What is eToro
eToro is a global online trading platform founded in Tel Aviv in 2007. It has almost 25 million registered users worldwide and allows users to trade stocks, commodities and currencies, as well as Exchange Traded Funds (ETFs) and Contracts For Difference (CFDs). eToro is the leading platform for social trading, a feature that allows less experienced users to copy the trades of other more successful traders in real-time.
How does eToro work?
eToro allows users to buy and sell a large range of global stocks, shares and cryptocurrencies either online or via its app. Additionally, eToro allows users to trade CFDs, meaning investors can place trades based on the volatility of certain assets rather than having to actually own them. eToro offers commission-free trading meaning users do not pay any dealing charges or management fees. It is free to open an account and UK users can start with an initial deposit of $50 USD.
How to set up an eToro account
Signing up for an eToro account is relatively simple and is likely to take around 10-15 minutes in total. Once complete, you'll need to wait for your account to be verified which can take up to 3 working days.
Step 1 - Create an account
You'll be asked to complete a short form where you'll need to choose a username, provide your email address and a secure password. Alternatively, you may wish to create an account using your Facebook or Google accounts.
Step 2 - Provide some additional information
Once you have verified your account you will need to provide some additional information including your name, date of birth, address and National Insurance number.
Step 3 - Investing experience
Next you will be asked some further questions about your trading experience and whether you have any knowledge of cryptocurrencies and how leveraging works.
Step 4 - Tell eToro how you plan to use its platform
This step of the set-up process allows eToro to understand how you plan to use its services. You'll be asked what you plan to trade and for how long. You'll also be asked about your reasons for investing, your future goals and your attitude to risk.
Step 5 - Verification
Finally, you'll need to verify your account by providing photo identification and proof of address. Common forms of photo identification include a passport or driving licence, while a bank statement or utility bill is the preferred form of proof of address.
Once complete, eToro says it can take up to 3 working days for your account to be fully verified and active, however, it is likely to be much quicker.
eToro products and features
eToro allows users to trade either through its trading platform or CFD platform and we explain each of these products below:
eToro trading platform
eToro's trading platform gives users access to over 2,000 assets including stocks, commodities, currencies and cryptocurrencies. We provide a list of the main features below:
- CopyTrader - allows users to replicate other traders’ actions in real-time.
- CopyPortfolios - allows users to invest in ready-made investment strategies and themes
- Virtual portfolio - allows users to create 'dummy' trades up to $100,000 USD in a practice account
- In-depth research - provides insight and analysis from leading experts
- Professional charts - a tool that allows users to compare data from different financial instruments
- Stop-loss and take-profit alerts - allows users to set the opening or closing point of open positions to maximise profits and protect losses
- Offline trading - allows users to place trades even if the platform is experiencing server issues or is down for scheduled maintenance
- Free investment insurance - provides insurance against loss in the event of eToro's insolvency or misconduct.
eToro money account
eToro's money account works alongside the eToro trading platform and allows users to instantly deposit and withdraw money from their investment account fee-free. Users can opt for the 'Green' account which allows users to withdraw up to £650 per month for free (a charge of 1.5% applies thereafter) or the 'Black' account which allows users to withdraw up to £1,000 per month (again a charge of 1.5% applies thereafter)
While there are no set-up fees or subscription fees for the eToro money account, eToro states that the account is free 'until 2022', which could mean that they are planning to introduce fees from 2023.
- Reduced fees - The eToro money account connects to the eToro investment account allowing users to deposit money fee-free and with no USD conversion fees
- Instant withdrawals - Users can access their funds immediately
- Debit card - Get a VISA debit card with no set-up fee or monthly costs
- Sort code and account number - Allowing users to send and receive money to any UK bank
- Financial protection - Money held in the eToro money account is not protected by the Financial Services Compensation Scheme (FSCS) but eToro safeguards the money by holding it in a separate regulated bank account. eToro maintains that if it were to go into liquidation then a third party would not have access to this money and it would be returned to you.
eToro CFD platform
CFD trading is more suited to experienced investors as it allows investors to speculate on rising or falling prices without ever actually owning the underlying asset. We provide a list of the main features below:
- Fractional shares - Investors can trade fractions of shares allowing easier access to expensive shares such as Amazon, Apple and Tesla
- Leveraged trading - Investors can leverage trades up to 30x
- Advanced risk management - Advanced tools so that investors can limit losses and maximise profits
eToro leverage explained
Investors can choose to use leverage, a way in which investors can increase their exposure while only investing a relatively small amount of capital. It is in essence a temporary loan provided by the eToro and is presented in the form of a multiplier. The multiplier dictates how much more the position is actually worth and thus magnifies the potential profit or loss for any given trade. We explain eToro's maximum leverage amounts below:
- 30x - Major currency pairs (such as EUR/USD)
- 20x - Non-major currency pairs (such as EUR/NZD), gold and other major indices
- 10x - Commodities other than gold and non-major equity indices
- 5x - CFD stocks and ETFs
- 2x - Cryptocurrency (eToro has currently disabled the ability to open leveraged crypto positions owing to market volatility)
Can you invest in a Stocks and Shares ISA with eToro?
