In its first decade of existence, eToro has grown to serve 5,000,000 traders sprawled across 140 countries. This Forex broker approaches the often stressful reality of currency trading with a combination of entertainment (more on this later) and education intended to help a newbie get up to speed in understanding the tools needed for successful trading: news analysis, indicators, strategies, and charts. Ever since deregulation of the Forex market in 1997, it seems you can’t throw a rock without hitting a new broker looking to grab a piece of this very large pie. Let’s take a closer look at eToro.
There’s no way to escape the reality that there is a moderate element of the Forex industry that are scummy, plain and simple. That’s what happens when there’s so much money to be made and little regulation to protect the little guy. You want to know your Forex broker won’t be here one day and gone the next, taking your money when it disappears into the cyber mist. The United States company that owns eToro, Tradonomi, is registered with both the CFTC and NFA. These two regulatory bodies are dedicated to fair trading within the borders of the United States. The trading platform itself is protected with industry standard SSL data encryption.
There are three ways to trade the market with eToro.
Openbook: The concept of social trading has taken the Forex market by storm in recent years and eToro is regarded as having one of the best programs in that arena. For those unfamiliar with the idea, social trading is just what it sounds like – a blend of trading and social media. The bottom line is you can follow and interact with other traders, even copying the trades of successful traders in real time.
WebTrader: For those who prefer to trade Forex via a desktop or laptop, this web-based platform is the way to go. Analyze, execute, and track your trades easily. Also allows you to synchronize with OpenBook.
Mobile Trader: With so many traders accessing the market through mobile devices like smart phones or tablets, eToro offers a fully functional app environment that syncs with OpenBook as well.
Trading accounts at eToro come in three flavors: Standard, Islamic, and Demo. Before discussing the differences, traders should note that eToro has recently added the capability to trade stocks and commodities, in addition to currency.
Standard Account: Gone are the bad, old days when a new trader needed thousands of dollars just to open an account. For as little as $50, eToro allows you to open a standard account and begin trading on any of the listed pairs. Obviously, you should utilize good money management techniques no matter the size of your account, but it’s not prohibitively expensive to dip your toe in the online trading world via eToro. Fund your account in a variety of ways like PayPal, wire transfer, MoneyGram, WebMoney, or a simple credit card. You will be asked to verify your account before withdrawals are allowed via the same method by which you funded. A small fee is charged any time funds are withdrawn, ranging from $5-$25 depending on the amount requested. A withdrawal can take up to five days.
Islamic Account: Those who follow the Islamic faith are forbidden by their beliefs to pay interest, which creates a problem in the traditional Forex world when an overnight position either pays or incurs interest. Many brokers, and eToro counts itself among them, offer an interest-free account for this scenario. The other main difference between a Standard and Islamic account is that the minimum amount required to open the latter is $1,000.
Demo Account: Unless you have extensive experience trading Forex, a demo account is where you should start. This no-obligation account allows you to trade under real world conditions, using identical charts and tools, with $10,000 in virtual money. This is a GREAT way to test strategies and learn trading without putting actual money at risk.
Pros / Cons
No Forex broker is perfect. Your choice depends upon your personal situation and which factors weigh more heavily. Here is a quick list of things to consider.
1. Extensive training library
2. Automatic trading
3. Regular promotions
4. Sophisticated social trading platform
1. Bare bones trading charts
2. Limited currency pairs
3. Relatively high spread
The Bottom Line
For the social trading aspect alone, those new to Forex might want to give eToro a second glance. Jumping into the fire of online trading can be an intimidating undertaking under the best of conditions. OpenBook offers a chance for newbies to put on a pair of training pants, so to speak, and might be the secret to figuring out how to trade defensively without blowing out your account. Before settling on any one broker, check out at least a handful so you have a good cross section to compare.