Etoro opened its doors in 2006 and since then has revolutionised how the stock market is used. A stock market is a place where traders can buy stocks and bonds, holding them for a period of time, then selling them off for a profit. The stock market would eat up inexperienced traders, but now beginners can join with investment and make money through Etoro’s new social trading system.
New traders can now buy stocks by copying other traders. This gives them experience and knowledge while also the key skills needed to become a successful trader. What is so great about Etoro is that they provide you with the most successful traders through the week, month or year, so you can make a decision on whether to copy their trades.
Below you will see the names of successful traders, showing a percentage of their profit margin, how many traders copying them and when clicked, a complete breakdown of their portfolio. This is the Twitter and Facebook of the stock market.
We will now talk about the way in which you as the copier should carefully choose your traders. Etoro gives you the tools to help you find the best traders, but we must also be aware of how we pick them. Always look through the portfolios of traders that you plan to copy. At first, you might think a trader with a high-profit margin means that they are experienced traders who know how to make money. However, when you look through their portfolio, you may notice that they have only been trading for a short time, getting lucky and playing recklessly leading to high returns.
If you look through the traders stats, you will be able to access two significant resources to determine if you will be copying them. They will be the Risk Score and the Weekly Breakdown. These will give you a bigger picture of how the trader uses the stock market and determines how successful he is through the days, months and years he has been using Etoto.
Risk Score: This will show you a number of risks the trader takes, this is judged by a 1 – 10 score. If the trader has a high score, this means that they take a lot of risks. This will allow you to see the current risk compared to previous months. They may have changed their strategy as their understanding of the stock market has evolved, or the score will display someone who is reckless in the market and has become lucky. Below is the graph on a user’s portfolio, Etoro offers copiers a vast amount of information to determine what trader’s they would like to copy.
Weekly Drawdown: This will show you the traders maximum negative swing in the week/month/year.
The most important stats that we have access to on a trader’s portfolio is the Profits/Losses that have been made throughout the traders life on Etoro.
The two graphs above are of a trader that seems to be quite conservative with his choices. He has made small gains in the past three years he’s been trading. His risk is one which means this trader will not take many risks when selecting on the stock market. This Trader seems like a good choice. He is a good choice, but your profit margin will not be so lucrative. When you are analysing each trader it is good to copy someone who can take risks but can also be very conservative, a mix would mean larger profit margins.A If you want a high return in a short period, then traders usually take more risks, but this is not advised.
Diversification in the stock market is a technique used by many traders to reduce the risk of losing money on stocks and commodities. Spreading your money through many different traders will in the long term give you more chance of success. This is the same concept that is advised when copying traders. Have a number of traders to increase potential and avoid losses, this is a game of probability and you should stay on the side of chance.
Popular traders can earn more money depending on how many people are following them. Etoro awards them with fixed monthly commissions for providing others with their stock market choices.