eToro – Social Trading and Investing Platform

Stocks
25

Gemini to the rescue

Yes, stock trading on eToro can be CFD trading, especially for customers residing in Finland and in certain situations.

Here are the most important things you need to know:

  • For Finnish stocks: Stocks traded on the Helsinki Stock Exchange are always executed as CFDs due to Finnish regulatory restrictions. This means that you do not own the shares themselves, but rather enter into an agreement with eToro regarding their price changes.
  • Other stocks (non-leveraged buys): When you open a non-leveraged buy position (long position) in foreign stocks, eToro buys and holds the shares on your behalf. In this case, you actually own the shares (or fractions thereof).
  • Leverage and short selling: If you use leverage or open a short position (i.e., sell a stock you don’t own, with the intention of buying it back cheaper), the trade is always executed as a CFD.
  • Identifying a CFD: eToro clearly indicates in the trade execution window whether it is a CFD trade. Your portfolio and account statements also show which of your positions are CFDs.

What is the difference between a real stock and a CFD?

  • Ownership: When you buy a real stock, you own a share of the company. In CFD trading, you do not own the underlying asset itself (e.g., a stock), but rather enter into a contract for difference with the broker.
  • Leverage: CFD trading often allows the use of leverage, which can amplify both profits and losses. Real stocks can usually be bought without leverage.
  • Short selling: With CFDs, you can easily short sell and profit from a stock’s price decline. Short selling real stocks is often more complex.
  • Costs: CFD trading may involve various costs, such as spreads and overnight fees, unlike traditional stock trading.
  • Taxation: In Finland, losses incurred from CFD trading cannot be deducted from capital income for tax purposes, unlike losses from genuine stocks.

In summary, on eToro, you can trade both real stocks (under certain conditions, especially non-leveraged buy positions in foreign stocks) and CFDs. It is important to understand the differences between them, especially as an investor residing in Finland, and to consider the associated risks and tax implications.

eToro’s CopyTrader service is not a paid service in itself for you, the copier of other traders.

eToro advertises CopyTrader as a free feature and does not charge separate management fees or other additional fees solely for copying.

However, it is important to note the following regarding costs:

  • Trading costs (spreads and overnight fees): Although you do not pay a separate CopyTrader fee, the trades made by the copied trader are subject to the same spread costs and overnight fees as if you had made the trades manually yourself. These are typical trading costs on all trading platforms, and they are how eToro makes a profit.
  • Cryptocurrency fees: In cryptocurrency trades, eToro typically charges a 1% fee on the buy and sell price. This fee also applies to copied cryptocurrency trades.
  • Withdrawal fees: eToro usually charges a small fixed fee for withdrawals (e.g., $5 from a USD account), unless you have an eToro Club membership, for example, which may reduce or waive fees.
  • Currency exchange fees: If you deposit money in a currency other than USD (e.g., euros), eToro performs a currency exchange to USD, and this may incur currency exchange fees.
  • Inactivity fee: If you do not log in to your eToro account for 12 months, a monthly inactivity fee of $10 may be charged to your account.

How do copied traders earn money?

Copied, successful traders (referred to as “Popular Investors”) receive compensation from eToro through the Popular Investor program. This compensation is often based on the amount of assets they manage (Assets Under Copy, AUC) and their achieved Popular Investor level. This is therefore paid by eToro, not directly from your capital as a separate fee.

In summary: Using eToro’s CopyTrader service does not incur additional management fees, but you should be aware of the usual trading costs (spreads, overnight fees) and other potential costs, such as withdrawal fees and currency exchange fees, which apply to all eToro trades, including copied ones.

Yes, you can receive real-time notifications (push notifications) to the eToro Android app and some email notifications even when using CopyTrader with virtual money.

eToro’s virtual portfolio (demo account) is designed to fully mimic a real account, allowing you to practice and familiarize yourself with the platform’s features risk-free. This means that notification features also work the same way as with real money.

Here’s how it works and how to manage notifications:

  1. Android app push notifications:
    • When you have copied a Popular Investor in your virtual portfolio, you will automatically receive push notifications to your Android app when the copied investor makes new trades or closes positions. These notifications are usually real-time or near real-time.
    • Ensure notifications are enabled:
      • First, check your Android device settings to ensure you have allowed push notifications for the eToro app. This is usually found under Settings > Notifications > Apps > eToro.
      • Also check within the eToro app settings:
        • Open the eToro app.
        • Go to Settings from the left menu.
        • Select Notifications.
        • Here you can customize what types of notifications you want to receive (e.g., trading-related notifications, social media activities, etc.). Make sure CopyTrader notifications are allowed.
  2. Email notifications:
    • Although Android app push notifications are usually the fastest and most comprehensive for CopyTrader’s trading-related events, you can also receive some email notifications.
    • Manage email notifications from eToro settings:
      • Log in to the eToro website (or via the app, but the website often offers more comprehensive settings).
      • Go to Settings > Notifications.
      • Select the “Email” tab and you can adjust what types of notifications you want to receive by email. These may not be as real-time or detailed as push notifications for individual trades, but you may receive a summary or more important notifications.

Important notes:

  • When using virtual money, the notifications received are identical in content and speed to those you would receive with real money, as both use the same platform technology and market data.
  • eToro cannot guarantee notification delivery: While notifications are generally reliable, service providers cannot fully guarantee 100% delivery or real-time nature of notifications due to, for example, network disruptions. Therefore, do not rely solely on notifications in critical situations.

Feel free to try CopyTrader with virtual money and adjust your notification settings to find the best way for you to follow copied trades.

I think I’ll start following Laurila myself using the virtual copy trader.

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