Contents
eToro, a great online brokerage for those who are in Kenya and want to acquire Bitcoin
Why do we recommend it?
- You can learn from other investment moves
- Allows you to go short
- Very intuitive and straightforward
- Leverage is allowed
- There are uncountable products you can invest in
Homepage: www.etoro.com/bitcoin
If you are interested in obtaining Bitcoin from Kenya, eToro is certainly the best way to do it.
“Social trading”, an innovative investment method that consists in replicating techniques and moves from other experienced investors, has become popular because of eToro.
If you are still a rookie or haven't gained much investment experience, eToro is very useful. You can rest assured that you will be doing a smart investment move when replicating those from subjects with a long profit record. On the contrary, if you are an expert in the subject and want to share your knowledge with the community, eToro pays up for it.
It is also worth mentioning how easy is the interface of the platform, ideal for beginners who are taking their first steps with Bitcoin.
Can you rely on eToro?
eToro is very rigorous with the information about past performances from traders, and its integrity has been tested once and again by independent organizations.
The main office of eToro is in Cyprus, and the platform is certified by the CySEC or Cyprus Securities Market Commission, which covers debts up to € 20,000 from its clients, including those from Kenya. Furthermore, eToro follows all the strict requirements of the European Union.
In Europe, it is backed by the European Financial Instruments Market (MiFID), and in the USA it responds to the Financial Conduct Authority (FCA). Besides all these regulations, you should know that eToro has more than 20 million users all over the world, and it has been operating for the last fifteen years. To sum up, we can be certain that our money is in good hands.
It is also worth mentioning the good functioning of its customer service. You can use the online chat, and they also have a phone number available for assistance.
eToro deposit methods
Within the payment methods that you will find on eToro are: bank transfer, PayPal, credit card (Visa, MasterCard, Diners, Visa Electron and Maestro), Neteller, and Skrill. Making a deposit on eToro is so simple: go to “Deposit funds”, set an amount and choose the payment method you prefer.
Evidently, for security policies, you need to be the account or credit card holder.
The minimum amount you can deposit is $ 200 and there is a limited amount if you are not verified, so if you want to trade with higher amounts, you should verify your account previously.
Finally, know that you can make the deposit in any currency since eToro will make the conversion to USD, although it charges a fee, so it is preferable to make the transfer directly in USD.
Futures Vs CFD
How are Futures and CFDs different?
- Counterparties
- Futures: the counterparty is another trader.
- CFDs: the counterparty is eToro, the brokerage.
- Date of expiry:
- Futures: there is a date of expiration. As soon as that date arrives, your operation is closed even if you are in losses.
- CFDs: they don't expire. As a result, you can wait until you get in a good position before exiting.
- Options for trading:
- Futures: options are much more limited
- CFDs: a lot of variety, there is a huge diversity and types of CFDs
- Minimum investment amount:
- Futures: very high minimum investment
- CFDs: it is possible to start with a low amount
- Pricing and charges:
- Futures: as you have to pay more in the first place, costs are lower
- CFDs: costs are higher
- Use of leverage:
- Futures: it isn't possible to trade with leverage
- CFDs: existing and available
In case you still don't know what “leverage” is, we'll put it short. When trading, it's the capacity of multiplying your investment by borrowing money from the broker. That way, if you start with $ 100 and you leverage x2, your initial investment will be $ 200.
Leverage, Take Profit and Stop Loss
Let's say that you are confident that Bitcoin will raise its price, and you want to “go long”. You have $ 1,000, but you actually can invest more and make more money.
You could go to your bank, request a credit, put something as a guarantee, wait for it to be accepted and receiving the money, and then acquire Bitcoin… But by then it is likely that your prediction was confirmed a long time ago, and Bitcoin would be already at such a high value that it is not worth investing.
Thanks to leverage, you can obtain that amount really easily. It's exactly like a loan, but much easier and quicker, and with the advantage that you will be getting it directly from eToro which will let you invest much more than you have on the platform's wallet. Before trading, you will how much leverage to use as in the screenshot below:
Within other markets, the leverage you can use is higher. Why? Because leverage is most common in short-term operations or day trading, and cryptocurrencies tend to be a medium or long-term investment. But let's see how leverage works.
