Contents
eToro is an excellent broker for those in Kenya who want to obtain Ethereum
Why do we recommend it?
- There are uncountable possibilities for investments
- You can trade leveraged
- User-friendly and simple
- It takes other successful investment strategies so you can copy them
- Admits short-trading
Official homepage: www.etoro.com/ethereum
If you are considering buying Ethereum from Kenya, eToro is certainly the best option.
This broker is well-known for making “social trading” a trend. Social trading is a revolutionary form of investing in which traders can emulate the strategies of other investors who have been making earnings for a long time.
eToro is very useful if you don't have much experience in trading. You can rest assured that you will be making a smart investment since the site duplicates those from subjects with a great deal of expertise. Also, in case you are an investor, the platform pays for your knowledge.
Besides, the interface of the website is so uncomplicated, ideal for users who want to start learning about Ethereum and trading, without ending up overwhelmed with tons of diagrams and numbers.
How does eToro work?
We mentioned previously that eToro is very friendly and intuitive. Anyone can start investing without previous experience or long explanations.
You won't have any problems with the interface if you have used any other social network.
We will explain, roughly, the registration process and the different tabs that you will find.
You will have to provide some personal information (like full name or address, for instance) when registering.
During the sign-up process, you will also have to answer some questions about your previous trade experience.
However, it's not like they're testing you or anything. It is only a way of finding out how much knowledge you have and what type of assets they can recommend. For instance, if you have never invested before, they will not recommend that you invest in futures.
When you finish filling in all the requested information, you will stop seeing the “incomplete profile” message.
Let's get to know the different sections of the site.
“Set Price Alerts” allows you to put alerts on the price of certain assets. It is a very useful tool for when you are after a security which price is decreasing, but it seems to you that it will decrease even more.
The section “News Feed” allows users to interact and learn from each other by sharing their opinion and experiences.
In “Discover” you will find: “Instruments”, “People” and “CopyPortfolios”. As we discussed previously, the different financial assets available on are:
- Cryptocurrencies
- ETFs
- Stocks
- Raw materials
- Forex trading
- Index funds
In the section “People” are all the profiles and historical performances of other investors, and you can replicate their strategies with just one click. This is where the “social trading” term is best applied.
You can search for those investors that you find more interesting: by risk level, types of instruments, average earnings… Just indicate the amount of your investment and eToro will replicate the movements of the selected investor, in proportion. This means that if you have $ 1000 and the investor puts 10% in an asset, eToro will invest also 10% of your funds (that is, $ 100) in that same asset.
Also, here you will see CopyPortfolios classified into: Top Trader, Market, and Partner.
Remember that in some cases, it might be better to copy from CopyPortfolios than to other investors, because you avoid putting all your eggs in one basket. There are all kinds of portfolios that you can recognize easily and are divided by sectors. Therefore, in case you suspect a specific sector, such as gaming or drones, will prosper in the future, you should probably look for that specific portfolio.
Can you rely on eToro?
eToro has been tested by independent organizations once and again to validate its integrity in displaying previous performance statistics. And it has been confirmed every time that eToro is rigorous with the figures.
eToro complies with all the demanding regulations requested by the European Union, legislation in which it is found. Its main offices are in Cyprus, and it is approved by the CySEC or Cyprus Securities Market Commission, which can cover up to € 20,000 of the debts that its clients may have with creditors (those from Kenya included).
It is also supported by the European Financial Instruments Market (MiFID), and in the USA it is under the control of the Financial Conduct Authority (FCA). Besides all these regulations, eToro has more than 20 million users worldwide, and it has been operating for the last fifteen years. In short, we can be confident that our money is in good hands.
Finally, their excellent customer service is also worth mentioning. You can use the ticketing system, an online chat, and they also have a phone number available for assistance.
In case you still don't know what “leverage” is, we'll describe it briefly: it is, simply, the ability to invest a higher amount than you actually have. For example, you can enter with $ 100, but if you use x2 leverage, you will be investing $ 200.
Leverage and the importance of “Take Profit” and “Stop Loss”
Assuming that, for example, you are certain that Ethereum is going up, and that you have $ 1,000 for “going long”, you should know that you can increase your investment and make more money.
You could consider requesting a loan at your bank or other financial company, but it is a process that takes time, and when you receive the money, Ethereum might be already at a much higher price, so you wouldn't be able to invest the way you planned.
Leverage is exactly like a credit, but it is only a few clicks away! You will be able to operate with much higher amounts than what you actually have on the platform's wallet. It is simple, before investing you will see the different options as in the screenshot:
When operating in different markets you can use higher leverage. This is because cryptocurrencies are a value that is invested in the medium-long term, and leverage is used primarily for short-term operations or day trading. But let's deepen a bit more on how all this 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: Ethereum increases by 20% and the value of your investment is now $ 2,400. But you don't want to take too much risk, so it's time to sell back.
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).
With $ 1000 you get a profit of $ 400, no less than a profit of 40%. That's not bad at all, right?
It may sound too good to be true. The trick is that the risk of losing out also increases. If everything goes as planned, you will earn more money in less time; but if the value of the asset goes down, you will also lose more in less time.
