eToro’s social features are what makes our platform unique in the online trading space. Both the CopyTrader™ system and Smart Portfolios investment strategies lean on eToro’s user-base, which numbers over 20 million users from 140 countries, and are designed to help traders explore new ways to generate profit.
How Does CopyTrader Work?
The CopyTrader system is one of the key reasons the platform is considered among the leaders of the fintech revolution. The general idea of the CopyTrader tool is pretty simple: Choose the traders you want to copy, decide on the amount you wish to invest, and copy everything they do automatically, and in real-time, with one click of a button.
Beyond the basic concept of copy trading, there are quite a few additional elements to the system.
Before we begin, we will refer to:
- ”Copied Trader” as the trader you are investing in (copying)
- “Copier” as the user who is doing the copy action (i.e. yourself)
Here are a few important points you should take into consideration before copying:
- 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 $2,000,000.
- The minimum amount for each copied position is $0.50. Positions not meeting the minimum will not be opened.
CopyTrader Automatic Reallocation
Our copy automatic reallocation model is designed to maintain alignment between your portfolio and that of the user you are copying. When the copied user makes changes to their portfolio, these changes are reflected in your copied portfolio as well.
This feature automates the process of adjusting the portfolio to mirror changes in the copied trader’s investments, providing efficiency, risk management, and a simplified investment experience, especially in rapidly changing market conditions. The reallocation process activates under specific conditions:
- Starting a new copy, adding or withdrawing funds, resuming a paused copy: These actions trigger reallocation to ensure your portfolio matches the investor’s current portfolio and strategies.
- Withdrawals by the copied investor prompt immediate reallocation of your copy portfolio. Conversely, their deposits initiate a reallocation within 48 hours, giving you an opportunity to add funds accordingly (should you choose to).
Please note that while reallocation is in progress, adding or removing funds, closing individual positions, or pausing an open copy is restricted in order to capture the latest asset distribution in the copied portfolio.
- You will be notified via in-app notifications when the allocation process has been completed.
- The process is typically completed within 2 business days, after which you can resume managing your copy as usual.
- You may however choose to stop the copy relationship at any time.
Start a New Copy
When you open a new copy investment, it will open based on the current percentage of the assets in the copied trader’s portfolio. The portfolio allocation will be the same between your portfolio and the copied trader’s at any point.
- The copy investment will mirror the Copied Trader’s current positions and future actions including changes in SL’s and TP and closing of the trade, from the moment you begin copying them. If the copied trader extends their SL by adding more funds to a position, your SL will adjust accordingly. However, your position amount will stay the same as its initial amount.
- You will be able to close a specific copied trade without closing the copy account.
- If the Copied Trader opens a position in markets that are closed during the time they are copied (market break for example), the system will open a Market Order for the copier. Once the market is open, the order will execute into a position with the first market rate.
- To see all of the trades copied from a single trader, go to your portfolio and click the Copied Trader’s name.
Please note: 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 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.
**These terms and conditions are subject to change at eToro’s discretion, at any time.
Copy Stop-Loss (CSL)
CSL is a feature that gives you the ability to effectively manage your copy investment and Smart Portfolio, by providing risk management across 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 system will automatically set the CSL at 40%, as a default, of your total invested copy value per copy relationship. Therefore, you will now be able to assume that when the copy value has reduced by 40%, the CSL will trigger and terminate that copy relationship, returning the remaining funds to your balance. The range that you can manually set your CSL at is between 5% to 95%. The 5% value is a true ‘safety net’ that should only trigger when nearly all the money in that copy relationship is gone.
For example: Trader A is copied by Trader B with $1,000. The CSL is set to 60% of the equity to return to the account, which in this case is $600. Once the current equity, including the profit/loss over all trades, is reduced to $600, the whole copy account will be closed, and the remaining funds (60% of the original copy amount) will be returned to Trader B’s balance.
So, what happens when CSL triggers?
If your copy relationship has unrealised losses of 40% of your allocated funds, the CSL will trigger, and all the positions in that relationship will close. The history tab on the platform contains a “Close By” column. The closed trades will be labelled in this column as “CSL”.
The CSL value can be adjusted to a value of minimum 5% and maximum 95% as a safety net. Please note that the system will not allow you to reduce the CSL to a value that is so small that it could trigger the closure of the CopyTrader relationship immediately.
