CFD trading at eToro - what options do I have?
The online broker eToro is currently the talk of the town and is considered to be the largest social trading provider in the world at the moment due to its approximately 20 million users spread across more than 140 countries. In a way, the platform fulfills two main purposes. First of all, it serves professional traders as an adequate platform for CFD trading, and at the same time it is excellently suited for beginners in the field of CFD trading, who can learn here "from the big ones" or replicate their successful trades 1:1 in their own securities account. For this purpose, eToro has developed the so-called "CopyTrader", which is a sophisticated tool for replicating a wide variety of portfolios [in real time]. For this purpose, eToro's trading platform offers its users access to more than 2,000 different investment products - including numerous CFDs. These can be based on the following asset classes:
- Stock CFDs
- Index Fund CFDs
- Forex CFDs
- Commodity CFDs
- ETF CFDs
- Crypto CFDs
Therefore, we would like to take this as an opportunity to show you the special services of eToro, its costs and fees as well as the points of security and regulation once in detail within the following sections.
What is eToro anyway?
The online broker eToro represents a multinational company that is active in the field of stock trading, CFD_trading and social trading. Basically, eToro is a so-called "multi-asset broker", which offers various asset classes such as CFDs, index funds, foreign exchange, cryptocurrencies and shares. In addition, eToro also acts as an investment platform and offers other services such as training programs and a free demo account.
The company itself was founded in Tel Aviv back in 2007 and has been headquartered in Israel ever since. eToro currently employs around 1,250 people and reported annual revenues of $2.50 billion in the last fiscal year 2020. In order to use the services of eToro, you as a potential trader - regardless of whether you are a beginner or a professional - need your own trading account, which is provided to you by eToro.
What is CFD trading anyway?
CFDs (or "contracts for difference") are financial products on the international financial markets that are concluded on specific underlying assets. Each underlying asset is based on a specific asset class - for example, equities, foreign exchange, commodities or entire index funds.
With a CFD, however, you as a potential trader do not acquire ownership of the actual underlying asset, but rather buy into its price trend and can use it to make speculations.
This means that you can bet on rising ("long") as well as falling prices ("short") in CFD trading. Thus, your profit or loss is based on your forecast of the price development between the time of purchase and sale of the CFD. Furthermore, CFDs are so-called leveraged products, as they can also be traded leveraged with the help of external capital provided by the broker.
What trading offer does eToro provide?
The online broker eToro initially offers you as a potential trader a wealth of different CFD types:
- Forex CFDs (on all major and minor currencies as well as exotic currency pairs)
- Commodity CFDs (on precious metals, fossil fuels, food, etc.)
- Indices CFDs (on the best known indices such as the S&P500 or the DAX40)
- Stock and ETF CFDs (on growth and dividend stocks as well as numerous ETFs)
- Crypto CFDs (on numerous cryptocurrencies such as BTC, ETH or XRP, for example).
For example, eToro offers more than 1,000 different currency pairs, 12 different indices and numerous other investment products that can be traded via CFDs.
What costs and fees does eToro charge for CFD trading?
The comprehensive services of eToro are unfortunately not available for free. Accordingly, we have taken a closer look at the costs and fees of the eToro broker and made the following distinctions:
- Costs for maintaining an eToro account (regardless of the trades made)
- Costs for spreads (i.e. direct trading fees)
- as well as costs for overnight and weekend positions
Learn more about the above mentioned costs at the eToro broker in the subsections that follow now.
The online broker eToro initially does not charge any custody account maintenance fees as well as any other management costs for the maintenance of its CFD accounts. Thus, opening as well as maintaining, managing as well as requesting tickets from customer support are free of charge for you as a potential eToro user. Deposits to the individual eToro account are also free of charge. Only and only when making withdrawals is a small fee of 5 US dollars charged. Commissions are not due in trading.
The situation is different when it comes to spreads. This is the difference between the buy and sell price of the CFD. eToro calculates different spreads depending on the type of CFD:
- Forex CFDs are the cheapest overall with [as of] 1 pip spreads
- Commodity CFDs are also very favorable with [from] 2 pips spreads
- Indices CFDs cost you as a potential trader [at least] 0.75 points of the underlying asset
- Stock and ETF CFDs are available with spreads as low as 0.09 percent
- Crypto CFDs are the most expensive overall with [at least] 0.75 percent spreads
However, it is important to note that spreads are variable. They differ depending on the underlying asset and are subject to daily fluctuations.
Overnight and weekend fees
When holding CFD positions overnight or over the weekend there are fees and unfortunately this is also the case with eToro. This is essentially an interest payment that you as a trader must pay to the broker. The calculation of the overnight fees for stock CFDs, for example, follows a certain scheme:
When buying: Interest (6.40 percent) + 1-month LIBOR / 365
For sale: Interest (2.90 percent) + 1-month LIBOR / 365
Weekend charges are accordingly three times the underlying overnight charges.
