Copy Trader on eToro

This is going to be your one-stop shop for eToro Copy Trader. I’m going to walk through what eToro Copy Trader is, what to look out for and how to use it to your advantage.

If you think that two heads are better than one, how about 9 million heads thinking together?

I’m going to break eToro copy trader down into a number of categories so you can follow along and see what works for you!

1. What is eToro Copy Trader?

eToro Copy Trader is allocating a portion of your funds to copy what another trader is doing. If the trader buys $GOOG stock, then the relative portion of your copy funds will buy $GOOG stock. You’re basically trusting the trader enough to copy their trades automatically.

It is important to note that none your money actually goes to the trader. Their trades are replicated within your copy trader funds.

They are essentially acting like a Funds Manager – and in the real world, when they get to a certain level, the Funds manager will get a kickback from eToro based on the Assets Under Management (AUM) – via the Popular Investor Program.

There are many options for copying another trader, which I will explain further in this post but there are some basic caveats with copy trader as well

Requirements to be a Copy trader/copied

  • The minimum amount to invest in a trader is $200.
  • The maximum amount of traders you can copy simultaneously is 100.
  • The maximum amount you can invest in one trader is $500,000.
  • The minimum amount for a copied trade is $1; trade valued below $1 won’t be opened. (more on this below)
  • If you close a copied trade manually, the funds from this position will be credited back to your copy balance (the amount allocated to copy that person that is not invested in open positions).

2. Who can you copy?

Nearly everyone! That’s the good thing about it.

Only those with a risk rating of 9 or 10 can’t be copied (or if they’ve reached their limit within the Popular Investor Program, but these are very rare!)

Just find the trader you want to copy and select the copy button on their profile!

Copy button

But before you copy anyone, you’ll want to do your research! An even better way is to use your virtual account before using your real money.

3. Picking someone to copy

Choosing a trader depends on a number of factors and luckily I’ve posted about my own personal filters to find that perfect trader.

Picking someone is purely up to the person choosing – use the information available to you to make the best selection you can.

What kind of copy trader are you?

(short/medium/long) and do you want to copy someone who is the same? You may want someone opposite to your style so you balance out

What level of risk is acceptable for you?

A trader with a risk of 5/6 tends to take riskier trades now and then. This could be a result from trading volatile stocks/cryptos etc. Currencies and indexes are normally have a low volatility (if you’re trading with a low leverage). They normally only change 0.5% day-to-day. The higher the volatility, the higher the risk but also the potential for bigger rewards and losses. The lower the risk score the more stable the traders’ portfolio is – but normally the returns are a lot lower. Max draw down is another factor with volatility. In simple terms, it’s the biggest loss the portfolio has experienced over the time period (day/weekly/yearly). Below is an example from a portfolio

Risk
The traders trading record/stats.

Have a look at the stats tab within the traders’ profile as there are a number of key items to look for.

4. When to copy someone

Their performance over the last few months/year

How have they been performing? Is it a consistent return or did they just get lucky for a few months, or on the other hand, did they have a terrible month which skewed their stats. They could have 120% for the last 12 months but have only traded for the last 2 months.

How long they have been trading for?

They may have only been trading for a month and get massive gains in their portfolio. If I saw a trader who consistently achieved 4% per month over two years, they would pique my interest over a trader who has only traded for 3 months and gained 70%. Someone who has been on the platform longer may have a better understanding. Note that this isn’t always the case

Are their results constant or fluctuate wildly?

Have at look at what their stats have been since joining eToro. A lot of investors got lucky during the crypto boom and saw massive gains in 2017. Then a lot of traders lost a lot of money when it crumbled in early 2018. So, see how they have been performing. Have their results been constant or fluctuated? A good indication is to compare them to the S&P 500 growth rate

Portfolio % performance vs actual trade performance.

