This article will guide you to choose the perfect investor for copy trading on Etoro. However, this assessment is just from my personal point of view. You should consider it before deciding because the money is always yours.
The perfect investor should be the one to suit your investment style. They also have to have a clear investment strategy, good risk management method, good capital management method during the long term of consideration. Considering these above criteria, I have the following advice.
Select the category for copy trading in Etoro
To view the copy function, at the Etoro account interface, select “Copy people” as shown below.
The investors are arranged in top-down order.
Editor’s Choice: Investors who are selected by the Etoro editorial board to introduce to their clients.
Top investors: Top investors according to Etoro assessment.
Trending: Investors who, in recent times, have had an impressive rate of return.
Most Copied: Investors who are being copied by most people.
Low-Risk Score: Investors with low-risk scores. Etoro assesses an investor’s risk level on a separate rating scale. The scale is from 1 to 10. Investors with a risk score of less than 4 are considered low-risk.
Medium Risk Score: Investors with medium risk, usually less than 6.
A perfect investor is completely different for everyone. Above all, it must match the investment style or personality of each person.
There are people who are adventurous, risky and want a quick profit in a short period of time while others prefer safety.
Some people like short term investments so they don’t want to hold orders for too long. On the contrary, some people like to invest in the long-term, year after year.
Some like to trade stocks while others like to invest in indices, crypto, gold, forex, etc.
Choose the right risk level – the main principle of Copy Trading
A good investor is in control of their losses. Capital preservation is a vital principle of financial investment. Therefore, you need to pay attention to the Risk score.
In Etoro, the investors are risk-rated on a scale of 1-10. An investor whose trades you want to copy should have a risk score of 3 – 6.
The reason is that if the level of risk is too low, you are capital-safe but the potential returns are low. But if the risk score is higher than 6, you can easily lose your capital when the market fluctuates.
A risk score within the range of 3 – 6 helps you to both achieve the expected profit and keep your account from being affected much during crises.
You can see this score of an investor as shown in the picture. The risk score is highlighted in purple frames.
Choose an investor that yields a profit level higher than or equal to the expected profit
There is no denying that everyone invests money in order to make a profit. Therefore, it would be very flawed if not considering the return level which an investor can bring to their followers.
Depending on each person, their expected return level will also vary. It also depends on the environment and the size of the trader’s account.
On the Etoro platform, you can view expected returns over different time periods. But for the most comprehensive assessment, you should look at annual profit expectations.
To filter the investors with the expected rate of return greater than or equal to your personal expected return, on the “Copy People” interface, click “FILTER”.
An interface appears. Select “Return” and click “Apply”.
The annual profit filter adjustment window of investors pops up. In the “custom” box, enter your expected profit and leave the following box as it is. Here, I choose the expected return of 30% and click “Apply”.
It will show all the investors who meet the search terms within your expected return range.
Which financial instruments do you like to trade? Why?
Etoro has a wide variety of tools for you to trade which covers most people’s needs. It includes cryptocurrencies, stocks, bonds of large corporations in the US. The commodity market includes Crude oil, Platinum, Gold, Silver, ETF, currency pairs, etc.
Everyone has a preference for investing in a different financial instrument. This is based on their predictions about the futures market and other factors.
Because we are choosing an investor to copy trade, it is obvious that we need to know what instruments these investors are trading with.
My advice is that you should choose investors who trade as few instruments as possible. Because in financial investing, a person who is good at crypto trading is not necessarily good at stocks trading. All other financial trading instruments have similar implications.
In this inherently complex financial market, you should find yourself simplicity. Do as Warren Buffett did, at least in the choice of financial instruments. An investor who trades a few financial instruments should always have a special preference in the list of people you intend to copy trade from.
Investors’ reputation – the more people believe, the better
An investor who is copied by many people shows that they have a high reputation in the community. There are no ratings for investors on Etoro. However, you can see a person’s reputation by consulting related metrics.
