How to Trade Forex on eToro – Ultimate Guide to eToro Forex Trading 2021

How to Trade Forex on eToro – Ultimate Guide to eToro Forex Trading 2021

The chances are you’ve been thinking about trading forex from the comfort of your home, and the hit social trading platform eToro sprung to mind.

People in their millions opt for this forex broker for a multitude of reasons. Notably, the platform provides access to more than 50 currency pairs from major, minor and exotic markets. All of which can be traded commission-free.

In this How to Trade Forex on eToro Guide, we walk you through the process from start to finish. We talk about finding a forex pair to trade, potential fees and commissions, and shed some light on some commonly adopted strategies used to stay ahead of the game.

Table of Content

     

    eToro - Buy and Invest in Assets Commissions-Free

    Our Rating

    • Buy over 2,400 stocks, 16 cryptocurrencies, and 250 ETFs without paying any commissions
    • Trade thousands of CFDs
    • Deposit funds with a debit/credit card, e-wallet, or bank account and PayPal
    • Perfect for newbie traders and heavily regulated

     

    Step 1: Open an Account at eToro

    Before getting into the core basics of how to trade forex on eToro, you need to open an account. If you have already signed up with the platform you can jump ahead to step 3.

    Nonetheless, the end to end sign up and verification process should take a matter of minutes.

    The first thing you need to do is head over to eToro and click on the ‘Join Now’ button.

    You will have to provide the following particulars:

    • First and last name
    • Residential address
    • Date of birth
    • Nationality
    • Email
    • Mobile number
    • Tax number

    In addition to the above, you will also be required to select a secure username and password. eToro will send you a code to your mobile phone, so enter this when prompted. The next step is to upload a clear copy of your driver’s license or passport so that the broker can verify your identity.

    When it comes to validating your residential address, you can use a utility bill or a bank statement. An advantage of trading via eToro is that the platform verifies ID documents using automatic identity verification software. Over at more traditional brokerage sites, it can take days on end to manually evaluate such documentation.

    Step 2: Add Funds to Your Trading Account

    Next, before you can fully get to grips with how to trade forex on eToro, you need to understand the deposit procedure. After all, you will need to fund your account in order to try and begin trading.

    eToro accepts traders from all over the world, although it is important to note that the platform is denominated in USD only. This includes deposits and withdrawals, and of course your account balance.

    As such, if you deposit funds into your account in any other currency, you will have to pay a currency conversion fee of 0.5%. Whilst this might seem a little irksome, it’s important to note that the broker charges nothing in the way of management fees or trading commissions.

    With regards to compatible payment methods, eToro shines. You can select any of the options listed below:

    • MasterCard
    • Visa
    • Maestro
    • Neteller
    • Paypal
    • Skrill
    • Bank Wire

    If you are keen to start trading forex on eToro right away, you are best advised to avoid bank wire. The reason being that it is one of the slowest payment types for brokers to process. As such, it’s advisable to opt for a credit/debit card or e-wallet instead.

    Step 3: Search for a Forex Pair to Trade

    By now you should have not only had your new account verified but also made a deposit. If this is the case, you can now start trading forex on eToro.

    The first thing you need to do is perform a quick search to find the forex pair you are interested in. For this, there are two options. First, you can enter the specifics into the search facility – as soon as it loads as a suggestion, select it.

    If you are still making your mind up about which pair you might like to trade – simply click ‘Trade Markets’. Next, you can hit ‘Currencies’ to browse what’s available.

    If you happen to be new to eToro, you might need some inspiration. With that in mind, you will have access to the following major FX pairs:

    • EUR/USD
    • GBP/USD
    • NZD/USD
    • USD/CAD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • And more

    Minor currency pairs found on eToro include:

    • EUR/GBP
    • EUR/CHF
    • EUR/JPY
    • GBP/JPY
    • EUR/AUD
    • EUR/CAD
    • AUD/JPY
    • CAD/JPY
    • And more

    Exotic currency pairs on the platform include:

    • USD/HKD
    • EUR/HUF
    • GBP/HUF
    • NZD/SGD
    • USD/HUF
    • GBP/ZAR
    • And more

    As you can see from above, there are heaps of forex trading pairs to choose from. This includes major pairs from the United Kingdom, Europe, Australia, New Zealand, and Japan.

