Changes for PI - Good or Bad? To me good

11:32 AM

- changes in the AUM and Lower risk score

- I believe will improve overall quality of traders

So there has been some recent changes on etoro, you can read about it here

So what do the changes encompass? Basically a demand for a lower risk score and minimum AUM.

From what I can read from @Annietoro feed, I can see many people are upset about the changes and some Popular Investors are looking to drop out (“PI”). But honestly I can see why etoro is going in this direction.


1)      Minimum AUM

I wrote briefly about a concern I had over some traders who had some strange returns, on my post here. “Skin in the game investing” is important and is one of the main things that have made etoro even remotely sucessful

 I have an abstract here:

“…. (this trader) was down 98% in one month then subsequently up 300% the next? It is most likely a last hooray before going bust. Let us put numbers to this, if you invested $1,000 and it came down 98% we would have $20 left, up 300%, $60. It happens!”

Unfortunately this behavior can be described as extremely destructive, because if someone has only US$2,000 or so, they might be taking more risk than someone who has $100,000 with etoro. I understand these numbers are relative, but generally speaking, this change should improve the quality of the etoro traders.

Not always but generally.

2)      A lower risk score

Risk score has always been defined by etoro as VaR (or Value at Risk), which means given the historical movement of what you are trading, what is the likely change in your total portfolio.

Try picturing it by hearing this analogy, you did your laundry in Manilla, Philippines and left it outside. Now, for the last 100 days it only rained 6-7 times and there was a thunderstorm once. What is the likelihood that tomorrow your clothes will not be drenched? While we don’t know but we can guess based on the probability that it is not likely.

What is being drenched in etoro terms? It is losing all the money you placed with the copied trader.

Another trader may represent another country, say London where it is more likely than not raining. So then the likelihood of your clothes being drenched goes up.

Some have commented that this will likely bring down profitability. I do agree, it will especially for the accounts that use a lot of leverage but it will bring down the Armageddon type events as well.


Overall, just based on pure speculation, I believe these changes a push by etoro to improve the overall quality of traders being copied and to get approval for US investors. In the short term, I believe many lower quality PI will drop out, while some good ones may get lost as well.

In the long run though, for those who stick with it for perhaps the US investors come in, the AUM of PI will dramatically increase as they are the largest consumers of Financial Technology.

For the PI based in countries with weaker currencies, such as ___ please do appeal for a waiver for the AUM as I think it is unfairly removing you from the trades. For others I do certainly hope you stick with etoro, IMHO they are the ones who have had the branding and marketing to move the market, and in the future return for you will be greater. You already have a first mover, give it time and I think you will do better here than other platforms.

Side note: 1) I am not paid or commission by etoro and these are my own opinions, 2) my money is still tied up and yet to be released into etoro, aiming to be released on Monday so I have no positions at the moment. But I have allocated US$15,000 as my initial investment.

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