How to Trade Stocks on eToro – Ultimate Guide to eToro Stock Trading 2021

How to Trade Stocks on eToro – Ultimate Guide to eToro Stock Trading 2021

If you’re planning to trade stocks from the comfort of your home – you’re likely thinking about using eToro.

Why? Well, the online broker gives you access to over 2,400 stocks from 17 international markets – all of which can be traded commission-free. In fact, not only can you buy stocks in the traditional way, but eToro also allows you to trade them via leveraged CFDs.

If you’re a complete novice, or you have simply never used the platform before – this guide will teach you how to trade stocks on eToro.

We’ll discuss everything you need to know – such as which stocks you can trade, what fees and commissions to expect, and what strategies are best used to stay ahead of the financial curve.

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 we even get to the fundamentals of how to trade stocks on eToro, you first need to go through the motions of getting set up. With that said, if you already have a verified account with eToro, you can skip this part of our guide and move straight onto Step 3.

    Nevertheless, the good news is that the account opening process typically takes just a few minutes – which includes the verification of your ID. 

    eToro sign up

    So, to get the ball rolling, visit eToro, and elect to open an account. The information that you will initially need to provide is as follows:

    • Full Name
    • Nationality
    • Home Address
    • Date of Birth
    • National Tax Number
    • Email Address
    • Mobile Phone Number

    You will also need to choose a username and password. eToro will send you a code via SMS too, which you will need to enter on-screen to move onto the next step.

    Next, you will be asked to go through a quick verification process. This will require two documents from you. Firstly, you’ll need to upload a clear copy of your passport or driver’s license. Secondly, to validate your home address, eToro needs a recently issued bank account statement or utility bill.

    The good news here is that eToro is usually able to verify your documents automatically, meaning it takes seconds. This is in stark contrast to age-old brokers like Fidelity or TD Ameritrade, which often take days to manually review your documents.

    Step 2: Add Funds to Your Trading Account

    The other key step that is required before you can learn how to trade stocks on eToro is that of the deposit process. After all, you will be risking your own funds with the view of making consistent stock trading profits. 

    So, the first thing to mention is that the minimum deposit at eToro is $200. Although the platform supports traders from most regions, all deposits, account balances, and withdrawals are facilitated in US dollars.

    This isn’t a major issue, albeit, all deposits come with a 0.5% FX fee (if in a currency other than USD). This FX cost, while somewhat annoying, is countered when you consider that the platform charges no commissions or ongoing account management fees.

    In terms of supported payment methods, this is where eToro really excels. This is because you can choose from one of the following deposit options:

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

    As always, bank wires are slow and cumbersome. As such if you want to start trading stocks on eToro straight away, opt for one of the other payment methods listed above. In doing so, your deposit will be credited to your eToro account instantly.

    Step 3: Search for Stocks to Trade

    If you’ve made it this far, then you should now have a verified, funded eToro account with at least $200 at your disposal. If so, now it’s time to start trading!

    Naturally, your first port of call will be to find the specific stock that you are interested in. You have two options in this respect. The easiest way is to simply enter the name of the stock into the search box. When you see the right stock load up, click it.

    Alternatively, if you don’t know which stocks you want to trade at eToro, click on the ‘Trade Markets’ button. Then, you can filter the results down by the respective stock exchange.

    If you’re new to eToro, you can choose from over 2,400 stocks from 17 marketplaces.

    This covers the following exchanges:

    • Amsterdam
    • Brussels
    • Copenhagen
    • Frankfurt
    • Helsinki
    • Hong Kong
    • Lisbon
    • London
    • Madrid
    • Milan
    • NASDAQ
    • NYSE
    • Oslo
    • Paris
    • Saudi Arabia
    • Stockholm
    • Zurich

    As you can see from the above, you can access stock trading markets in North America, Europe, the Middle East, and Asia.

    With that said, if you’re looking to trade stocks on eToro from a specific industry, there is also a drop-down list you can use.

    For example, this includes:

    • Basic Materials
    • Conglomerates
    • Consumer Goods
    • Financial
    • Healthcare
    • Industrial Goods
    • Services
    • Technology
    • Utilities

    Spend some time browsing the stock library before you start trading at eToro. After all, it’s good to know which stocks you will have at your disposal and thus – be able to capitalize on potential profit-making opportunities at the click of a button.

