You can earn by trading the markets without actually trading yourself! Sounds foolish? It’s possible with eToro’s Social Trading System. No need to do technical or fundamental analysis, no need to time the markets, no need to look at charts and indicators, you can directly copy what professional traders are buying and selling in an instant. A way to make passive income without doing the hard work yourself.
Why would successful traders allow themselves to get copied? This is because they also earn when people copy them. It’s a win-win situation. According to eToro, top traders earn as much as 2% of their Asset Under Management (AUM). Top traders from eToro manage up to $5 million, that’s easy $100,000 on top of what they earn by trading. With eToro you can copy trade US stocks, ETF’s, commodities, cryptocurrencies, forex, and indices.
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Trading is Risky
Trading with eToro is risky especially if you are doing it all by yourself. According to the website, 66% of retail investors lose their money with the platform. The reality is most traders lose money trading stocks, forex, cryptos, etc. regardless of the platform. This is because of emotions, greed, ineffective trading strategy, listening to too much noise, and overconfidence will ruin your chance of success in trading. It takes at least 2 years of active trading in demo accounts before you can be ready to trade live accounts. In those 2 years you’re not even considered an expert.
Do you really want to trade?
According to psychologist K. Anders Ericsson, it takes 10,000 hours of practice before you can be an expert at something. That’s at least 3.4 years or 1,250 days of trading at 8 hours a day. Even people who trade for a living for 10 or more years commit mistakes from time to time. Even gurus on YouTube who talk about reading charts and technical analysis are not profitable with their trades! Most of them earn more doing YouTube videos (and making people think they have a working strategy) compared to trading. Why do you think they publish videos on a regular basis? If you really want to “just share” your “working strategy” with the world, do one video and that’s it. Your obligation to humanity is done. But no, they need money from YouTube that’s why they spend more time with their videos rather than actual trading.
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Mitigating Risks by Copy Trading
With eToro, you get to see a lot of data to help you decide whether you want to copy an individual or not. You see the historical performance, year started, risk score, the number of copiers, open trades, % of profitable weeks, among other information. You can really decide for yourself whether a trader fits your risk-to-reward profile before copying.
You can also set a stop copy limit. Let’s say you invest $500, you can set the system to stop copy trading if your fund value goes below $300 or $200. The threshold is up to you. This prevents your account from going down to zero.
You can determine a person’s risk appetite from their risk score. If you are a conservative investor, copy only those traders with risk score below “3”.
OlivierDanvel (Olivier Jean Andre Danvel) one of the more popular traders in eToro has a risk score of “1” with no negative months. Even when there is a lot of volatility in the market, he still manages to end each month with a gain no matter how small. He is up +1.51% so far in 2020, +8.43% in 2019, +18.39% in 2018, and +16% in 2017. Copy-trading this guy beats all your investments in any kind of mutual fund. Check out this article.
If you copy misterg23 (George Thomson) or harshsmith (Harshvir Kang) at the start of 2020, your investments would +33% and +24% respectively. You can mix and match your copy trade portfolio to match your risk and reward profile.
You can also invest in CopyPortfolios which can mitigate risk by investing in multiple aggregated companies or traders. Some of the more notable portfolios to copy include GainersQtr and FoodDrink which averaged 14.05% and 26.59% respectively in 2019.
Start your passive income journey by copying these profitable traders below.
Not a Get-Rich-Quick Scheme
Copytrading will not get you rich quick. Expect a return of somewhere between 2% to 30% per year copying less risky traders. Some years might even be negative as historical data does not guarantee future performance. Simply put, treat it as one of your high-risk investment portfolios with good returns. If you are earning 1.5% on time-deposit, 3% on money-market funds, 5% on bonds, 7% on mutual funds, you can earn higher returns with more risk with eToro. eToro is available in over 140 countries worldwide.
