eToro Trading System
I have been getting many requests from my blog readers to write this post, so here it is – my overview of trading on eToro over the past 12 months using my rather simple eToro Trading System!
This is for the period from March 2012 – February 2013 (included) – the last 12 months.
I started with a £10k deposit at the end of 2011. Currently my bank account stands at £20k+. This was achieved in the space of around 14 months.
Is it a good profit to have on a passive investment? You bet it is! I’m very happy and even actually surprised that I managed to keep my head well above water at the end of the year considering I made two stupid mistakes which I will cover later in this post.
When I first started trading on eToro my idea was to make 10% profit (+/-) each month. In reality that turned out to be mission impossible. I know, I know – greedy me! But over the last year spent following traders and seeing how good traders can go down the drain in a matter of just a few days, I realised that whatever I do, I won’t be able to predict such situations and un-copy in time, just before disaster strikes.
A 10% monthly yield would mean a 313% yearly yield (remember, monthly results would accumulate so it’s not just 120%). My result is 80.5%, which is roughly 25% of my initial goal. If we look at my eToro trading experience from this point of view, I have failed miserably. But then again, I’m more realistic now than I was a year ago.
If you ask me today, I’d say that by following my eToro trading system, you can achieve a 30%-100% yearly gain, probably 100% being a very lucky case. Even with 80% I consider myself very lucky. Realistically, 30%-60% is probably what you’re looking at.
Is it good or bad ROI? Depends on how you look at it – I could probably make way more by investing that money in stock and selling on eBay, but that would require way more time and effort on my part. eToro trading is all about passive income – I really don’t spend more than 1-2 hours a week on this, just enough to monitor current traders, cancel bad ones and spot rising stars. So it’s not really comparable.
You can probably compare eToro copy trading with stock trading, but in my opinion eToro carries less risk; with stocks, you would have to look out for penny stocks to get gains like these and they are very risky to deal with in the first place. To each his own, I guess, but for me the stock market looks way more risky than copying successful traders on eToro.
1) My idea of long term investment in oil failed miserably. I didn’t make any profit, worse still I had to cut the deal and accept a small loss to get out of my positions. And I’m glad I did it last summer as today, in 2013, the price of oil STILL hasn’t improved. In fact, it’s $4 LESS per barrel then when I bought it for the first time a year or so ago. So yeah, this didn’t work out very well for me, LOL.
With that being said, I’m sure that in the long term, the price of oil is bound to increase, but I guess it won’t happen that soon – in few months’ time. (Now that I said that it will definitely happen, LOL).
But even if it does, eToro
may not be the best platform for such long trades as the small fees to
carry trades over the weekend eat into your potential profits,
especially if we’re talking about years of passive trading. It would
probably be a better idea to buy commodities in proper commodity
markets. So, no more OIL investments for me at this time.
2) My second and third mistakes can be clearly seen from my 12-month graph:
Wonder what happened there?
I’ll tell you! Andrew decided that he was smart enough to do trades
on his own! You know – you hear bad stuff about Greece on the evening
news, you know that the EUR will go down the following morning, right?
As it turns out, it’s not that simple – far from it!
I tried day trading as well as short-term trading (morning-evening) and failed. I couldn’t find any rules to follow. Luckily enough, I somehow managed to win back what I lost (the odds turned in my favour) but I’ll tell you – it’s pure gambling in my eyes! I’m not a financial expert and probably never will be.
This didn’t stop me from doing the same thing few months after my first failure (see the second blue circle in the graph). You should learn from your mistakes, right? Absolutely! For me it did take 2 tries, but now I’m cool, totally cool.
From now on, I’ll stick to copying people who know what they’re doing. That way I can manage my risks very effectively and even if 1 or 2 traders from my portfolio have a bad week, the others usually make up for it so that I’m still in profit (not that every week is profitable, of course).