    Step 4: Buy Stocks or Trade CFDs?

    Once you know which stock you want to access – you then need to make a crucial decision. That is to say, are you looking to buy stocks or trade them?

    Although there is often a misconception that buying and trading are one and the same thing, this couldn’t be further from the truth.

    Bearing in mind that eToro supports traditional stock buys and CFD trading, we explain the difference between the two in the sections below. 

    Buy Stocks on eToro

    In a nutshell, when you ‘buy’ or ‘invest’ in stocks, you are purchasing them in the traditional sense. This means that ultimately – you are a shareholder of the company in question and thus – are entitled to certain rights.

    For example:

    • You are entitled to your share of any dividend payments the company distributes
    • You are entitled to vote in any general meetings that the company hosts
    • You have a legal right to inspect the statutory books of the company
    • You are entitled to share of any proceeds should the company be wound up

    Crucially, the main thing to remember here is that by buying stocks on eToro, you own the share outright – proportionate to the amount you invest.

    Now, we should stress that if you consider yourself a long-term ‘buy and hold’ investor – this option at eToro is going to be the way to go. This is because you will be buying stocks and leaving them in your eToro portfolio for several months or years. As the platform does not charge any ongoing account fees, so can buy and hold stocks at eToro for as long as you wish.

    With that being said, if you are looking to place more sophisticated stock trades at eToro, then you might find yourself buying and selling CFD instruments.

    Trade Stock CFDs on eToro

    Contracts-for-Differences, of simply CFDs, are financial instruments offered by hundreds of brokers in the online space. eToro is no different.

    For those unaware, the CFD instrument will track the real-world price of the stock in question. For example, if Paypal stocks are priced at $237.64 each on the NASDAQ, then the respective CFD instrument at eToro will also be priced at $237.64. Then, if Paypal stocks increase by 1.45%, as will the CFD.

    At eToro, not only can you can trade CFDs on stocks, but virtually any asset class imaginable. This includes hard metals like gold and silver, agricultural products such as wheat and sugar, cryptocurrencies, interest rates, ETFs, indices, and more.

    Nevertheless, it is important to note that by trading stock CFDs at eToro, you will not own the underlying shares. This means that legally, you are not entitled to dividends, you can’t vote in annual general meetings, and you won’t be owed anything should the company in question go bankrupt.

    On the flip side, stock CFDs at eToro come with several benefits that you won’t get when you buy shares in the traditional sense.

    This includes both short-selling and leverage, which we elaborate on in more detail below:

    Long and Short Positions Supported

    Perhaps the best benefit of trading stock CFDs on eToro is that you can choose from a long or short position.

    For example:

    • If you think that the price of the stock is likely to increase, you will be ‘going long’ by placing a ‘buy order’.
    • In contrast, if you think the stock will decrease in value, you will be ‘going short’ by placing a ‘sell order’.

    Sure, speculating on the price of the stock is no different from buying shares in the traditional sense. But, short-selling is something that you can really only do with ease when trading CFDs.

    So, how does short-selling stock CFDs work at eToro? Let’s look at a quick example to help clear the mist.

    • Let’s suppose that after performing some research, you believe that at $145.05, Nike stocks are over-priced. In other words, you think that the stocks will decrease over the course of the next few coming days.
    • As such, you place a ‘sell order’ on Nike stock CFDs – staking a total of $500.
    • As per your prediction, Nike stocks have since fallen to $129.50 on the NYSE. In turn, your Nike stock CFD at eToro is also priced at $129.50.
    • Crucially, this means that Nike stocks are now worth 10.72% less than when you placed your sell order.
    • As a result, this means that you are 10.72% in profit. On a stake of $500, you’ve made gains of $53.60

    As you can see from the above, short-selling stock CFDs at eToro is super-easy.

    Leverage

    If you are planning to apply leverage to your eToro stock trades, then you will need to do this via CFDs. For those unaware, leverage allows you to trade stocks (or any other supported asset) at eToro with more than you have in your account. This is illustrated as a ratio at eToro – for example, 2x, 5x, 10x, and so on.

    The leverage ratio that you select is then multiplied by your stake. For example, if you stake $500 at a leverage of 2x, your position is worth $1,000. Similarly, if you applied leverage of 5x, your stake would be amplified to $2,500.