Did you know that the last 12months performance is different to actual performance? As you know, the 12-month performance tracks how the portfolio fluctuates over the year. Those % increases only show how your portfolio has changed, not how your equity has changed. We only make/lose money when we close a trade. We can have someone with over 1000% increase for 12months. But if they haven’t closed any trades, they haven’t made any money (yet). Below is a screenshot of a trader who was nearly 300% for the year! Which is awesome but when you actually look into their closed trades, they’re only at 76% for the year – still a fantastic year of trading! If the market collapsed and they lost their whole portfolio, you would have only been 76% up. So be wary of traders with massive gains – check their history to see their true portfolio gains.

Closed trades
Current market conditions

How is the market performing currently? Is it a bear market or is it bullish? Depending on your trading strategy, you don’t want to jump in on a downtrend because you’ll be behind. Look at how the trader’s portfolio is fairing in relation to the market – are they following the same pattern? If their portfolio is down for the month, is there room for it to grow the following month? The timing of when to copy is paramount to ensure that you’re getting the best results possible! Is earnings season coming up?  Earnings Season is volatile and can spell disaster if it goes the wrong way.

5. Alright, I’ve found someone – how much do I allocate?

The absolute minimum to copy someone is $200. How much you want to copy them with is up to you.  As expected, the more you copy with, the bigger the return (or the loss!) Your loss can be minimised with a stop loss.

As an example – copying with $200 vs $800 > If you make it through the year and their return is 45% for the year. If you invested $200, you would get $90 profit, so now you’re playing with $290! If you invested $800, you would get $360 profit – then you’ll have $1160 to play with.

How are the funds split across the trades?

The amount you copy the trader with is ratioed into their trades and split accordingly. If the trader has 50 open trades of equal value, each trade will represent 2% (or $4) of your copy. Anything under $1 is not copied.

Each position will open in a proportional amount. As an example, if the copied trader has a trade using 10% of his realized equity, your trade will be opened using 10% of your copy amount.

Before you copy a trader, you can see in their account how much funds he recommends allocating in order to successfully copy them. Sometimes this is inflated so they seem to be handling more AUM than what is required.

You can calculate the minimum copy amount using the follow technique. Find out what the smallest holding is and what the value of the portfolio it represents. This represents the smalled % that $1 (min open trade) can cover.

To explain this in simple terms

The trader has 300 open positions and the smallest of those represents 0.17% of their portfolio value. That means, if you want to copy all open trades, then $1 needs to represent at least 0.17% of the portfolio. Please note that nothing under $1 is opened.

So in order to copy all of the open trades, you’ll need to copy with $590.
0.17% of $590 is $1 – the minimum required for a trade to be opened.

Remember that the decision of how much to allocate is yours and yours alone.

6. Copy open trades or not?

The CopyTrader system gives copiers the option to copy all of the currently open trades of the copied trader or to only copy new trades. Copiers choosing this method will copy all open trades at the market rate. If the market is closed, at the rate once the market opens)

This can be both beneficial and detrimental. Your copy will essentially start in the negative due to the spread. It doesn’t matter what the trader has in regards to the profit/loss for that stock. You’ll start as you had just bought it. They could be 500% up on $XRP but you’ll start at 0. That is not including the spread, so you’ll actually be in the negative. The only time you get the same rate is when the Trader opens a new trade.

Something to note on Copy Trader

The trades will all open in your account at the same time. You will see them at a slight loss which reflects the spread between the Buy and Sell rates, to show you a real-time representation of the funds you will receive if you close the trade. New trades will open at the same rates as the copied trader opens them, and use the Realised equity (balance + invested funds) as the basis for the proportions of copied trades. For example, a trade opened with 10% of the Copied Trader’s realised equity will open a trade in your copy account with 10% of the realised equity in the copy relationship.

A lot of traders will tell you to copy open trades but it depends on their trading style – if they trade several times per week, then I would copy only new trades. If they buy and hold, then I would copy open trades, that way there’ll be time for the stock to grow before taking profit.

7. eToro Copy Trader Tips and Tricks

What to do if you start copying someone and you want to add money to your copy fund?

