In a nutshell, there are four primary ways to make money on eToro: firstly, by buying investments such as stocks, cryptocurrencies, and ETFs to sell at a higher price; secondly, by using CFDs (Contracts for Difference) to short the market, profiting from declining asset prices; thirdly, by copying the portfolios of successful investors through eToro’s CopyTrading feature; and fourthly, by becoming a ‘Popular Investor’, allowing others to copy your trades and earning rewards based on your performance and the amount of capital copying you.
As an in-demand low-fee trading platform with over 30 million users1, eToro holds huge money-making potential.
In this guide, I’ve put together essential strategies on how to make money on eToro, exploring diverse opportunities from buying assets to mastering CFDs and copy trading.
I aim to provide you with clear, actionable steps to enhance your trading skills and capitalise on eToro’s unique platform features.
4 Ways to Make Money on eToro
Here’s a breakdown of each way to make money on eToro:
1. Buying Investments Such as Stocks, Cryptocurrencies, and ETFs
The first approach to making money on eToro centers on buying investments, encompassing stocks, cryptocurrencies, and Exchange-Traded Funds (ETFs).
This method involves several steps:
- Research and Selection: Start by exploring eToro’s diverse range of assets, which includes over 3,000 stocks from 17 global stock exchanges, various cryptocurrencies, and a selection of ETFs. Utilise eToro’s tools to analyse market trends and assess the performance potential of different assets.
- Buying Assets: On eToro, you can purchase assets directly. This involves selecting the asset, deciding on the investment amount, and executing the buy order. Notably, eToro allows for fractional share purchases, enabling investment in high-value stocks with lower capital, such as buying a portion of a Tesla share.
- Portfolio Management: Active management of your portfolio is vital. Stay informed on market changes and news that could impact your investments. Leverage eToro’s social network for insights and community opinions.
- Selling for Profit: The ultimate aim is to sell assets at a higher price than the purchase cost. Regularly monitor your investments and determine the optimal time to sell, based on your investment strategy, whether aiming for short-term gains or long-term growth.
While investing in single stocks, like popular US stocks such as Tesla and Netflix, can be lucrative, it’s important to be aware of the risks.
Market volatility can lead to significant price fluctuations, and timing the market incorrectly can result in losses.
Diversifying your portfolio, for instance, by including ETFs like the VOO Vanguard ETF which tracks the S&P 500, can mitigate these risks.
However, a long-term investment view is recommended, as quick profits are not guaranteed and the markets can be unpredictable.
Remember, despite eToro’s commission-free trades, there are other fees to consider, such as stamp duty for UK investors, currency conversion charges, and withdrawal fees.
2. Using CFDs (Contracts for Difference) to Short the Market
The second approach to making money on eToro involves using CFDs (Contracts for Difference) to short the market, a strategy effective in a declining market.
Here’s an integrated view of how it works:
- Understanding CFDs: CFDs allow you to speculate on price movements of assets like stocks, indices, or commodities, without owning the underlying asset. For example, buying 5,000 CFDs of Netflix shares is equivalent to buying 5,000 physical shares in terms of exposure.
- Short Selling: With CFDs, you can ‘short’ sell stocks, profiting from falling prices. You sell stocks without owning them and buy them back when prices are lower. This strategy saves you from paying the 0.5% stamp duty associated with physical stock transactions.
- Leverage and Risk Management: eToro offers the option to trade on leverage, meaning you can control a larger position with a smaller amount of capital. For example, with a 2:1 leverage, you could buy £5,000 worth of shares with just £2,500. eToro also allows adjusting margin rates, useful for hedging. If you have a portfolio of UK-listed stocks and expect a short-term market drop, you can hedge by shorting the FTSE with selected leverage, from 1x to 20x, to match your hedging needs and risk tolerance.
- Risks and Costs: Trading CFDs on margin amplifies both potential profits and losses. If the market moves against your position, you can incur significant losses, especially if not leveraging underlying stock positions for hedging. Additionally, be aware of costs like spreads and overnight fees.
