Etoro copy trading is a must for your investment portfolio, but only when used correctly. Let’s find out why.
As with many internet based investment opportunities, a picture will be painted of unbelievable wealth, just by doing 5 minutes work a week! well guess what, just like all of our business opportunities, you have to keep your ambitions real and put the hard work in. Otherwise everybody will be doing it right?
Etoro copy trading – what is it?
Making money out of stocks and shares is one of those opportunities that is really possible as long as you know what you are doing, and you apply some basic rules. The key is also to apply a sensible trading strategy that works for you and is built on logic, not emotions.
Copy trading is where you deposit to a copy trader platform such as Etoro or Zulutrade and you can follow other people’s trading decisions.
Customers are allowed to risk only 20pc of their total equity copying any one trader and an account can be opened for as little as £30. eToro operates like a spread-betting platform, allowing customers to bet on major markets but without the need to stump up the full value of the transaction.
“We’re helping people discover the wisdom of the crowds,” Mr Assia added. “By copying other traders people gain a better understanding of the markets and our research shows that eToro users are consistently more profitable than people who just trade manually.”
Now, this might be sounding quite easy, simply find somebody that has made a profit this year, copy them and then boom, cash in, right? wrong! You still have to research and carry out a risk assessment of every trader because what you need to know is their strategy to trading.
What I mean by this is that one trader may well be in profit but they may have at some point traded some stocks really low without stop losses. This means that people with smaller investments could be either wiped out, or that some positions are still open and therefore not yet registered as a loss in the hope that the trade will bounce back.
My guide to making money from Etoro copy trading
1 – Copy at least three traders
Even the best traders have bad trading spells, and that’s why with any wealth creation strategy you should always have your investment spread across multiple sources. This means you are spreading the risk, so that if one investment falters, the other two back you up. If you are careful enough about the selection of your three traders, hopefully you will never have more than one that has a bad period.
2 – Do the research
Use the filters to find traders to follow, because the featured traders are not always the best. Look at their trading history, holding time, trading frequency etc. You want to ensure that they have been trading for a period of time, and the trading approach suits your method of investing.
Do they take risks?, do they hold on to trades when they lose money or do they input stop losses to reduce the impact on the overall investment? I always look for people that have losses as well as profits because this shows their mindset is to reduce risk and take the loss, knowing that their overall trading approach will produce profits in the long term.
3 – Test out traders
eToro gives you a free practice account which you can use at any time, so use it! You can still run your real account alongside the practice account.
4 – Don’t touch new traders
18 months trading history is a must for me because I need to see that they have form, and have also traded through different seasons. I want to know that they have traded the same period of time in the year, and good results were not just luck. The markets have certain trends through the year, and I want to see how traders deal with this.
5 – Copy lower risk traders
Use the risk score to evaluate how risk averse they are. Stay away from anyone with a score over 4. This is because they are using too much leverage or committing a high proportion of funds to a single trade. This is a high risk strategy and it doesn’t play out well over the long term.
6 – Reinvest profits
Although it’s tempting and often necessary to withdraw profits straight away, don’t forget about compounding. It’s a fundamental part of wealth creation. Profits automatically get reinvested back into etoro when you copytrade. This is a great thing as it should increase the size of your profits over time.
7 – Don’t be afraid to stop
If the trader you are following is making decisions that you are unsure about, stop following them and take the loss. If you think the investments they are involved in are going to lose money in the long run, then don’t be afraid to pull out and take the hit. Would you rather lose 20% of your funds or 40%?
Hopefully you found this article interesting and go on to have some success with Etoro copy trading. I believe that to create wealth you need to have a number of strategies for your investments, and without a doubt I believe that trading stocks and shares should be part of that strategy.
If you have your own strategy you should execute it with discipline, or by using these rules on a copy trading platform, you can follow somebody else that can enforce a disciplined strategy for you.
Thanks for reading our Etoro copy trading article, why not read our popular article on Amazon dropshipping.
High & Wise