Well, it depends on how much money you are adding. If you are adding a significant amount (say 60%+ of the current value) I would suggest to stop copying the trader, then recopy them with the new total amount. If you just add the new funds to the copy trade without stopping, it’ll just add it to the realised equity pile, so when they do their next trade, that new trade will have a significantly higher % allocation compared to the rest – that’s why I suggest you stop coying and add it all together (so you have a similar % of allocation to the stocks.)

Please note: The proportion can change when the Copied Trader changes their available balance. This can occur when the copied trader makes a deposit or withdrawal or closes an old trade that was opened before you started copying them (if you chose not to copy the already opened trades). When any of these events occur, you might get trades that have a different proportion than before.

Did you know you add funds to an eToro copy trader and reopen manually closed trades?

A relatively unknown feature when copying someone is that you can actually manually close trades within your copy. What’s even more unknown is that if you add funds in the future, you can recopy all the open trades and those manually closed trades! As an example

  • I copy JMilazzo with $1000, covering 10 positions at $100 each
  • After a month I manually close 2 positions (Stock 1 and Stock 2)
  • The next month, I decided to add another $2000 to the copy fund
  • Now you can either add funds without copying open positions OR copy open positions
  • This means the $2000 you’re about to add will be distributed across the 10 positions JMilazzo has open, including the 2 you manually closed.
  • So the original $1,000 is across stocks 2-10
  • The new $2,000 is now across stocks 1-10
  • So now your eToro copy trader covers all of the copiers open trades!

Using a Copy Stop Loss in your copy trades?

Copy Stop Loss (CSL) is a feature that gives you the ability to manage your trades effectively by providing risk management in each “copy relationship” based on real time Profit/Loss values. It is essentially an automated risk control system that allows you to set controls for the entire copy relationship at a dollar value. The CSL amount represents the copy equity that needs to be reached in order for the entire copy to close automatically, NOT the amount you are willing to lose.

For example:

Trader A is copied by Trader B with $100 and a CSL set at $60 – meaning Trader B does not want the copy relationship to lose more than $40 before CSL triggers. Trader A has 2 positions: one that has gained $10, another that just dropped to -$50. At that point, CSL triggers and both positions – the losing position, and the gaining position are closed and the copy relationship with that trader is disconnected.

The default CSL is set at 60%* of your copy equity so that once you’ve lost 40% of your investment, the copy will close. You will be able to edit your CSL upon copying a trader and at any point thereafter; however it is important to note that every time you edit your CSL, the new value will reflect as a percentage of your copy equity at the time of the edit and not the original allocated amount.

*The default CSL in a CopyPortfolio is set at 5% of your invested amount so that once the value has dropped below 95% of your investment, the CopyPortfolio will close.

8. eToro Copy Trader fees

It doesn’t actually cost money to use the eToro Copy Trader feature – although there is a caveat. If the trader you are copying, uses leverage for their trades, the fees associated with that trade will come out of the equity you have with them. That is, whatever money you have copied the trader with could be hit with leverage fees.

If they only use x1 leverage, as I do in my portfolio, then there is nothing to worry about.

9. eToro Copy Trader filters

These are my personal filters I would choose if I was to copy someone:

  1. Time Period = Last 12 Months
  2. Status = Verified
  3. Country = Anywhere
  4. Name + Picture = Profile Picture
  5. Copiers = n/a
  6. Copiers change = n/a
  7. Copy AUM = n/a
  8. Return = > 10%
  9. Profitable Months = >50%
  10. Profitable trades = n/a
  11. Risk Score = 1-6
  12. Daily Drawdown = <5%
  13. Weekly drawdown = <10%
  14. Allocation = Crypto <25%
  15. Average Trade Size = <4%

I go into more detail here about why these should be the parameters for selecting someone to copy.

That’s it for now – I’ll continue to update this page as I tweak my copy trader reviews and add some tips and tricks I learn along the way.

Good luck in your trading and if there are any hints you’d like me to look at, let me know!

Cheers

Joe

Advertisements

Leave a Reply