You begin with $ 1,000 and pick leverage x2, which means you would really invest $ 2,000 (the extra $ 1,000 to reach $ 2,000 are “borrowed” from eToro).
A few days pass and turns out that you were right: Bitcoin has risen by 20% and the value of your investment is now $ 2,400. Ok, don't be greedy, let's sell.
You will have to give back the $ 1,000 of leverage and the net profit would be $ 400 (since the other $ 1,000 was your initial investment).
In conclusion, by investing $ 1000 and obtaining $ 400, your net profit would be 40%. That is pretty decent.
It may sound too good to be true. The trick is that the risk of losing out is also there. If everything goes according to plan and the price goes up, you will earn profits in little time; but in the opposite case, you will also lose more really quickly.
Let's imagine that the price didn't increase by 20%, but it went down also by 20%, you won't lose $ 20 but $ 40, because of the leverage. Therefore, when using leverage it is essential to know about Take Profit and Stop Loss.
Take Profit is used as a form of reducing risks when trading. When you enter, you can set a profit limit and ask that your position is automatically closed when the asset reaches a price.
If you bought Bitcoin at $ 100, you request eToro to close when it reaches $ 120. That way, you make sure you won't be blinded by greed and decide to wait a bit longer in case it keeps going up, which could be a mistake since the price could go down again really fast.
Also, if you use leverage you absolutely need to place a Stop Loss order (take into account that any small loss is greater with leverage). You always need to establish a Stop Loss lower than that suggested by the broker.
About ETFs
Have you heard about Exchange-traded funds? They are similar to index funds and are known for merging the benefits of stocks and mutual funds: they can be traded at any moment in the market, but have much more investment possibilities and considerably lower fees.
Exchange-Traded Funds
Exchange-Traded Funds or ETFs are similar to index funds. They can be described as a combination of stocks and mutual funds. They are traded in the market like stocks, during the day. However, their advantage is that they are more diversified compared to stocks, and have lower fees.
Commodity market
Most investors trade with raw materials due to their stability. While other assets tend to fluctuate more, commodity prices vary less and offer safety against inflation or market volatility. Nevertheless, prices do depend on supply and demand, so if an economic situation produces greater demand for a certain good, its cost will also increase.
Consider that, unlike shares, raw materials don't pay dividends. Thus, by trading with these you will only have a further profit by selling them back.
There are two basic kinds of commodities: hard raw materials and soft raw materials. The former include precious metals (such as gold, silver, copper, and platinum), industrial metals, and oil; while the latter are agricultural products, like cocoa, soybeans, rice, or sugar, among many others.
Forex trading
Foreign exchange trading or Forex consists, as the name says, in the exchange of currencies. It is the conversion between two currencies, and the aim is, evidently, to make a profit out of this.
If you decide to trade the EUR/USD pair, for instance, you speculate how many dollars it will take to buy a euro, with the expectation that the first currency (the euro) will increase compared to the second (the dollar), to make a profit by selling it. Let's say you entered when a euro is worth 1.10 USD and you close when the price has gone up to 1.15: that difference is yours once you make the operation.
You may be thinking that trading with currencies requires investing considerable amounts, and you are not wrong, because variations are usually minimal, and if you use a lot of leverage to counter that, you will take a considerable risk. In case you are a novice in trading, it is not a good idea to begin with Forex, because it is very risky and complex.
You can operate with almost every popular currency on eToro but remember that Forex functions through CFDs, which means you will not be the owner of the real asset.
How do Contracts for Difference Function?
It is possible that you have seen the term CFD more than once if you entered eToro before. We will come back to it, but you should know first that cryptocurrency trading on the platform is only CFD when you go short or select leverage above x2 (but this is not even available on eToro).
We will also refer to terms like leverage and “going short”, in case you are interested in day trading cryptocurrency or more advanced practices.
Even if you don't have a positive balance, you can still operate on eToro with CFDs. In a hypothetical case: you are sure that the Bitcoin will go down, so you obviously think “if it is going to depreciate or go down, I'll simply wait until it does”. However, if it really falls, it might mean extra money for you.