    As such, it’s worth having a good look at the available markets on eToro to see what will be available to trade. Knowing what currencies are on offer will make it easier to grab a trading opportunity when the time is right.

    Step 4: Try out a Forex Copy Trader

    When you have decided on which financial asset you wish to access – you could elect to utilize eToro’s ‘Copy Trader’ feature. For those aware, this enables you to copy a pro forex trader like for like.

    If the pro trader thinks the euro will increase in value against the Australian dollar and subsequently places a buy order on EUR/AUD – this will be reflected in your portfolio.

    If they sell ZAR/USD, again, you will see this mirrored in proportion to your portfolio. Interestingly, despite this being a completely passive way to trade forex, you are able to add or remove assets from your portfolio as and when you like.

    The minimum investment amount to use the eToro Copy Trader feature is just $200. Any buy or sell positions that the respective trader makes will be reflected in your own eToro portfolio – at a proportionate amount.

    Here’s a quick example to clear the mist on how to trade forex on eToro via the Copy Trader tool.

    • You invest $500 into your chosen forex trader
    • The forex trader risks 2% of their balance on a GBP/USD buy order. They also apply leverage of 1:30.
    • As such, $10 is taken from your portfolio and placed into a GBP/USD buy order
    • The trader closes the GBP/USD position and makes a profit of 10%
    • Your position is also closed. This means that you made a profit of $30.
    • This is because you risked 2% of your portfolio, which is $10. You made 10% profit, so that’s $1. But, you had leverage of 1:30 applied, so your total gains were $30.

    As you can see from the above, the Copy Trader tool is a great way to trade forex on eToro in a 100% passive nature. This makes it ideal for newbies or those that simply don’t have the time to actively trade.

    Step 5: Set up a Forex Trading Order

    Having made it through steps 1 to 4, you should now have a new eToro account with trading funds to spend. If you tried out the demo account facility and feel ready to ‘go live’, you can simply switch the settings in your dashboard from ‘demo mode’ to ‘real account’.

    When you are ready to go, click on ‘Trade’ – at which point an order box will appear for your chosen pair. If you don’t know where to start when it comes to placing a forex order on eToro, see the below.

    Buy or Sell Order

    The first thing you need to do when placing any trading order is to choose between a buy order and a sell order. If you think the pair is undervalued and will rise in price – place a buy order. If you think the pair will lose value – place a sell order.

    When the order box appears, it will be set to ‘buy’ order automatically. If you decide to go short on your selected market when thinking about how to trade forex on eToro – click ‘sell’ above the pair in question.

    Set Rate – Market Order or Limit Order

    Next, you will be required to select between a ‘market order’ and a ‘limit order’. This tells eToro exactly how you wish to enter the market.

    Market Order

    A market order is used when you are quoted a price and you want your forex trade actioned immediately. There will invariably be a slight disparity between the value in your order box, and the amount your trade is executed at.

    For instance,  you might place a market order of GBP/USD at $1.3556, but the order is actioned at $1.3558. This is the nature of the ever-changing supply and demand of the forex markets and any other.

    The market order is the automatic selection when trading forex on eToro. Furthermore, if you create a market order out of trading hours it will be executed when the relevant markets open. If you want a ‘limit order’ instead you will have to change it manually, which we cover next.

    Limit Order

    A limit order is good for those that want to take advantage of the modest but regular gains short-term trading invites. This is because limit orders enable you to be price specific when it comes to how you want to enter the trade.

    Let’s clear the mist with an example of a limit order below:

    • Using the above example for continuity, eToro is quoting $1.3556 on GBP/USD
    • However, you don’t want to enter the position until the pair hits $1.3600
    • As such, you place a limit order of $1.3600
    • This means that eToro will only execute your order when GBP/USD reaches $1.3600
    • This position will remain as it is until either your target price has been reached – or you cancel the order. You may cancel your limit order whenever you see fit.

    As is clear from the above example, if you plan on trading forex at eToro on a short-term basis, this order is superb for controlling the price at which you enter the market.

    As we touched on, if it is a limit or you want, you will need to change this manually. This can be easily achieved by clicking ‘Rate’ – which can be found just by ‘At Market’. You will now be able to input the price of your limit order.

    Amount

    You will now be required to enter a value in the ‘Amount’ box. This refers to the amount you willing to risk on your forex trade on eToro.