What
these filters do is they allow you to set very precise eToro parameters
to find the most suitable traders for your search criteria. Previously
we were limited to simple Low/Medium/High risk searches and win ratio,
but now you can use 8 different filters:
1) Average Position – this means how much money a
trader puts on each trade against its overall balance. For example, if a
trader has a balance of $1,000 and he puts $500 down on one trade, his
average position would be 50%. Now, that’s very high and risky. I
usually try to stick with traders whose average position doesn’t exceed
10% and even that is only occasionally. Ideally, this figure should be
below 5%.
2) Leverage - I won’t go into detail on how this works here as it would take a few paragraphs, but to cut a long story short leverage means that a trader is trading with/risking money he doesn’t have. The higher the leverage number, the more risk a trader is taking on a regular basis.
3) Weekly Drawdown – a new and very helpful indicator. This basically shows the MAX losses a trader has made over a chosen time period. It also shows unrealised trades, which is great as this allows us to filter out “good-looking” traders who have long-standing negative trades open that they don’t want to close so as to not ruin profit numbers. When using this filter for low risk trades set it to 20%-25% and below.
4) Winning Weeks – this filter is not very objective as winning weeks really doesn’t mean anything. Some traders may have a very low rate, but when they win they win big (long trades) while others may win 9 out of 10 weeks but when they lose, they lose everything they made during those 9 profitable weeks. So this really is irrelevant.
5) Win Ratio – similarly to the Winning Weeks filter – it’s not very objective, but obviously if you’re looking for low risk traders, this number should be quite high, at least 50%+.
6) Gain – or profit made against the bank. This is obviously a very important filter as it shows exactly how much money a trader has made over a given period of time.
7) Minimum Number of Trades – this is a good one. By using this you can filter out all those lucky traders who have impressive gain figures, but who have only made a few trades. We want tried and tested traders who make at least a few dozen trades per year (if the number of trades is that low, the win through rate should be very, very high).
8) Exposure - another good indicator for spotting low risk traders as they’ll never risk their entire bank in all of their open trades (unless several open positions are open against each other, e.g. when one increases, the other decreases). Still, this number shouldn’t be more than 50% in most cases.
These filters really help me to find good traders.
Don’t forget that sometimes simple doesn’t mean bad. For example, when you go to the People tab to look for traders, you can simply click on Copiers to sort all traders by the number of Copiers they have. If a trader is copied by 2,000 other people and the history graph looks good, it must be worth taking a closer look, right? 2,000 people wouldn’t just blindly copy someone who is losing money for them:
Below the Advanced Filters section, you’ll find Most Popular Searches.
These are searches that are already pre-defined with the most commonly
used filter settings. For example, “Low Risk with Gain 10%-20%” would be
very suitable for my eToro trading system with a few small adjustments (increase the number of minimum trades and increase the weekly drawdown a little):
Even after using filters, remember that you want to check each trader manually
to see past trades and open positions, the number of copiers, portfolio
allocation and most importantly – graphs/trends for last 6 and 12
months of trading results. From these graphs you can instantly spot a
good trader with steady growth over time and a low number of high risk
trades.
Here’s what I plan to do now – I’ll withdraw the £10k I made in profit and leave everything else in the system. This way I simply cut off any risks associated with this venture – I have made back my initial investment and I will now leave the profit to make more money for me. No risk of losing for me from now on.
You could say – why, Andrew? Leave all the money in the account so you can double it this year and make some real money, etc. etc. Yeah, right! It could work out like that, but then again, it might not – I can’t know for sure. Maybe I’ll lose all the money this year. I simply don’t know because Forex trading is not predictable. That’s why I am choosing to take the safest path, sleep well at night and only risk the money I earned last year.
As I explained in my original blog post, I’m not really a risk taker – at least not on this kind of scale. I would never put my life savings into eToro, the stock market or similar risky activities. NEVER!
I simply wouldn’t be able to sleep at night and would be stressed out
all the time. Prices go down the same way they go up – you never know
what you’ll see in your account each day – and it’s very stressful! That
is, if you’re risking money you can’t afford to lose – much like when
you play poker for stakes you’re not comfortable losing.