Supposing that the price didn't increase by 20%, but it decreased also by 20%, you won't lose $ 20 but double, $ 40. Therefore, when operating with leverage it is essential to take into account 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 Ethereum at $ 100, you can ask eToro to close once it reaches $ 120. That way, you make sure you won't change your mind and decide to wait a bit longer in case it keeps rising, which could be a mistake.
Stop Loss is even more important, especially when operating with leverage, since a small loss could have a significant impact on your wallet. Take into account that eToro will recommend a limit for Stop Loss, but it is better to place it lower than the platform suggests.
About ETFs
Have you heard about Exchange-traded funds? They are similar to index funds and are known for merging the advantages of stocks and mutual funds: they can be traded regularly at market price, but include a much wider diversity of assets and considerably lower fees.
Raw materials
The major advantage of trading with raw materials is that prices are more stable than those of other financial assets. In fact, their stability is what makes people often invest in raw materials, to take refuge from economic adversities or market volatility. Still, the prices of commodities are defined by their demand. Therefore, if a generalized fear of inflation provokes higher demand, the prices will also rise.
Remember that the only intended income from the investment in raw materials will be the hypothetical capital gain after selling them: unlike stocks, these don't pay dividends.
Commodities can be divided into two main categories: 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 goods as sugar, coffee, corn, soy, among many others.
Exchange-Traded Funds
Have you heard about Exchange-traded funds? They are similar to index funds and are known for combining the advantages of stocks and mutual funds, because they can be traded at any moment in the market, but include a much wider diversity of assets and the fees are significantly lower.
About Index Funds
Index funds are suitable for those interested in long-term trading, especially for beginners. If you don't need an amount of money for the next five or ten years, index funds are the safest.
Contrary to what it may seem, it is very hard to beat the market (although you have probably heard of managers who achieve huge returns).
But putting aside some exceptional cases (like Warren Buffett's), all that glitters is not gold: if you hear of someone who has beaten the benchmark, they have probably done so for a short period, or the rates are so high that it ends up being better for you to index (whit minimal commissions). Besides, take into account that if something happened in the past it doesn't mean necessarily that it will happen again in the future.
Index funds provide solutions to both concerns: their commissions are insignificant and in the long term they almost always beat active managers.
Differences between futures and CFDs
In case you want to know, here are the most important differences between Futures and CFDs:
- Who is the counterparty? In the case of Futures, the counterparty is another trader. In CDFs, it’s the brokerage, in this case eToro
- Expiration date Futures have a determined expiration. CFDs don’t have expiration date
- Markets available for trading The market for Futures is narrower. CFDs include a wide range of possibilities.
- Minimum deposit Costs for Futures are higher than costs for CFDs.
- Use of leverage With Futures, you can’t leverage; while with CFDs leverage is always available.
How do Contracts for Difference Function?
If you have entered eToro previously, you probably realized that the acronym CFD appears all the time. Before we come back to it, we must say that CFDs on eToro are only possible if you go short.
For the record, and in case you want to know about day trading cryptocurrency or other advanced operations, next you will also meet concepts like short-selling and leverage.
With CFDs you can operate on eToro even if you are not “in the black” or having a negative balance. For instance, you have the certitude that the Ethereum will go down, so the logical thing is to think “if it is going to depreciate (go down in price), I simply wait and I'll go in when it has gone down”. But if you really think that it's going down, why not making some profits out of it?
You can do this through a practice known as “going short”. Its operation, roughly, consists in the following:
- You ask for a loan of, let's say, 100 units of Ethereum, which cost $ 5,000 at the moment (these figures aren't real)
- You make $ 5,000 by selling the 100 units
- The Ethereum goes from $ 50 to $ 30 (as you presumed, it devaluates)
- You get the 100 units again, but at $ 3,000
- You return the 100 units
- The rest is yours, so, you will have earned $ 2000
It all seems more complicated than it really is. Just keep in mind that by trading in Ethereum on eToro, with CFDs you can make a profit when you anticipate the price will fall.
Investment strategies
You can trade cryptocurrencies in many different ways: for example, you can buy and hold, or you can day trade (and benefit from price volatility).
If you don't have much experience trading, I recommend something in between: placing a dynamic stop-loss (15-20% under the highest price) and wait for it to work.
For example, if you purchase a cryptocurrency at $ 15, then it increases to $ 25 and falls back to $17, the stop-loss will close your position at $ 21 or $ 22. Hence, you will obtain a good profit.
You may be wondering: why not selling when the cost is at its peak? But that would only work for a psychic or a fortune-teller. The mentioned strategy is more down-to-earth and can work out perfectly if it is well applied.
Sooner or later, you will be ready for applying advanced trading strategies, such as going short or using leverage.
How does a virtual portfolio work?
For those who still don't have much experience in investing, a demo account can be useful. You just need to set the virtual mode and you can start trading with fictional funds.
A virtual account can help you to practice and gain experience 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 just with Ethereum).
The first attempt is not usually that good. But you can ask support to replenish the virtual $ 100k to your portfolio, and the second try you should do better.
But keep in mind that you need to be prudent for trading, and demo account trading can have an adverse effect. It is not the same to risk your own money than to trade with virtual funds that you don't mind losing. Also, using fake money can prevent you from learning to control your emotions, something you should be able to do when trading.
Evidently, the virtual mode is kind of pointless if you want to trade 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 trying out short or medium-term investments.