    As we mentioned earlier, eToro is denominated in USD. With that said, the platform will accept most currencies. This means that no matter whether you live in the UK, Australia, Barbados, or Iceland – the broker will simply exchange it to USD for a small fee.

    Stop-Loss

    Moving on to the stop-loss order. This is one of the most important orders, as it enables you to control the amount of capital you can potentially lose on a forex trade.

    For instance, you might be keen on trading GBP/USD but are not willing or able to lose more than 3% of your initial stake. This is where a stop-loss order comes in. On eToro, by creating a stop-loss order,  this ensures that the broker closes your forex trade for you – should the value of your trade fall by 3%.

    • Unlike market orders, stop-loss orders aren’t automatically added – thus you will need to set it up yourself
    • Simply hit ‘stop-loss’ to set up your order
    • Next, input the price at which you want the stop-loss order executed
    • Although you won’t be able to input a precise percentage, this will be illustrated when you enter the stop loss value
    • As such,  simply change the value until the percentage reflects what you had in mind

    Having said that, figuring out your stop-loss price is as easy as a simple calculation.

    For instance:

    • Imagine you are trading GBP/USD at $1.3655
    • You are unwilling to lose more than 2%
    • If you are going long on the pair, believing its value will rise – you can set the stop-loss order at 2% below $1.3655. This would be $1.3381
    • If you are going short on the pair, believing the value will fall – you can set the stop-loss order at 2% higher than $1.3655. This would be $1.3928.

    Much like with a limit order, if or when your forex pair rises or falls by 2%, eToro will close the trade automatically for you. By creating this order you are cutting out the concern of big losses. In other words, the order has instructed eToro that you don’t want to lose more than 2%.

    Take-Profit

    Take profit orders are comparable to stop-loss orders, in the sense you can be price specific. The main contrast between the two orders is that a stop-loss order will limit your losses on a forex trade, whereas a take profit order will lock in your profit.

    For instance, let’s hypothesize that you want to make a profit of 8% on EUR/USD  – and you enter the trade at $1.2078. See below an example of how your take profit order would look:

    • If you want to go long on EUR/USD, believing its value will rise –  you can set a take-profit order 8% above $1.2078. This equates to a take-profit value of $1.3044.
    • Instead, if you want to go short on EUR/USD, believing its value will fall – you can set a take-profit order 8% below $1.2078. This equates to a take-profit value of $1.1111.

    It is super easy to create a take-profit order on eToro. Just click on the ‘take profit’ button in the order box and enter the price.

    Leverage

    If you would like to take advantage of leverage on your forex trade this will be achieved via CFDs. As you likely know, CFDs track the real-world price shifts of forex pairs. Using leverage at eToro enables you to trade forex on margin – meaning for more than your account allows.

    More often than not leverage is illustrated as a ratio. So, for instance – 5x, 10x, 20x, and so forth. As you can see from the image below, on a major currency pair you have access to 30x leverage on eToro. This means that with an account balance of $1,000, you could potentially trade with $30,000.

    As you can see, you can select a lower leverage limit on eToro if you prefer, which is certainly recommended for beginners. After all, whilst this leverage can certainly boost any profits – it can do the same to your losses.

    To clear the mist, take a look at the example below of how to trade forex on eToro with leverage

    • Let’s imagine you want to trade GBP/USD
    • Priced at $1.3554 you have a feeling its value will rise a few weeks down the line
    • As such, you take a punt and risk $100 on the trade, with leverage of x30
    • Weeks later GBP/USD has increased to $1.5588
    • Your position is now worth 15% more than it was when you placed the buy order. On a $100 stake your gains would have amounted to $15
    • However, because you applied leverage of x30 – your gains are multiplied by 30. Consequently, you made a profit of $450.

    However, it is important to remember that a poorly executed leverage trade can result in your position being ‘liquidated’. In this instance, eToro will close your trade and you invariably lose the entire stake.

    • For instance, if you stake $300 with x2 leverage, you are able to trade with $600 ($300 x 2).
    • As such, you are trading with a 50% margin.
    • This means that if your position falls in value by this amount you will lose your initial stake of $300.

    Ergo, the higher the leverage you decide to use, the higher the risk of liquidation. With that in mind, use leverage with caution when considering how to trade forex on eToro.