    Perhaps an easier way to look at leverage is that your profits and losses are multiplied by your chosen ratio. For example, if you made gains of $50, but applied leverage of 10x, your actual profit amounts to $500.

    Still confused? Let’s look at a quick example of how to trade stocks on eToro with leverage.

    • This time, you are interested in trading Facebook stocks.
    • At a current price of $251.09, you think that Facebook stocks are undervalued and thus – will increase in price over the coming weeks.
    • You decide to risk $1,000 on this trade – and apply leverage of 5x
    • A couple of weeks later, Facebook stocks have increased to $290.67
    • This means that your long position is worth 15.76% more. On a stake of $1,000 – your profit would have initially amounted to $157.60.
    • However, you applied leverage of 5x – so your profits are multiplied by a factor of 5. As such, you walked away with total gains of $788.

    As great as leverage can be for boosting profit margins, it can also do the same for losses. More specifically, if you are trading stocks on eToro and your position goes against you by the amount of leverage you applied, then the broker will close your trade automatically. In turn, you will lose your stake in its entirety.

    For example, if you applied leverage of 2x and you staked $200, you are effectively trading with $400 ($200 x 2). In turn, this means that your ‘margin’ is 50%. As such, if your stock trading position on eToro goes down by 50%, you will be ‘liquidated’ – meaning you would lose your $200 stake.

    This means that the more leverage you apply, the greater the chance of your trade reaching the point of liquidation. For example, if you traded stocks at eToro with leverage of 5x on a $200 stake, this means that you are trading with $1,000. As your margin amounts to 20%, your trade will be liquidated if it goes against you by 20%.

    Overnight Financing Fees on eToro

    In the sections above, we explained that stock CFDs give you the opportunity to apply leverage and short-sell. While these benefits might be highly conducive for your eToro stock trading needs – CFDs do come with a crucial drawback – overnight financing fees.

    For those unaware, overnight financing fees (otherwise known as swap fees), is a ‘daily’ fee charged on CFD instruments. This is because CFDs are leveraged financial products.

    Take note, even if you trade stock CFDs without applying leverage, overnight financing fees are still applied.  Nevertheless, this fee will be payable for each day that you keep your CFD position open. At eToro, this kicks in at 17:00 New York time.

    In terms of how much you will pay, this will depend on the following factors:

    • The asset that you are trading
    • The size of your stake
    • How much leverage you apply, if any
    • Whether you keep your position open over the weekend (a surcharge sometimes apply)

    Our guide on how to trade stocks on eToro looked at several examples to understanding what sort of overnight financing fees the broker charges.

    • If trading going long on Apple CFDs at a leverage of 2x and a stake of $200, you will pay an overnight financing fee of $0.07 per day. However, this is increased to $0.21 per day over the weekend.
    • If trading going long on Apple CFDs at a leverage of 5x and a stake of $1,000, you will pay an overnight financing fee of $0.36 per day. However, this is increased to $1.07 per day over the weekend.

    As you can see from the above, the overnight financing fee on stock CFD trades will increase in-line with the stake and amount of leverage being applied.

    Buy or Trade? Quick Recap

    You should now know whether you prefer to buy stocks on eToro and own the shares outright, or trade via CFDs. If you can’t decide, here’s a quick recap:

    • If you are planning to invest in a company over several months or years, you should ‘buy’ stocks at eToro and avoid CFDs.
    • If you are planning to short-sell or apply leverage, opt for stock CFDs

    Before we move onto the next section of our guide on how to trade stocks on eToro, it is important to note that you are not actually given the option to choose between a classic buy or CFD trade. On the contrary, this will be reflected automatically depending on the position you take.

    For example:

    • If you go long on a stock (buy order) without applying any leverage, you will be buying the shares in the traditional sense
    • If you go short on a stock (sell order) or apply leverage, you will be trading stock CFDs

    As a side tip, you can see if you are trading CFDs when setting up your order – as this is clearly displayed.

    Step 5: Set up a Stock Trading Order

    In this section of our How to Trade Stocks on eToro Guide, we are going to walk you through the order processes. You will be presented with an order box on your chosen stock as soon as you click on the ‘Trade’ button. 