I would rather invest that larger sum of money in stock, because I know for sure that in 99% of cases I’ll be able to sell it. In the worst case scenario, I sell it at cost price. Same goes for property investment – in today’s climate, when prices are down but rents are relatively high, investing in a good property is a much safer long-term investment. Sure, with properties you can’t make an 80% gain in one year, BUT the risks are much smaller too.
To sum up – it has been a really great, fun experience trading on eToro and it turned out to be quite profitable, too! I would never put £100k or £200k into this system, but as a side investment it has worked out very well for me so far.
Whether or not it’s suitable for you is your decision to make! It can’t hurt to try, right? Even if you start with just a few hundred pounds, it is a great learning experience and can bring in some extra cash to spend on Xmas gifts at the end of the year.
Good Luck with your trading activities!
The Results
This is for the period from March 2012 – February 2013 (included) – the last 12 months.Is it a good profit to have on a passive investment? You bet it is! I’m very happy and even actually surprised that I managed to keep my head well above water at the end of the year considering I made two stupid mistakes which I will cover later in this post.
When I first started trading on eToro my idea was to make 10% profit (+/-) each month. In reality that turned out to be mission impossible. I know, I know – greedy me! But over the last year spent following traders and seeing how good traders can go down the drain in a matter of just a few days, I realised that whatever I do, I won’t be able to predict such situations and un-copy in time, just before disaster strikes.
A 10% monthly yield would mean a 313% yearly yield (remember, monthly results would accumulate so it’s not just 120%). My result is 80.5%, which is roughly 25% of my initial goal. If we look at my eToro trading experience from this point of view, I have failed miserably. But then again, I’m more realistic now than I was a year ago.
If you ask me today, I’d say that by following my eToro trading system, you can achieve a 30%-100% yearly gain, probably 100% being a very lucky case. Even with 80% I consider myself very lucky. Realistically, 30%-60% is probably what you’re looking at.
Is it good or bad ROI? Depends on how you look at it – I could probably make way more by investing that money in stock and selling on eBay, but that would require way more time and effort on my part. eToro trading is all about passive income – I really don’t spend more than 1-2 hours a week on this, just enough to monitor current traders, cancel bad ones and spot rising stars. So it’s not really comparable.
You can probably compare eToro copy trading with stock trading, but in my opinion eToro carries less risk; with stocks, you would have to look out for penny stocks to get gains like these and they are very risky to deal with in the first place. To each his own, I guess, but for me the stock market looks way more risky than copying successful traders on eToro.
Mistakes
I made 2, no actually 3 mistakes:1) My idea of long term investment in oil failed miserably. I didn’t make any profit, worse still I had to cut the deal and accept a small loss to get out of my positions. And I’m glad I did it last summer as today, in 2013, the price of oil STILL hasn’t improved. In fact, it’s $4 LESS per barrel then when I bought it for the first time a year or so ago. So yeah, this didn’t work out very well for me, LOL.
With that being said, I’m sure that in the long term, the price of oil is bound to increase, but I guess it won’t happen that soon – in few months’ time. (Now that I said that it will definitely happen, LOL).
But even if it does, eToro
may not be the best platform for such long trades as the small fees to
carry trades over the weekend eat into your potential profits,
especially if we’re talking about years of passive trading. It would
probably be a better idea to buy commodities in proper commodity
markets. So, no more OIL investments for me at this time.Wonder what happened there?I tried day trading as well as short-term trading (morning-evening) and failed. I couldn’t find any rules to follow. Luckily enough, I somehow managed to win back what I lost (the odds turned in my favour) but I’ll tell you – it’s pure gambling in my eyes! I’m not a financial expert and probably never will be.
This didn’t stop me from doing the same thing few months after my first failure (see the second blue circle in the graph). You should learn from your mistakes, right? Absolutely! For me it did take 2 tries, but now I’m cool, totally cool.