    Overnight Financing Fees on eToro

    It’s important to be mindful that leveraged positions invite overnight financing fees. This isn’t just the case on eToro, but all online trading platforms.

    This fee is also commonly referred to as a ‘swap fee’. On eToro or any broker platform, this will come with a daily charge for each night the FX position is left open.

    For instance, a $1,000 position on GBP/USD with leverage of 1:30 will result in an overnight financing fee of $1.02 per weekday and $3.07 over the weekend. However, if we change the leverage to a more modest x2, meaning you can still double your position – the overnight financing fee drops down to $0.07 on a weekday and $0.20 over the weekend.

    Confirm Forex Trading Order

    As soon as you have completed all of the order particulars, you can check you are happy with it. To confirm your order, simply click ‘Open Trade’. Please note that if you place your order out of market hours, the button will instead say ‘Set Order’.

    This means that the particular forex market is closed. As such, your order will be executed by eToro as soon as the marketplace opens. Forex markets open on Sundays and close on Fridays. Apart from USD/RUB, which is open between 9 am Monday and 9 pm Friday.

    With that said, once your forex trade has gone live you will be able to cash out, even if the market is closed. Bear in mind that if you have placed stop-loss and take-profit orders, the position will be closed automatically as soon as the pair hits the respective order price.

    Step 6: Withdrawing Your Profits From eToro

    At some point, you are going to want to cash out which entails making a withdrawal request on eToro. As long as you have already provided all of the ID required and had your account verified – this is easy.

    The minimum withdrawal stipulated on eToro is $30, and there will be a $5 fee if you are not a US resident.

    Anti-money laundering laws state that the aforementioned withdrawal must be sent to the payment method you used to initially deposit. Whilst it doesn’t have to be the full amount, it should at least be the deposit value.

    The Verdict: How to Trade Forex on eToro

    In this guide on how to trade forex on eToro, we have talked about how to open an account, the fundamentals of trading currencies, and how to set up basic entry orders.

    We also discussed the significance of utilizing take-profit and stop-loss orders on all eToro forex trades. This is a superb way to manage your risks when trading forex on eToro.

    Crucially, getting to grips with the essentials is only the tip of the iceberg. It’s also important to educate yourself on things like technical and fundamental analysis. These tools are available at your fingertips and are vital for making those tough decisions. Namely – what the direction of market sentiment towards your chosen forex pair might be.

     

    eToro - Buy and Invest in Assets Commissions-Free

    Our Rating

    • Buy over 2,400 stocks, 16 cryptocurrencies, and 250 ETFs without paying any commissions
    • Trade thousands of CFDs
    • Deposit funds with a debit/credit card, e-wallet, or bank account and PayPal
    • Perfect for newbie traders and heavily regulated

     

    FAQs

    What forex pairs can be traded on eToro?

    There are over 50 forex pairs to choose from on eToro. This ranges from major pairs like GPB/USD and EUR/USD, to minor pairs such as EUR/GBP and CAD/JPY. Furthermore, while not all brokers offer access to exotic pairs - eToro has exotics such as GBP/HUF, NZD/SGD, and many others.

    What are the eToro forex trading fees?

    eToro charges zero commission. This means that when you trade forex, you do not have to pay a cent to the broker.

    What is the minimum forex trade on eToro?

    The minimum forex trade on eToro is technically $1,000. However, you can apply leverage of up to 1:30 - meaning that your stake is just $33.33.

    Does eToro offer leverage on forex?

    Yes. eToro offers leverage of 1:30 on major currency pairs like EUR/USD, and 1:20 on non-major pairs such as EUR/NZD.

    Can I trade forex on eToro passively?

    Yes. One of the most popular ways to trade forex passively on eToro is by utilizing the 'Copy Trader' feature. You can invest as little as $200 in the forex trader of your choosing. Everything the pro trader buys or sells will be reflected in your own portfolio - without you having to lift a finger.

    Author : Samantha Forlow

    Samantha Forlow

    Samantha is a UK-based researcher and writer that specializes in all-things finance. This covers everything from traditional equity and fund investments, to forex and CFD trading. Samantha has been writing financial-based content for several years and has a variety of publications in the online domain. Crucially, she is able to explain complex financial subjects in a newbie-friendly manner.