- Market Analysis: Effective use of CFDs for shorting requires a deep understanding of market trends and the ability to predict price movements accurately. Stay informed about economic developments and use technical analysis to guide your trading decisions.
Using CFDs to short the market on eToro is a sophisticated strategy with the potential for high rewards but also significant risks, particularly due to the leverage involved.
It’s best suited for experienced traders who are skilled in risk management and market analysis.
Check out our guide on how to trade CFDs UK.
3. Copying the Portfolios of Successful Traders Through eToro’s CopyTrader Feature
The third method to make money on eToro is through its innovative CopyTrader feature, which allows you to replicate the trading strategies of successful traders.
Here’s how it can be utilised effectively:
- Choosing Traders to Copy: On eToro, you can browse through the profiles of various traders, assessing their performance, risk score, and trading strategies. Look for traders whose investment style and risk tolerance align with your own financial goals. It’s essential to do thorough research to identify traders who have a consistent track record of success. Check out our roundup of the best traders to copy on eToro.
- Copying Trades: Once you’ve selected a trader to copy, you can allocate a portion of your funds to automatically mimic their trades in real time. This means when they make a trade, the same trade is executed in your account proportionally. You can set a minimum amount for CopyTrading and manage the maximum amount you’re willing to allocate.
- Management and Control: While the trades are automatically copied, you have full control over your account. You can stop copying a trader, pause, or add more funds to the copy relationship at any time. It’s important to regularly review the performance and continue or modify your copying decisions based on results and changing market conditions.
- Diversification: To spread risk, consider copying multiple traders with different trading strategies and in various markets. This diversification can balance your portfolio, reducing the impact of potential losses from any single trader’s strategy.
- Passive Investment Strategy: CopyTrading is ideal for those who may not have the time or expertise to analyse the markets themselves. It offers a more passive investment approach while still allowing you to learn from experienced traders.
- Costs and Considerations: There are no additional fees for using the CopyTrader feature, but the usual eToro costs like spreads and overnight fees apply. Also, remember that past performance of a trader is not an indicator of future results.
CopyTrading with eToro’s CopyTrader feature provides an opportunity to leverage the knowledge and strategies of experienced traders, making it a unique and potentially profitable way to invest, especially for those new to trading or with limited time to devote to market analysis.
4. Become a Popular Investor
The fourth method to earn money on eToro is by becoming a ‘Popular Investor’.
This program allows successful traders to earn additional income by being copied by other users.
Here’s an overview of how it works:
- Building a Strong Track Record: To become a Popular Investor, you first need to establish a consistent track record of successful trading on eToro. This involves demonstrating a strategy that yields positive returns and showcases your trading skills and market knowledge.
- Gaining Followers: Start by growing your presence on eToro. Share insights, post about your trading strategies, and engage with the community. As more users find your content valuable and your trading performance appealing, they are more likely to start copying you.
- Joining the Popular Investor Program: Once you have a following, you can apply to join eToro’s Popular Investor Program. eToro evaluates your application based on factors like trading performance, risk score, and the number of copiers. Being part of this program not only brings recognition but also additional income.
- Earning Additional Income: As a Popular Investor, you earn a percentage of the assets under management (AUM) that are copying your trades. This payment is in addition to any profits you make from your trading activities. The more copiers and the larger their investment, the higher your potential earnings.
- Responsibility and Influence: Being a Popular Investor means that others are relying on your trading decisions, making it a role of responsibility. Your trading actions directly influence your copiers’ portfolios, so it’s crucial to maintain a sound, well-thought-out trading strategy.
- Continuous Engagement and Growth: Keep your copiers engaged by regularly updating your trading strategy and market outlook. Continuous growth in your follower count and maintaining good trading performance can enhance your earnings as a Popular Investor.
Becoming a Popular Investor on eToro is a unique opportunity to earn income not just from your trades, but also by sharing your expertise with a community of followers.
It requires a combination of successful trading, community engagement, and a commitment to maintaining a reliable investment strategy.
What Is eToro?
As a regulated brokerage, eToro provides users access to trade a diverse range of assets.
Its offerings span over 3,000 stocks, 300 ETFs, and 25 major cryptocurrencies.