What account types does eToro offer for CFD traders?
At eToro, there are a total of three different account types available to you as a potential trader:
- a regular trading account
- a professional trading account
- Islamic account
- a free demo account
We would also like to explain the individual account types and their options in detail in the following subsections.
The regular trading account from eToro
From a minimum deposit of $50 you can open a normal trading account (or "standard account") at eToro. This allows you to use all common order commands and chart analysis techniques and is especially suitable for beginners in the field of CFD trading. Standard levers up to a maximum of 1:30 are also possible here, as stipulated by EU regulation.
The professional CFD trading account from eToro
Significantly more features are offered by the professional CFD trading account (also called: "VIP account"). You can use significantly higher leverage with this account type. Furthermore, more analysis tools are provided with this account type. However, in order to open the account, you must have several years of trading experience in the CFD environment. The increased leverage leads to a significantly increased risk of losing the entire capital.
The Islamic Trading Account
This account is a swap-free account that can be set up specifically upon request at eToro. It follows the strict Sharia law in its basic features and is therefore also suitable for Islamic traders to trade on the international financial markets.
The demo account from eToro
Last but not least, you can use eToro's demo account to practice trading on the international financial markets with virtual money ($100,000). It is therefore suitable for beginners, but also for advanced and professional traders, who can use eToro's free demo account to test individual trading strategies before arming them. The virtual credit on the demo account can be replenished at any time.
Is social trading via eToro feasible?
eToro is one of the leading platforms in the field of social trading or also called copy trading. The online broker eToro is a social network for CFD trading. Here professional investors meet with private investors. As a potential user of eToro, you can benefit from the expertise of experienced traders. This concept is also called "copy trading" and ensures that you automatically mimic the portfolio of an experienced trader (selected by you).
How safe and how reputable is eToro?
eToro is a Cypriot investment company, which is registered under the number "HE20058". It is therefore subject to the strict Cypriot regulatory authority CySEC, which ensures that at least 20,000 euros per investor are protected. Customers from the UK are even compensated with 85,000 GBP in the event of a broker insolvency.
Furthermore, CySEC ensures that the broker accounts for company and customer funds separately. Even more security is provided by the comprehensive access and data protection measures, which are implemented through various identity verification procedures as well as "two-factor authentication". In addition, there are various security tools such as firewalls, SSL data encryption and other encryption methods, which ensure a very high level of security overall.
How does the deposit opening process work at eToro?
To open your own CFD trading account with eToro, you simply need to download the necessary deposit opening documents. You will then need to fill in your individual contact details (postal address, email address and telephone number). In addition, you need to indicate your previous CFD trading experience within the opening documents - the eToro broker will then create your individual risk profile.
It is also common for the broker to ask for proof of address. For this, it is sufficient to upload a current electricity bill or similar document containing the specified address. You will then receive your access data by e-mail. Then make the required minimum deposit from your deposited reference account and you can fully use your new eToro CFD account from then on.
How customer friendly is eToro?
The eToro broker offers its users various customer support services, including the reliable email support via the contact form on eToro's website as well as via live chat. With the latter, you can send your individual inquiries directly to an eToro customer service representative. All inquiries are usually answered quickly and comprehensively. Only a direct telephone contact with the employees of eToro is sometimes not offered. Inquiries made via the ticketing system are also answered quickly and satisfactorily - often within a few hours - or implemented. From this point of view, eToro's customer service offer is extremely versatile and customer-friendly.
FAQs about CFD trading at eToro
- How many trading assets can be traded in the area of CFDs at eToro?
Answer: Currently, you as a potential trader can choose from a total of more than 1400 different CFDs at eToro.
- What is the maximum leverage at eToro?
Answer: Through eToro's professional VIP account you can currently use a maximum leverage of 1:400. The standard accounts are subject to EU regulation have a maximum leverage of 1:30 for Forex. It is important to note that with higher leverage the risk of loss increases significantly.
- What types of CFDs can be traded at eToro?
Answer: At eToro, in addition to stock and ETF CFDs, you can also choose from crypto CFDs, indices CFDs, commodities CFDs and forex CFDs.
- Does the eToro broker charge a custody fee?
Answer: No. Maintaining a CFD account with eToro is completely free of charge. Only in case of inactivity there is a fee if you have not logged into the account for more than 12 months.
- What types of order commands does the CFD broker eToro offer?
Answer: On eToro's trading platform, in addition to "long" and "short" commands, "trailling stops", "stop loss" and "take profit" commands can be used in CFD trading.
Conclusion about CFD trading at eToro
Overall, the eToro broker is a promising platform for social trading, which now enjoys a worldwide audience. Moreover, eToro is a reputable and strictly regulated broker that is customer-friendly and offers a user-friendly trading platform.