Part one of our Online Stock Trading Series – Etoro
In our last article we made a brief guide on how to get started with our investment tutorials. We introduced the basics towards identifying and familiarising different options, how to copy and who to copy. Here we would like to continue where we left off and show you the next steps. If you haven’t had a chance to review our previous article and new to online platform trading and brokerage, you can have a look at Part I.
Just like before, we’d recommend you to think through and practice your investment strategies before investing real money. And I would recommend you go through the main mistakes, my colleagues and I had experienced:
1, Not doing your homework before investing
2, Simply over-trading when making small profits
3, Allocating more than 25% of your total equity
4, Copying whoever with green, profit margins without researching them
5, Allocating more than 10% of your total equity to one of your own trades
6, You keep trying to close every single trade in the green
7, Only once you really feel like you know what you’re doing on eToro with basic stocks, should you even consider trading indices, currencies (forex) and commodities. These trades tend to fluctuate more because of market sensitivity to change. There is much more risk involved compared to stocks.
With these in mind, let’s continue!
Part II – How to place a trade
When you have built your profile and got yourself registered, you can click on ‘Trade Markets’, then ‘Stocks’, then ‘Industry’. Choose an industry, for example ‘Technology.’
You will then be presented with a list of all financial stocks tradable on eToro. You will also see their respective prices and change over the past day.
Let’s pretend we want to buy some Yahoo stock, say $100 worth. Click on ‘AABA’ (this is the ticker used for Yahoo on the stock exchange) and you will first see the ‘Feed’. This displays all the latest news and insightful discussions surrounding the Yahoo share price and the company’s activity in general.
Click ‘Chart’ to display a chart showing the company’s stock prices over the last year. You’re able to change the period shown by zooming in and out.
If you want to invest in Yahoo (believing that the bar will rise), click on ‘Trade’ in the top right corner.
The minimum amount to trade is $100. Below this you can set the amounts at which you automatically want to close the trade, for both loss and profit.
It is crucial to take note of the “Leverage” figure. The number refers to how much you can multiply your gains (and losses) by. The higher the number equals higher risk.
X1 is essentially buying the real stock. If you traded at X2, any price movement is magnified by 2 (the value doubles. Usually it’s automatically on X5, so for beginners I’d suggest clicking on the number and reducing it to X1.
When you’re ready click ‘Set Order’.
That’s it! You have just made your first investment in Yahoo!!!
You can check your performance by clicking ‘Portfolio’ to see your open positions.
If you click on the Yahoo stock, you can see more info. In my case below, if I bought $100 worth this April and it shows my current percentage earned on this trade (P/L %), which would translate to a certain value earned (P/L $).
Don’t look for short-term gains. Be confident that over the longer term the value of your portfolio will rise. It’s patience that has served me well, since I did not aim at making a big buck over the months. Don’t make rash decisions just because a company released some ‘bad’ news and the market overreacted in the short-term. This is not a crypto trading platform. 😛
Keep in mind that the markets tend to fluctuate and there are sometimes downturns, with overall long-term trend is upwards. Even the best traders in the world will have some fluctuations, but most copiers lose money by copying at the peaks and stop copying shortly after because they’re down a few dollars.
Cost of Trading
All trades charge both a spread and daily rollover fees. The rollover fees are small costs, proportional to the size of the trade you are opening and the level of risk. It’s important to know that these fees are constantly changing depending on market conditions and may either be a fee or a credit.
The ‘spread’ is the small difference between the buy and sell price that all brokers offer – this is how they make their money and similar in magnitude to the markup for stocks. You will be charged this when you close a position. One way to minimise the spread fees is not to over-trade. It’s also worth mentioning that if you become a popular investor you can get a partial or even total rebate on these fees.
This is understandable from Etoro’s perspective. Just like any for-profit company, eToro provides its services to make money. The costs of trading here are far less than traditional stockbrokers, crypto platforms and fund managers. This is one reason why I recommend you stick to this market when starting out.
When copying another user you’ll be charged the same fees as they are on trades (which may not always be stocks), so it’s worth checking your portfolio to see what positions they have opened.
The only other fee you will encounter on eToro is the withdrawal fee if you want to transfer funds out of your account.
Be aware that even though everyone is out there to grab money, this is a community after all. Everyone aims to show their best colour and gain followers. This cannot be done if you try to put everyone out of your way.
With all these in mind, I wish you good luck! 🙂