From now on, I’ll stick to copying people who know what they’re doing. That way I can manage my risks very effectively and even if 1 or 2 traders from my portfolio have a bad week, the others usually make up for it so that I’m still in profit (not that every week is profitable, of course).
New Filters to Find the Best Traders
Right after I published my initial guide to How to Make Money on eToro, they introduced a new, advanced filter system to help us find traders we’re looking for more easily:What
these filters do is they allow you to set very precise eToro parameters
to find the most suitable traders for your search criteria. Previously
we were limited to simple Low/Medium/High risk searches and win ratio,
but now you can use 8 different filters:2) Leverage - I won’t go into detail on how this works here as it would take a few paragraphs, but to cut a long story short leverage means that a trader is trading with/risking money he doesn’t have. The higher the leverage number, the more risk a trader is taking on a regular basis.
3) Weekly Drawdown – a new and very helpful indicator. This basically shows the MAX losses a trader has made over a chosen time period. It also shows unrealised trades, which is great as this allows us to filter out “good-looking” traders who have long-standing negative trades open that they don’t want to close so as to not ruin profit numbers. When using this filter for low risk trades set it to 20%-25% and below.
4) Winning Weeks – this filter is not very objective as winning weeks really doesn’t mean anything. Some traders may have a very low rate, but when they win they win big (long trades) while others may win 9 out of 10 weeks but when they lose, they lose everything they made during those 9 profitable weeks. So this really is irrelevant.
5) Win Ratio – similarly to the Winning Weeks filter – it’s not very objective, but obviously if you’re looking for low risk traders, this number should be quite high, at least 50%+.
6) Gain – or profit made against the bank. This is obviously a very important filter as it shows exactly how much money a trader has made over a given period of time.
7) Minimum Number of Trades – this is a good one. By using this you can filter out all those lucky traders who have impressive gain figures, but who have only made a few trades. We want tried and tested traders who make at least a few dozen trades per year (if the number of trades is that low, the win through rate should be very, very high).
8) Exposure - another good indicator for spotting low risk traders as they’ll never risk their entire bank in all of their open trades (unless several open positions are open against each other, e.g. when one increases, the other decreases). Still, this number shouldn’t be more than 50% in most cases.
These filters really help me to find good traders.
Don’t forget that sometimes simple doesn’t mean bad. For example, when you go to the People tab to look for traders, you can simply click on Copiers to sort all traders by the number of Copiers they have. If a trader is copied by 2,000 other people and the history graph looks good, it must be worth taking a closer look, right? 2,000 people wouldn’t just blindly copy someone who is losing money for them:
Conclusion
I hope this update is of some value to you and gives you a better insight into what’s going on with my eToro trading activities.Here’s what I plan to do now – I’ll withdraw the £10k I made in profit and leave everything else in the system. This way I simply cut off any risks associated with this venture – I have made back my initial investment and I will now leave the profit to make more money for me. No risk of losing for me from now on.
You could say – why, Andrew? Leave all the money in the account so you can double it this year and make some real money, etc. etc. Yeah, right! It could work out like that, but then again, it might not – I can’t know for sure. Maybe I’ll lose all the money this year. I simply don’t know because Forex trading is not predictable. That’s why I am choosing to take the safest path, sleep well at night and only risk the money I earned last year.
I would rather invest that larger sum of money in stock, because I know for sure that in 99% of cases I’ll be able to sell it. In the worst case scenario, I sell it at cost price. Same goes for property investment – in today’s climate, when prices are down but rents are relatively high, investing in a good property is a much safer long-term investment. Sure, with properties you can’t make an 80% gain in one year, BUT the risks are much smaller too.
To sum up – it has been a really great, fun experience trading on eToro and it turned out to be quite profitable, too! I would never put £100k or £200k into this system, but as a side investment it has worked out very well for me so far.
Whether or not it’s suitable for you is your decision to make! It can’t hurt to try, right? Even if you start with just a few hundred pounds, it is a great learning experience and can bring in some extra cash to spend on Xmas gifts at the end of the year.
Good Luck with your trading activities!
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