    There are several key steps that you need to take when filling in an order box at eToro, so make sure you review the following sections.

    Buy or Sell Order

    First and foremost, you need to set up a buy or sell order. As we noted earlier, a buy order is to be used if you think the stock will increase in price. Alternatively, if you think the price of the stock will decrease, you should place a sell order.

    Now, by default, when the order box appears on your chosen stock, it will be a buy order. As such, if you want to short-sell the stock, click on the ‘Sell’ button at the top of the order box. In doing so, this will instantly change your position from a traditional share purchase to that of a stock CFD trade.

    Set Rate

    The next part of the order box process is to determine how you wish to enter the market. To do this,  you need to choose from a ‘market order’ or a ‘limit order’.

    Market Order 

    A market order instructs eToro to execute your stock trade instantly at the current market price. There is likely to be a slight deviation in the price you see on the order box and the actual price that your position is executed at.

    For example, you might try and buy Apple stocks at $129.17 – but find that the order is executed at $129.19. This is just the nature of market orders and ever-changing stock prices.

    Take note, by default, a market order is already selected when you trade stocks on eToro. Additionally, if you place a market order outside of standard trading hours, it will only be executed once the respective stock exchange reopens.

    Limit Order 

    If you are looking to buy stocks on eToro and hold on to them for several months or years, you’ll be best off sticking with a classic market order.

    However, if you are looking to trade stocks on eToro on a short-term basis, then a limit order is likely to be more sufficient. This is because the nature of short-term trading is that you will be targeting smaller margins but on a much more frequent basis.

    So, unlike a market order, a limit order allows you to choose the exact price that your stock trader is executed at.

    Here’s an example of how a limit order works:

    • Sticking with the same example as above, let’s say that eToro is showing you a price of $129.17 on Apple stocks.
    • However, you might not want to enter the market until Apple stocks hit $132.50.
    • In this scenario, you can set up a limit order at $132.50.
    • In doing so, your Apple stock trade will only be executed by eToro is Apple hits a stock price of $132.50
    • In the meantime, the limit order will remain pending. You can, of course, cancel the order at any given time.

    As you can see from the above, limit orders are great for short-term traders as you control the exact price that your position is executed at.

    So, if you want to opt for a limit order on eToro, you need to change this manually. All you need to do is click on the ‘Rate’ button, which is situated next to the ‘At Market’ box. Once you click it, this will then allow you to enter the specific price that you want your limit order set to.

    Amount

    The next box that you need to attend to is that of the ‘Amount’ field. As the name implies, this is the amount of money that you are looking to risk on the stock trade in question.

    As we covered earlier, everything at eToro is denominated in US dollars, so do bear this in mind. In fact, this is the case even if you are looking to trade a stock that isn’t priced in dollars – such as those listed in the UK or Europe.

    In terms of the minimum stake permitted, stock trades at eToro start from $50 upwards. Even if the current price of the stock is more than $50 (which most US-listed blue-chip stocks are), you can still risk just $50.

    This is because eToro supports fractional share ownership. In other words, if the stock you are interested in trading is priced at $1,000 and you stake $50 – you are trading 5% of a single share.

    Stop-Loss

    Make no mistake about it – this section of your eToro order form is potentially the most important. This is because – and as the name suggests, stop-loss orders allow you to ‘limit’ the amount of money that you can lose on a trade.

    For example, you might decide that you want to trade IBM stocks, but at the same time, you don’t want to lose more than 2% of your stake. In turn, you can set-up a stop-loss order to ensure that eToro closes your order should it go down in value by 2%.

    • By default, no stop-loss order is attached to your eToro stock trade – so you need to manually set it up.
    • To do this, you first need to click on the ‘Stop Loss’ button.
    • Then, you need to enter the price that you want to stop-loss orders to be activated at.
    • While you can’t enter the exact percentage, this will be displayed when you change the stop-loss price.
    • As such, you can keep entering different stop-loss prices until you hit the exact percentage that you seek.

    With that said, it’s probably just easier to calculate the required stop-loss price yourself.