You can accomplish that by “going short”. Here's how it works ,roughly:
- You get from a loan 100 units of Bitcoin, valued at a total of $ 5,000 (these are completely fictional figures)
- You make $ 5,000 by selling them at the market price
- The Bitcoin devaluates from $ 50 to $ 30
- You get the 100 units again, but at $ 3,000
- You pay back the 100 units
- You will have made $ 2000, since you keep the difference
Take into account that it is much simpler than it sounds: we can summarize this whole operation by saying that by trading in Bitcoin you can also make money if you predict the downs.
How does eToro work?
We mentioned before that one of the best things about eToro is that the platform is very intuitive and easy to use. You don't need to read a lot or have previous knowledge to start trading.
Everyone who has used Whatsapp, Pinterest or any of the most common social networks, has enough skills to use eToro.
We will explain, roughly, the registration steps and the different sections that you will find.
You will have to provide some personal data when registering.
Additionally, you will see that they ask you some questions about your experience at investing.
But don't feel intimidated. They only intend to find out about your previous experience and knowledge to determine which assets to recommend for you.
Next, we will explain the fundamental sections of the platform.
“Set Price Alerts” allows you to put alerts on the price of certain assets. It is a very useful tool for when you want to buy an asset that is falling, but it seems to you that it has not finished falling yet.
“News Feed” is for social purposes and interaction. This is the section where users can share opinions and learn from each other.
“Instruments”, “People” and “CopyPortfolios” are within “Discover”. As we mentioned before, the types of financial assets that eToro offers are:
- Cryptocurrencies
- ETFs
- Shares
- Commodities
- Forex trading
- Index funds
The concept “social trading” comes to life within “People”: that is where you can replicate the trading strategies of the investors you find most inspiring.
You can search for those users that you find more interesting: by risk level, types of financial assets, average earnings… You just have to choose the amount of your investment and eToro itself will replicate the movements of the selected investor, in proportion. “In proportion” means that if you have $ 1000 and the investor puts 10% of his or her balance in an asset, eToro will invest also 10% of your funds (that is, $ 100) in that same asset.
Finally, there are three main kinds of CopyPortfolios: Top Trader, Market, and Partner.
Sometimes you might prefer copying to CopyPortfolios than to other traders, because you avoid putting all your eggs in one basket, or in other words, risk is more diversified. The different portfolios are easily identifiable: one about gaming, another about large drone companies, another about pharmacy … Do you suspect that a certain sector will prosper anytime soon? Then look, because surely there is a CopyPortfolio about it.
Trading strategies
When trading cryptocurrencies, there are different possible methods or strategies, like buying and holding or day trading (and using market fluctuation to your advantage), for naming just a few.
In case you are new in the world of investment, I recommend a middle point: placing a dynamic stop-loss (15-20% under the highest price) and wait for it to work its magic.
Therefore, if for example you acquire a cryptocurrency at $ 10, it rises to $ 20 and then falls to $ 12, your stop loss will close your position at $ 16-17 and you will obtain a pretty good profit.
You may be wondering: why not selling when the price is at its peak? But that would only work for a psychic or a fortune-teller. The mentioned method is completely realistic and can work out perfectly if it is well applied.
Eventually, you will be ready for applying more advanced investment strategies, like short-selling or using leverage.
Practice account
If you do not have much experience investing, you can start by practicing with a “demo” option. You just have to make sure that the “Virtual” option is set in the upper left corner and you will be able to trade with an imaginary balance.
A virtual account can be a good way of gaining confidence before starting to trade with real money. When you create your demo account, you will begin with a virtual amount of $ 100.000, to trade with a variety of financial instruments available on the platform (not only with Bitcoin).
Don't worry, since if you lose all your virtual funds, you can contact support so they can add back the $ 100,000 to your portfolio and you can make a second attempt.
Nevertheless, remember that you need to be prudent for trading, and demo account trading can have an adverse effect. It is completely different to risk your real savings than to do operations with a fake balance which loss does not suppose any drama.
Finally, the demo mode is kind of absurd if you intend to invest in the medium or long-term (with almost guaranteed returns only by replicating an index), since you would be wasting years. Virtual accounts may be ideal for practicing before investing in the short or medium-term.