No, eToro does not offer a Stocks and Shares ISA and it is unknown as to whether it plans on adding one to its list of products in the future. Those looking for a trading app that offers a Stocks and Shares ISA may wish to look at our reviews of Trading 212 and Freetrade.
eToro fees and charges explained
While eToro users can trade commission-free there are other fees and charges that are not immediately obvious. As a UK user, there is a currency conversion fee of 0.5% each time you deposit funds. There is also a withdrawal fee of $5 USD for each withdrawal you make and an inactivity fee of $10 USD per month once the account has been inactive for a year or more. eToro also charges 'overnight' and 'weekend' fees on open CFD positions. Users can see the charge at the bottom of the trade window when opening a new trade as shown in the image below.
Finally, there are fees in the form of the 'spread'. The spread is the difference between the buy price (offer) and the sell price (bid) that is quoted for a particular asset. eToro explains the spread on its website saying 'as soon as you open a new trade, you will see a “loss” in the position — this is due to the spread'. When trading products with a spread, traders are essentially hoping that the price moves beyond the price of the spread. If it does, it can be closed for a profit. So while trading is provided commission-free, it isn't necessarily fee-free as there are charges in the form of the spread.
eToro charges and fees - Costs summary table
In order to simplify the fees charged by eToro, we have created the following table
|Fee Type||Fee charged||When is the fee charged|
|Currency conversion fee||0.50%||Every deposit|
|Overnight fee||Dependent on the asset held||Daily - every weekday. Charged on CFDs that remain open overnight|
|Weekend fee||Dependent on the asset held||Either every Wednesday or Friday - depending on the asset. Charged on CFDs that remain open throughout the weekend|
|Inactivity fee||$10 USD||Every month after an inactivity period of 1 year.|
|Withdrawal fee||$5||Every withdrawal (Minimum $30)|
So while it is free to trade shares on the eToro app, those that hold assets for long periods or regularly withdraw money will quickly see the fees mounting up. UK users also need to be aware that there is an additional 0.50% currency conversion fee applied each time you deposit money.
eToro deposits and withdrawals
There are limits and charges to certain deposits and withdrawals with eToro and we have summarised each of these below.
eToro minimum deposit for UK users
UK users will need to deposit an initial minimum of $10 USD with eToro. Any subsequent deposits will need to meet the $10 minimum and if you wish to make a bank transfer then you'll need to deposit at least $500 each time. We have summarised the minimum deposits with eToro below.
- eToro minimum first-time deposit - $10 USD
- eToro subsequent minimum deposit - $10 USD
- eToro minimum deposit by bank transfer - $500 USD
It is also worth noting that as a UK user, there is a currency conversion fee of 0.5% each time you deposit funds with eToro.
eToro withdrawal limits and fees for UK users
The minimum withdrawal amount is $30 USD and eToro users are charged $5 USD for each withdrawal.
Is eToro safe?
The eToro trading platform is authorised and regulated in the UK by the Financial Conduct Authority (FCA) and is covered by the Financial Services Compensation Scheme (FSCS). This means that in the event that it goes bust your investments will be protected up to £85,000.
However, it is worth noting that any money held in the eToro Money account is not protected by the Financial Services Compensation Scheme. Instead, the money is safeguarded by being held in a separate regulated bank account and eToro states that in the event that they were go into liquidation, the money would be returned to you.
Additionally, eToro provides its clients with free investment insurance provided by Lloyd’s of London. It provides coverage of up to £1m GBP, Euro or AUD (depending on the region) in the event of eToro’s insolvency and in case of 'Event of Misconduct'.
Importantly, the insurance only covers cash, CFD positions and securities. Cryptoassets trading (non-CFD) are not covered by the insurance.
It is worth remembering that as with any type of investment, the value can go down as well as up and so there is no guarantee that you will make money when using eToro. In fact, eToro itself states that '68% of retail investor accounts lose money when trading CFDs with this provider'.
How does eToro make money?
eToro makes money by charging a number of fees to its users including currency conversion fees, inactivity fees, withdrawal fees and overnight and weekend fees on open CFD positions. It also makes money from spreads which is the difference between the buy and sell price of a particular asset.
eToro customer reviews
eToro is rated as 'average' on Trustpilot, with a score of 4.2 stars out of 5.0 from almost 15,000 reviews. Users say the site and app is easy to navigate and that they particularly like the CopyTrader feature. Many of the 1-star reviews complain about the high withdrawal fees and poor customer support.
eToro is rated 4.2 out of 5.0 on Google play from over 117,000 reviews and 3.7 out of 5.0 on the Apple app store from almost 7,000 reviews.
Pros and Cons of eToro
- Easy to set up and use
- Social/copy trading allows users to copy successful investors
- Commission-free trading
- Free demo account
- Currency conversion fee of 0.50%
- Withdrawal fee of $5 USD each time you withdraw money
- Poor customer support
Summary - Should you use eToro for trading?
eToro is a popular trading platform that allows investors to trade stocks, commodities and currencies free of any commission. It is particularly popular among those who wish to buy and trade cryptocurrency and eToro has a number of helpful guides as well and provides investors with their own secure eToro crypto wallet. Perhaps its most impressive feature and one that sets it apart from other trading apps is its social trading feature that allows investors to copy the trades of other successful traders. Customer reviews of eToro are mixed and while eToro allows investors to trade 'commission-free', there are a number of fees that new users should be aware of, fees that aren't charged by the likes of Trading 212 and Freetrade.