conducted on a mobile device, either iOS or Android. The platform hosts 21 different languages and has great functionality that is comparable to a web-based platform. The platform is primarily used for CFD and Forex trades, but as mentioned earlier, traders can also take advantage of ETFs, stock, and cryptocurrency trades. A unique feature of the eToro platform is that it is a social trading platform, meaning you can copy other users’ trading strategies. This can be helpful for beginners who aren’t confident in their own abilities, but it’s important to make sure you are copying someone who is experienced and appears to know what they’re doing.
Traders whose portfolio and executed trades are copied can earn an extra commission for being an influencer,” but this can create issues if traders manipulate their portfolios to look more successful than they just to earn that extra commission. Also, novice trades may fall susceptible to the tricks and end up making poor trading decisions by copying those they think are doing things well. In addition to the social trading features, the platform houses fundamental data about the market analysis, charting with technical indicators, and a news feed with up to the minute updates that may impact your trading outcomes.
Customer service is essential for any broker because traders invest their money, and if something goes wrong, they need a quick fix so that they don’t lose copious amounts of funds. eToro’s customer support is mediocre at best. Traders can speak with a customer representative through live chat, email ticketing system, or a web-based ticketing system, which gives users multiple means of communication, but there are some downfalls. While they have fast response times and live chat features, their customer support isn’t 24/7, meaning there are times where traders are left to navigate issues on their own or wait until a customer representative is available.
As we’ve mentioned previously, the platform isn’t ideal for beginners due to the fee and deposit structure, but there are other reasons the platform isn’t suitable for beginners as well. As you’ve likely read, if you’ve been following our blog, most brokers and platforms host a variety of tutorials, educational videos, or guides, but eToro’s educational system is not very strong. While they equip users with a demo account, they fail to provide basic educational videos, which can leave users making uninformed trades or copying portfolios of traders who look experienced but are not. To make the platform better for beginners, it would be helpful if they included information on what to look for in portfolios that traders are considering copying.
So, what is the bottom line? Is eToro legit? The broker is legit and has several key benefits for more advanced traders who want to compare strategies and engage in zero-commission trading, but the non-trading fees are high, and the customer support is subpar. If you have any additional input on eToro, we’d love to hear it! As always, happy trading, friends!