Users can easily buy and sell assets, short-sell stocks, or trade CFDs on commodities, indices, and currencies.
eToro’s platform is designed to be user-friendly for beginners, yet robust enough for advanced traders.
Charts, research tools, risk management features, order types, and indicators help inform trading decisions.
Social and copy trading functionalities cater to different investment strategies.
As a global multi-asset brokerage, eToro holds regulatory licences in several jurisdictions.
Operating under the regulations of top-tier authorities like the Financial Conduct Authority (FCA) in the UK, CySEC in Cyprus and the Australian Securities and Investments Commission (ASIC) ensures a secure trading environment.
Read my complete eToro review to find out more.
Avoiding Common Mistakes on eToro
When navigating markets, mistakes inevitably happen but learning lessons from errors breeds wisdom.
Timing the Market – A Risky Move
Predicting short-term blips or calling market bottoms/peaks provides an unreliable trading edge at best and financial ruin at worst.
Consider electric vehicle maker Tesla – its share price swung between £150 to £900 several times from 2019 to 2022 based on production targets, earnings results, and Elon Musk’s tweets.
Timing entries or exits amidst such volatility gets extremely tricky, if not impossible without hindsight.
Traders fixated on buying only on 10%+ dips or selling exactly at 52-week highs often miss capturing more rational moves in between.
Continuous, methodical investing aligned to fundamentals and diversification proves more profitable over multi-year horizons for most retail investors.
Timing the market frequently does more harm than good.
Understanding Your Investments
“Never invest in a business you cannot understand” – sage words from Warren Buffet2 that eToro traders should embed when assessing new opportunities.
Reviewing financial statements, leadership, competitive positioning, and addressable markets provides insights into the investment case.
What macroeconomic forces might drive growth? How does management allocate capital? What partnerships are cementing?
Develop perspectives on these aspects before committing funds.
While cryptos and meme stocks thrived based on community excitement alone recently, fundamentals caught up eventually.
Do your homework first for sustainable gains.
Emotional Trading Decisions
Under volatile, noisy conditions, panic selling near cyclical lows or chasing skyrocketing cryptos breed loss-making moves.
Detaching emotions when assessing data and indicators prevents such impulses.
If facts point to short-term uncertainty but positives on a 12-24 month horizon, have the belief to hold positions or average down costs.
Let rational forward analysis anchor decisions – not short-lived fears or exuberance.
Knowing When to Cut Losses
That said, clinging onto declining stocks and hoping for recoveries is equally damaging, especially if the business trajectory shifts.
Cutting losses requires acknowledging when investment predictions play out incorrectly.
Review indicators dispassionately to assess the viability of turnarounds.
For example, if a stock falls 20%, breaching technical supports, it then needs a 25% gain just to recoup losses.
Case-by-case evaluations help decide whether fundamentals suggest such reversals are achievable or if capital better serves other opportunities.
Building a diversified portfolio seems intuitive.
But allocation centered on overlapping assets breeds ‘diworsification’.
For example, a portfolio split equally across AI companies, clean energy stocks and tech hardware firms still carries concentration risks as the assets correlate around high-growth innovation.
Shocks impacting risk appetites for such stocks cascade losses across the portfolio.
True diversification balances assets, sectors, geographies, and market caps to smooth volatility and enhance compounding through cycles.
Is eToro a good way to make money?
eToro can be a good way to make money for those who are knowledgeable about trading and investing, offering diverse trading options like stocks, cryptocurrencies, CFDs, and the unique CopyTrading feature. However, success on eToro depends on individual skill, market knowledge, risk management, and the ability to make informed decisions. Like all investment platforms, it carries risks, and profits are not guaranteed, especially for beginners or those without a clear strategy.
How to make money on eToro for beginners?
For beginners looking to make money on eToro, start by educating yourself about the markets and practicing with a demo account. Focus on long-term, diversified investments in stocks or ETFs, and consider using eToro’s CopyTrading feature to replicate the trades of successful investors. It’s important to invest only what you can afford to lose, use risk management tools like stop-loss orders, and gradually develop your trading skills and strategies.
You may also like: