eToro Copy Trading Success Tips for 2021

One of the most appealing features of eToro is CopyTrading. Copy Trading allows you to automatically copy the trades made by experienced investors. I've been playing around with CopyTrading on eToro for the last few years and here are my top tips for having success.

On eToro there are thousands of different investors you can copy. So how do you find the best traders to copy? These are the things I look for before I start copy trading.

Note – While eToro is available worldwide, this guide is just for Australian users and the Australian version of eToro.

Who to Copy on eToro – My Top Tips

Past performance is not indicative of future returns.

12+ Months of Trading History

I believe that anyone can make a couple of lucky trades. But it takes knowledge and skill to make money trading over the long term. That's why I only copy traders on eToro who have been using the platform for at least 12 months.

eToro will show you how long a trader has been active on the platform and give you a monthly break down of their gains and losses.

Trading history on eToro

I also like looking at the traders history to make sure they haven't had any major periods of losses.

I'm fine seeing a few months of red. All investors have good and bad months. Many traders on eToro have longer term strategies so as long as the longer term trend is positive, I'm happy to copy a trader.

Reasonable Gains

I have come across a few traders who have had 300%+ gains over a year on eToro. When I see this, I dig into the profile to see what's going on. It could mean a couple of different things. It could just mean the investor was heavily trading crypto. Those types of gains aren't crazy for crypto. However because there is also the risk of similar losses in crypto, I wouldn't be too interested in copying that type of trader.

Another explanation could be the trader using too much leverage. Leverage is powerful when used correctly. Newer traders will often use too much leverage. They will have massive gains but they'll lose it all in one trade. You don't want to be copying a trader using such a risky strategy. Buy luckily eToro gives a risk score to help filter out these traders…

Low Risk Score

eToro gives each investor on the platform a risk score. I like to copy traders with score of 4 or less. The higher the score, the riskier the trader. I do believe that eToro is now limiting people from being able to copy traders with a high risk score. This is a great thing!

Losing Trades

I actually like copying traders who have made losing trades! If a trader is profitable over the course of a year or more but has a number of losing trades that have been closed, I view this as a great sign. This mean the trader has a strategy and they are closing trades when they deviate from the strategy. In the world of trading, nobody is perfect. Everyone has losing trades. What makes a great trader is being able to close the losing trades before they wipe out a portfolio. So don't be put off if you see a trader who has a few losing trades. That can be a great sign.

To see a a traders history, visit their profile. Then click on portfolio and then select “History” from the dropdown.

How to view past trades on eToro

One trader (Flora008) I came across when putting together this post had a gain last year of 42% and this year a gain of 12% (so far). Of the trader's past trades, only 9% of those were profitable. This is a bit of an extreme case, but it just goes to show a trader can have success even when they have losing trades.

Check the Strategy

The top traders on eToro fully explain what their strategy is in their bio. I'm not too interested in copying an investor who is just investing in ETFs. I feel like I can do that on my own. Although I'm sure there are many newer investors who would love to copy this type of trader. So I recommend just checking what an investor is trading. And whether their strategy matches up with your investing goals.

What you need to know about Copy Trading

Minimum investment to copy trade on eToro

To copy a trader on eToro you'll need at least $200 USD. You can deposit AUD on eToro, but it will get converted into U.S dollars. Some traders will recommend you copy with more money. I believe this is so that the copied positions don't end up being too tiny. I however haven't had any issues copying traders with just $200.

Diversification

You can copy multiple traders on eToro. This is a great way to spread the risk. You can also set a stop loss. If a copied account draws down too much, you'll automatically stop copying. When you copy multiple traders, your money will be put to work across potentially hundreds of trades.

How copying works

Trades are copying using matching ratios. So if a copied trader opens a position using 1% of their account capital. A position using 1% of the funds you allocated to copy the trader will be used to open the trade. This is great! Some copy trading platforms open positions using matching lot sizes. On eToro the trader you are copying, most likely has an account balance with $50k+ in it. But you can copy this trader with just $200. Your trade sizes will just be much much smaller. But the gains or losses will match the copied trade!

Building a Diverse Portfolio on eToro

eToro isn't just a copy trading platform. I use eToro to invest in a portfolio of stocks and ETFs. You can build a portfolio of stocks, ETFs, copy trading and even crypto.

Different assets on eToro

eToro also offers an automated product called copy portfolios. These are themed investments and beyond the scope of this post.

Find out more about eToro here.

CFD Disclaimer

On eToro you can invest in real stocks and CFDs. If you do choose to invest in CFDs, just remember they carry additional risk. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

This post is for educational purposes and should not be considered as investment advice. This post is based on individual experience and journalistic research.

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