5 Reasons I Like Etoro Vs. Traditional Trading

11:37 PM

Finally, 21 years old. Who remembers that feeling of waking up and saying, “Now life really begins for me.” Such an exciting time full of optimism over what life is going to bring to you. We go out, have a huge party and drink to the edge of consciousness.

Well, my 21st birthday was slightly different. The months and couple of years leading up to this faithful day, I was taking trading seriously thinking it was going to be a make-or-break for me. Maybe I was going to be a superstar trader and people would recognize how great I was. Finally, I was at the legal age where I could own my very first trading account. So I woke up that morning, had a normal breakfast, took a bus into town, walked over to the bank to get a check from the bank teller, and walked across the street to open my very first brokerage accounts.

My key to life was finally here! And I did well! In the first month, I made $1,000 from my $3,000 account. I remember withdrawing some of the money and treating my friends and family to a great meal. I even bought a new skateboard. Man it felt great! What felt even better was that a close friend who was going be a missionary was raising money, but as a full time student, no one expected that I could fork out $800. Nothing, and I mean absolutely nothing, feels better than 1) providing for your family and 2) giving money away. You can call it the Law of Attraction or something, but I just think it innate to our human nature. 

Alas, the reality was, trading isn't easy, it is BRUTAL. A short year later, I busted my accounts.  It was so absolutely humiliating after all the hype and talk of earning big bucks vanished.  

I did eventually open another and successfully traded my way through university earning about 3-7% a month and even managed to get a job as a part-time trader in a hedge fund. I've also learnt some important lessons from my busted account. And here are five reasons I think technology is changing the way we invest.   

Reason 1: Remember Rare Pokémon? They are rare for a reason.

Mew-two: Remember this little rare fella? 

It is possible to make money. It doesn't matter what people say; it is possible. Is it a very small percentage? Absolutely. It is possible? Absolutely. It is possible to do it full-time and quit your job? Absolutely.

Read this book if you need proof. But again, these are the rarities and should not be taken as the norm.

On etoro there are some consistently profitable traders, and I believe I have found them. Wouldn't it be great if you could hire them to trade your money?

Also the learning curve is steep and time and money investment is high, amongst others the lessons to be learned. There’s the months upon months of papers trading, and at the end of it, you might not even be that good at it. Or worse yet, the system you have does not fit your schedule or your personality type.

Even if you are willing to go through that pain, what happens if you lose your first account? I once met some traders who described the experience of losing their first real money account as part of the “school fees.”

Etoro has some people who have already paid the school fees. Why not ask them to trade on your behalf?

Reason 2: Batman? Billionaire playboy by day and superhero by night.

I can do this on the side and still work a full time job. Well some people are able to for inspiration please read the Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game, i should be doing a book review soon. But if you have responsibilities I would like to present you with a term called "ego depletion." We all have a limited reservoir of ego or decision-making abilities in a single day. If you have a stressful job, a wife and a kid, will you still have the mental ability to manage the super stressful arena of trading? I remember how I used to hide in the toilet to monitor my trades. Not something I would recommend.  For more on this, you can read Willpower by Roy Baumeister and John Tierney.

And honestly, do you really want to spend your time glued to the screen? I find most people who get into trading want to get into the game to have enough money to do something they really love. Or rather, the freedom to do things they just don't have the time and money for.

If you knew your end goal and are patient enough to earn it, wouldn't investing your money in someone who knew the market be better? After all, even the most seasoned traders don't make as much as you think.

Reason 3: Why be Robin when you can be Batman? 

Throwback Robin "Holly smokes Batman"

But wait, didn’t you trade part time when you were in school? Why do you want to recommend copytrading instead of doing this yourself?

While I was in school, I could sleep when I needed to as long as there weren’t classes, study when I wanted to, and I had Sundays to catch up on sleep and had no family obligations. Depending on your lifestyle, you may not have the ability to do this.

I will have to do my own monitoring, but since I will be in the market I will not need to handle the nitty gritty everyday stress.

Reason 4: Okay, fine, I'm not batman, but I can buy a Robocop - Robotraders? They seem to do well.

Well, it’s not right for me to make a sweeping statement about Robotraders, but honestly I have found that systems may work for a while and completely disappear later. I bought one system way back in 2010, backtested to good effect, and realised it didn't provide as many returns as advertised. 

Yes, the buy my robot “and in no time buy a Ferrari” doesn’t really apply.

The trading strategy I was using in 2008 may not apply in 2012 and certainly hasn't in 2016. Some robotraders promise continuous updates, but if you were to ask me, humans still triumph over the machines.

And please don't mistaken Robotraders for HFT (High Frequency Trading). This is a "Big-boys Only Club" and is essentially riskless. 

Reason 5: Doomsday virus - what if the trader goes nuts?
Doomsday Virus Even Superman has a bad day right?

Yes, humans have emotions, too. What happens if they go berserk and forget their strategy?

Etoro has one unique feature to settle this over traditional funds: Your fund manager will lose money if you lose money. It is estimated that for a traditional mutual fund, less than 10% actually have a stake in their own fund! If the fund loses money, they lose nothing. 

Copytrading means if you lose money, the trader on the other end of the trade loses money as well. Finance geeks know this as "skin in the game," as popularized by Naseem Taleb.

“Instead of relying on thousands of meandering pages of regulation, we should enforce a basic principle of ‘skin in the game’ when it comes to financial oversight: The captain goes down with the ship; every captain and every ship. In other words, nobody should be in a position to have the upside without sharing the downside, particularly when others may be harmed. While this principle seems simple, we have moved away from it in the finance world, particularly when it comes to financial organizations that have been deemed ‘too big to fail .’” - Nassim Nicholas Taleb and George A. Martin

In the case of Etoro, this is very true.

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