eToro – Social Trading

Posted by Deb | Forex | Thursday 8 November 2012 11:52 pm

Some time ago I was contacted by a sales person who told me about eToro. I attended a webinar explaining the concept of social trading, and it sounded promising: Instead of relying for your trading solely on your own knowledge and estimates, you can rely also in real time on the decisions and judgement of other experienced traders. In eToro you can even decide to be lazy and let others decide for you: You can attach a certain amount of your investment to the account of some other trader in this system that seems to be doing well, and they will buy and sell for you according to this trader’s actions.

As the main trading tools in eToro are of Forex, and I am no Forex expert, I decided to open a demo account and see if the lazy attitude can work for me. In the demo account you get an initial account of $10000. I decided to choose 6 traders that seemed to be doing well according to the given statistics in eToro, and tie $1000 from my account to each of their accounts. The remaining $4000 I left idle.

My conclusion: NO. You can’t have totally “lazy” account. Maybe I just didn’t choose well, but what happened was that in the first 2 weeks my account grew nicely, but then it had a few drops. I didn’t touch any of the trading decisions, letting it go automatically with the decisions of my “gurus”, but that didn’t go well. In the first 2-3 weeks I was making money (or demo money), but than I lost most of it. Today, about 6 months after I opened the demo account, it is only worth $10150. 1.5% in 6 weeks may be not so bad, bad it could have been better. In the first 2 weeks I had made 3%.

That does not mean that I don’t recommend eToro, or social trading. eToro has some nice graphic and other trading tools, and being able to look “over the shoulder” of traders who are doing well is a wonderful asset. You just can’t leave your account to do everything automatically. In order to make a nice profit you should use the social networking but also the graphs and your own judgement in order to get out of your positions in the right time. You should also use the eToro learning tools to make yourself more knowledgeable about what you are trading.

If you are already an expert in what you are trading, you can also gain from eToro: If people choose you as their “guru” and decide to follow your actions, eToro would be paying you extra commissions, so that you will be profiting twice: From you actual trading, and from your followers.

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