eToro is a trading platform that is available in Australia. You can trade stocks, currencies, cryptocurrencies, commodities and ETFs. But is it a good option for investing and trading? We break down the pros and cons.
What is eToro
eToro is an online trading platform. You can buy and sell stocks, forex (currency like the AUD), cryptos (like bitcoin) and commodities (such as Gold and Oil). It’s also a “copy trading platform”. This means you can copy trades made by more experienced traders. Whenever they make a trade, your account also makes a trade.
What are you trading on eToro?
In Australia when you open a trade on eToro you are opening a CFD position. CFD stands for “Contract for Difference”. So what does this mean? Well instead of buying and holding the underlying asset (such as a stock) you’re simply trading a contract.
This has some pros and cons. One pro is that you’re able to buy and sell assets extremely quickly. Unlike traditional trading platforms, settlement on eToro happens pretty much instantly instead of in a few days. The other advantage is you’re able to invest in partial shares. You can open a position of any size (within the min and max sizes). For example you can buy just $50 worth of apple shares.
What are the cons? Well for starters you’re not actually buying and holding the underlying asset. You never actually own the Apple shares. This means it’s not ideal for long term trading. CFD trading is designed for shorter term investing. If you trade with leverage it’s also possible to lose more than you invested. You don’t have to trade with leverage on eToro. But it’s something to watch out for.
What is eToro Copy Trading
eToro Copy Trading is where you copy a trader. When you copy a trader, you allocate funds that will automatically be used to copy all the trades made by the copied trader. Whenever they make a trade, your account will make a similar trade. When they close a trade, your account will close the trade too.
If you have limited trading experience then this could be a good way to see how trading works.
Should you trade on eToro
If you want to have more control over your investments then eToro could be a good option. I believe that eToro is suited to more advanced traders – if you’ve never done any trading before, don’t go ahead and start depositing money on eToro. You can actually sign up for free and trade with a virtual practice account. If you can’t make money with a virtual trading account, you shouldn’t try trading with a real account.
If you’ve already had experience with other forex or stock trading platforms then eToro might be a good option for you. It’s got a great range of assets and a pretty good trading interface.
Pros and Cons of eToro
- Access stocks and assets from all over the world
- Trade partial shares
- Invest with as little as $50
- CFD Trading (can be much more risky than regular stock trading).
- Withdrawal fees (depends on how much you invest).
- Fees for short positions and holding over weekends etc.