    For example:

    • Let’s say that you are trading IBM stocks- which is currently priced at $129.33
    • You want to limit your losses to 3%
    • If you are going long on IBM stocks – meaning you think they will increase, then you need to set the stop-loss order at 3% below $129.33. This amounts to a stop-loss price of $125.46
    • If you are going short on IBM stocks – meaning you think they will decrease, then you need to set the stop-loss order at 3% above $129.33. This amounts to a stop-loss price of $133.2

    As per the above, if the price of IBM stocks hits your specified stop-loss order price, eToro will close the trade automatically. If anything, this means that you never need to worry about making huge losses, as you are instructing eToro to exit the position as soon as your trade is down by a certain amount.

    Take-Profit

    We don’t need to go into too much detail in this section, as take-profit orders work in exactly the same way as stop-losses. The key difference is that while stop-loss orders limit the amount you can lose, take-profit orders lock in your gains.

    For example, you might decide that you want to target gains of 10% by trading Visa stocks – which are currently priced at $208.50. In turn, your take-profit order would look like the following:

    • If you are going long on Visa stocks – meaning you think they will increase, then you need to set the take-profit order at 10% above $208.50. This amounts to a take-profit price of $229.35
    • If you are going short on Visa stocks – meaning you think they will decrease, then you need to set the take-profit order at 10% below $208.50. This amounts to a take-profit price of $187.65

    To set your take-profit order at eToro, simply click on the ‘Take Profit’ button. Then, enter your desired price.

    To clarify, we should make it clear that each and every stock trade that you place on eToro should include both a take-profit and stop-loss order. In fact, the reasons for this are two-fold. Firstly, you know exactly what you are looking to get from the trade with clear entry and exit targets in place.

    Secondly, there is no reason for you to manually stare at your computer for hours on end waiting to exit the trade. On the contrary, your trade will be closed automatically at eToro when either your take-profit or stop-loss order price is triggered!

    Confirm Stock Trading Order 

    Once you have filled in all of the required fields, all that is left is for you to check the order. If everything looks good – simply hit the ‘Open Trade’ button.

    Take note, if the specific stock market you are trading is closed, the button will be displayed as ‘Set Order’. This means that eToro will execute it once the market reopens.

    Nevertheless, once your stock trade is live, you can cash it out any time (during market hours). With that said, if you followed our guidelines by setting up a take-profit and stop-loss order, the trade will be closed automatically when one of the respective order prices is triggered.

    Step 6: Withdrawing Your Profits From eToro

    It is hoped that at some point in time, you will be looking to withdraw your profits from eToro and back into your bank account. You can do this at any time as long as you have already verified your identity. 

    Take note, the minimum withdrawal at eToro is $30. You will pay a withdrawal fee of $5. If, however, you are from the US, there is no withdrawal fee at all.

    As per anti-money laundering laws, you need to withdraw at least the deposit amount back to the same payment method you originally used.

    For example, if you deposited $300 with your Mastercard and you are looking to withdraw $500, at least $300 needs to go back to the same card. If you no longer have access to the original payment method, you will need to contact eToro.

    The Verdict: How to Trade Stocks on eToro

    In summary, this guide has discussed the ins and outs of how to trade stocks on eToro. We’ve walked you through the end-to-end process of opening an account, choosing a stock to trade, deciding from traditional shares or CFDs, and how to set up orders.

    We’ve also explained the importance of setting up stop-loss and take-profit positions – which will ensure you trade on eToro in a risk-averse manner.

    And don’t forget, understanding the basics of how to trade stocks on eToro is only the beginning. In other words, you also need to learn how to perform fundamental and technical analysis. In doing so, this will enable you to determine whether your chosen stock is likely to go up or down in price!

     

    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 stocks can you trade on eToro?

    eToro is home to over 2,400 stocks. This covers 17 international markets - from the US and Germany to the UK and Hong Kong.

    What are the eToro stock trading fees?

    eToro is a 100% commission-free broker. This means that you can trade stocks without paying a single cent in fees.

    What is the minimum stock trade on eToro?

    The minimum stock trade on eToro is $50. This is the case irrespective of how much the stock in question in currently priced at.

    Does eToro offer leverage on stocks?

    It certainly does. In most cases, you will get leverage of up to 1:5 when trading stocks on eToro. This means that you can trade with five times the amount you have in your eToro account.

    Do you get stocks dividends on eToro?

    Yes, when you use eToro to buy stocks, you will be entitled to dividends. This is usually reflected in your eToro the day after the company makes the distribution.

    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.