Updated: February 21, 2021
After signing up and then verifying your eToro account, most users do CopyTrading next.
In today’s eToro tutorial series, we’ll be covering eToro’s famous CopyTrading feature. Through CopyTrading, you can automatically copy another trader’s performance, risk management, and of course, trades.
I’ve written about CopyTrading before in this blog, but to make everything easy, let’s do it today, step-by-step.
First, you can find people to copy by going to the Copy People page, under Discover.
The Editor’s Choice is always a great place to start and consider. If you’re just in your virtual account, I suggest copying some of them to test how it works.
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Aside from Editor’s Choice, there are other categories as well, like Top Investors, Trending, Most Copied, Lower Risk Score, and Medium Risk Score. I recommend going through them as well.
Lower and medium risk score categories are quite interesting for me because you can see right away the average returns of the traders compared to their risk.
In the image below, you can see that traders there with 3-4 risk score have average returns of 20-30%, while traders with medium risk have average returns of 35-40+%.
If you’re just in your virtual account, I recommend copying at least 10 different traders. This is so that you get to see the strategies and trading habits of different traders. This will prepare you better for when you want to copy using real money.
For our example, let’s take someone from the Editor’s Choice: harshsmith
Right from the Editor’s Choice page, we see some stats of harshsmith right away. As of time of writing this, harshsmith has made a profit of 32.07% over the past 12 months, with a risk score of 5. He also has 1,737 total copiers, which is quite good.
His initial stats are interesting, so let’s dive into his profile to learn more about him, before deciding if we want to copy him or not.
I always make it a point to look at a trader’s biography and personal notes. This is a crucial factor for me as the trader normally shares his strategy and goals. harshsmith in this case recommends to copy him for a couple of months and with at least $600.
If you want to copy people, the minimum amount is only $200. Traders, like harshsmith, will sometimes give you a recommended amount, but you can still copy them with just $200.
Next, we naturally have to look at his stats and numbers. Click the Stats tab to view all relevant stats.
Performance tells us his exact profit and loss percentages since he started trading with eToro. Naturally, this is one of the most important metrics to look at. harshsmith seems particularly good for me because he was able to perform well during October 2018, which was a difficult time for the market last year.
While he does have negative months, this is normal in trading and the good thing is, his losses aren’t substantially big.
Risk score and drawdowns are another important factor that I look at. It essentially tells you on average, how much the trader is risking to get the returns he makes.
For harshsmith, his risk score is 3, which is quite low, and his yearly drawdowns is -9.93%. What this means is that he is risking 9.93% of his money, to get upwards of 20% return.
Finally, we take a look at how diverse he is. Diversification is always important for a portfolio. Putting all your eggs in one basket is never a good thing.
Looking at his portfolio, we can see that there is a decent amount of diversification. While majority are stocks, he has investments in indices and ETFs as well.
Something interesting to note is that he has very low exposure to more volatile assets such as crypto and commodities. As we know, oil prices and crpyto prices are prone to swings, so his low exposure to them might be the reason for his low risk score.
If we’re comfortable and ready to copy harshmith, we just click the Copy button on the far right side.
The familiar trade window will appear:
As we’ve mentioned before, minimum to copy someone is only $200. And in this window, we have 2 things to consider: Copy Stop Loss and Copy Open Trades.
Copy Stop Loss is very simple. In the example above, it just means that if our trader loses money and the $200 amount we invested in him becomes less than $120, eToro will stop the copy and return the remaining money to our balance.
This is a good way for us to limit our loses since it is our first time to copy harshsmith.
Copy Open Trades on the other hand, means that we will copy all current open positions the trader has. So as of writing, harshsmith has these open positions:
If we check copy open trades, it will open all of these in our accounts as well. Be careful though, as the prices we will buy the stocks he invested in will be different, because we will buy it at the price today.
If you don’t check copy open trades, you will not buy anything yet and will only do so once harshsmith opens a new position.
Pro-tip: Most traders will tell you in their bio whether to copy open positions or not.
And that’s it! That is how to do and use eToro’s CopyTrading function. It is a pretty simple and easy process. I highly encourage people to test this using their virtual accounts first to be safe and get used to it.
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