As an example: Let’s say you are copying a trader with $1,000 and you are currently losing $300, while your CSL value is the default 60%, and you want to adjust the CSL value. You will not be able to set it for a value of 70% ($300 in this case) or less as this would trigger the immediate closure of the CopyTrader relationship and all the trades under it. In this case, the maximum CSL you would be able to set is 65%.
Keep in mind that the CSL value will change if you change your copy amount. Adding or removing funds from the copied trader will trigger a recalculation of the CSL value as a percentage of the new copy amount.
Say, for example; you’re copying a trader with $1,000. Your investment in this trader has lost $900 of its value, but you still believe in this copy relationship. When you allocate another $1,000 to that trader – the CSL value will now be updated and calculated on the new $2,000 total allocated to copying this trader. Remember you can update the CSL at any time.
Copied Trades SL
The CSL was put in place to limit your overall exposure to any one trader. Because your copied trades are protected by the CSL, we can allow for more flexibility when it comes to their Stop Losses (SL).
With regular trades, whenever you increase the SL, funds are added to the trade from the account balance to represent the extra funds needed to support it.
With copied trades, whenever the Copied Trader extends their SL, there are no extra funds deducted from the overall copy amount. Therefore, any one trade can go 200%, even 300% into loss, which gives it the flexibility to potentially recover the losses without being closed by the SL, and at the same time, leaves the copy amount with enough balance to cover additional trades. However, if the Copied Trader reaches your set CSL regarding an unrealised loss overall, the entire copy relationship will be closed.
This difference creates several discrepancies between the copied trades and the original trades:
We don’t add funds into copied trades. Therefore the percentage of available copy balance might be greater than the balance of the copied trader.
The copied trade’s gain/loss is calculated according to the original amount invested in the trade.
Pause or Resume Copy
Pause Copy is a feature that allows you to stop copying a trader without actually closing all of the currently opened positions.
- “Pause copy” can be activated from the portfolio page on eToro by clicking on the settings button and “Pause Copy.”
- When “Pause copy” is activated there will be no new trades opened under that copy relationship. However, all the currently opened trades will still be copying the SL/TP and close actions from the Copied Trader.
- You may resume the copy relationship at any time by heading over to the portfolio page and clicking “Resume Copy”
When you wish to stop copying an investor altogether, choose “Stop copying” from the copy settings menu. You will have two choices on how to proceed:
- “Sell All,” which closes the copy entirely.,
- “Keep All,” which will transfer all copied positions to your own portfolio, where they can be managed independently of the copy.
- You can choose to close a specific copy position without stopping the copy relationship. The funds from this position will be credited back to your copy balance
Add or Remove Funds
You can add to your copy investment at any time by allocating additional funds, which will be proportionally adjusted within your portfolio. Similarly, you have the option to withdraw uninvested cash, moving it back to your general “Available Cash”. Keep in mind, only funds that have not been invested can be withdrawn.
How do Smart Portfolios work?
eToro’s Smart Portfolios are thematic investment instruments programmed for long-term double-digit return. Each Smart Portfolio aggregates various assets or a group of traders and is constantly optimised by machine-learning algorithms.
General Smart Portfolios considerations:
- The minimum investment amount is as low as $500.
- The default Stop Loss for a Smart Portfolio is set at 10%.
- The weights allocation of each Smart Portfolio can change over time.
Market Smart Portfolios
Market Smart Portfolios aggregate various assets together in a single portfolio, following a predetermined market strategy or focusing on a specific market segment. eToro’s financial experts determine the composition of each Smart Portfolio, in conjunction with a machine-learning algorithm programmed to reduce risk and increase profit.
For example, the BigTech Smart Portfolio groups major companies from the tech sector, offering an asset for traders who wish to invest in the industry as a whole.
Top Trader Smart Portfolios
Leaning on the CopyTrader tool, Top Trader Smart Portfolios group successful traders together in different portfolios. Similar to Market Smart Portfolios, the traders within are selected by eToro’s investment committee and a sophisticated algorithm which is looking for specific trading attributes that are optimised for profit.
For example, the GainersQtr Smart Portfolio groups investors who have shown consistent returns, and who are likely to turn a profit over the next quarter, according to predetermined parameters which the Smart Portfolio’s algorithm takes into account. The composition of the Smart Portfolio is updated periodically, to maintain low risk and increase the probability of profit.
For more information about Smart Portfolios, please refer to the Smart Portfolios page.
We hope this article has helped you gain a clearer understanding of our Copy systems. If you have any further questions, please don’t hesitate to contact us via our @CustomerService wall on eToro, or learn more on our help page.