It is one of the smart ways and should not be overlooked when choosing the perfect investor for you. In addition, a person’s reputation can also be judged through the star just below their avatar and name.
Look at the picture above. Some people are with a red, blue, yellow, or green star.
What is the difference between them when their stars are of different colors?
Blue: Cadet level. The requirements to become Cadets are not too difficult.
Yellow: New star. The criteria are slightly more difficult.
Red: Champion. The criteria are harder than the new star in terms of Equity and Minimum AUM.
Green: This is the most difficult level to achieve on the Etoro platform in terms of all requirements.
It is easy to see that you should choose investors with red or green stars. Due to the strict requirements of the criteria they meet, a higher level proves a higher level of reputation. That is what you are looking for.
Choose a short/medium term investor or a long term investor?
Each person has their own preference for different trading time frames. Some do not want to open too many orders due to the transaction fees involved. Others don’t want their money stuck within orders. They want to see money in their account. Therefore, they want to perform transactions continuously in a short period of time.
For this reason, you need to choose a suitable trader who meets your requirements. On Etoro, you can see this through the “Additional Stats” menu. Just click on the investor you want to see and scroll down to this item in the “Stats” menu.
As shown above, this investor trades 0.67 orders per week on average. For each order, he holds 16 months on average.
Transaction history when trading in Etoro
One of the features that you cannot ignore when choosing an investor for copy trading is to view their transaction history.
All transactions from the early time of investors up to now are listed by Etoro. That is a good basis to choose an investor with good trading strategies.
To view an investor’s transaction history, on the main interface, select “Copy people”. Choose the investors you need to see and go to the “Stats” menu.
In the “Stats” menu, you may notice “Performance”.
This menu will show, month by month, all the profits of the investor in the past, and the last column is for the year. Thanks to this statistic, you may know whether investors are good at managing capital.
In my opinion, an investor who is good at capital management will not lose more than 6% per month. It is my priority to choose a perfect investor and then copy their trade.
Details of each order of investors
In addition, you can also view the history of each trading order of an investor. Change to the “Portfolio” menu and choose “History”. Then, enter the period you want to refer to.
It will help you to have the most complete view on how to manage capital, divide capital, cut loss, etc. of investors. This is the best key for you to decide whether to copy him or not.
You can also view all trading orders or a specific trading instrument executed by investors by selecting “TRADING” on the “Stats” interface.
As shown in the picture above, SparkLiang has opened 37 orders in total. His profit ratio is 100% on the total number of orders (all win). For each winning order, his average payout rate is 92.99%. This is a very good and desirable result for an investor.
This is the rare case in which investors have a 100% profit rate on stocks. This shows you that if you copy when he trades, the likelihood of success is almost absolute.
When should we invest more, copy, or exit an order?
In Etoro, you can customize your copy trading very well. Assume that you initially copy many people. After a while, you see one of them giving good and stable returns and want to invest more.
Instructions for using copy trading
Log into your account. Choose “Portfolio” from the menu on the left. Select the gear icon in the right corner of the investor and then select “Add Funds”. Finally, enter the amount you need to add to copy trade and click “Update”.
If you want to take out money from the funds which you have put your money in, you can choose “Remove Funds” and enter the amount to take out. This taken-out amount will be credited to your account and you will immediately see it displays in the “Available” menu. This solution is often used if you want to make monthly withdrawals from your investments. Regarding the “Available” balance, you can withdraw to your bank account.
You can also pause your copy trading by selecting “Pause Copy” while the previous orders are still active. However, it will not start copying the following orders unless you choose “Pause Copy” once again.
You can also stop copying trades from a trader by selecting “Stop Copying”. All previous copied orders will be closed immediately. And you also terminate copying subsequent orders of that investor.
You can better manage your capital by setting a 2-level stop-loss. Level 1 is the stop-loss from the investor while level 2 is yours by clicking “Set Copy Stop Loss”.