Contents
eToro, our favorite option for purchasing Stellar in Bangladesh
Why do we recommend it?
- It is uncomplicated and user-friendly
- You are able to imitate investment moves
- Allows short-selling
- You can leverage
- It is possible to invest in plenty of different goods
Official main site: www.etoro.com/stellar
You should certainly consider eToro if you are interested in purchasing Stellar from Bangladesh.
“Social trading”, a relatively new investment method that consists in replicating techniques and moves from other experienced investors, has become trendy thanks to eToro.
If you are still a newbie or do not have much investment experience, eToro is very useful, because it puts your investment on autopilot by repeating strategies from traders with a long profit history. And for those skilled investors willing to share their techniques with the community, eToro rewards your knowledge with money.
It is also very convenient how accessible is the platform, perfect for new traders who are taking their first steps in the investment world.
About Contracts for Difference
If you already registered on eToro, you probably realized that the initials CFD appear all the time. We will come back to it, but first, you should know that cryptocurrency operations on eToro are only CFDs if you go short.
If you want to try at some point day trading cryptocurrency and other more advanced practices, later on you will also find information about terms such as going short and leverage.
With CFDs you can bet on the platform even if you are not “in the black” or having a negative balance. For example: you are sure that the Stellar will fall, so perhaps it is obvious to think “if it is going to depreciate (go down in price), I'll simply wait until it does”. But if it actually falls, you can earn some money out of that.
You can do this through a practice known as “going short”. Its operation, roughly, consists in the following:
- You get from a loan 100 units of Stellar, with a total price of $ 5,000 (these numbers are entirely made up)
- You make $ 5,000 by selling the 100 units
- The Stellar goes from $ 50 to $ 30 (as you predicted, the price decreases)
- You purchase the 100 units again, but at $ 3,000
- You return the 100 units to the loaner
- You will have made $ 2000, since you keep the difference
It is really simple. Just keep in mind that by trading in Stellar on eToro, with CFDs you can earn money when you anticipate downs.
What's the difference between CFDs and futures?
If you want to know, next you have some major differences between CFDs and Futures:
- Counterparties
- Futures: operations are made with someone else, another investor.
- CFDs: the counterparty is the brokerage, in this case, eToro. In other words: you don't “play” with someone else but with the bank.
- Expiration:
- Futures: they have an expiry date. When that moment arrives, your position is closed even if you are in losses.
- CFDs: on the contrary, they do not have an expiry date. It is possible to wait until you are in a good shape to close.
- Variety:
- Futures: there are fewer options for investment
- CFDs: a lot of variety, there are CFDs of practically anything
- Minimum investment:
- Futures: you need to start with a higher amount
- CFDs: you can get in with a lower trade size
- Cost of trading and fees:
- Futures: being higher figures, rates are, commonly, proportionally lower
- CFDs: higher (although not too much)
- Use of leverage:
- Futures: it isn't possible to trade with leverage
- CFDs: it is always possible to leverage
Have you heard about “leverage”? We'll put it simply:
the good thing about trading is that it lets you invest even more than what you really have. For instance, if you enter with $ 100 and you use x2 leverage, you will be really investing $ 200.
Leverage and the importance of “Take Profit” and “Stop Loss”
Suppose now that you are sure that Stellar is going to appreciate, thus you choose to “go long”.
You are absolutely sure that Stellar will go up, and you just have $ 1,000 at that moment, but the fact is, you have the chance of investing more.
You could consider asking for a credit at your bank, but it is a process that takes time, and when you receive the money, Stellar might be already so expensive (if your guess was right) that investing wouldn't be convenient anymore.
With leverage, you can obtain that amount of money really easily. It's like borrowing money, but much easier and quicker, and with the benefit that you will be getting it directly from eToro. Before trading, you will be able to choose between the different options as in the screenshot below:
Within other markets, you can use more leverage. This is 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 deepen a bit more on how all this works.
If you have the $ 1,000 and choose leverage x2, you will be investing $ 2,000. eToro would be “loaning” you the extra $ 1,000.
A few days later, as you thought, Stellar raises its price by 20% and your money has appreciated reaching $ 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 $ 400, in other words, 40% more. That's not bad at all.
But not everything is wonderful. If all goes as you intended and the asset increases, you will make profits. However, if the price goes down, you will also lose more money in the blink of an eye.
Let's suppose that the asset didn't increase by 20%, but it went down also by 20%, you won't lose $ 20 but $ 40, because of the leverage. For that reason, the concepts of Take Profit and Stop Loss are crucial when using leverage.
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 purchased Stellar 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 keep waiting in case it keeps going up, which could make you lose it all.
Stop Loss is even more necessary, particularly when operating with leverage, since a small loss could have a significant impact. Consider that eToro will recommend a limit for Stop Loss, but you should place it lower than the platform suggests.
ETFs
Have you heard about Exchange-traded funds or ETFs? They are passively managed funds, known for merging the benefits of stocks and mutual funds: they can be exchanged regularly at market price, but have much more investment possibilities and the rates are significantly lower.
Equities
Stocks or shares are the most common securities. Some enterprises divide their capital into portions and have several shareholders. By investing money in them, you can own a fraction of a company and obtain returns.
We can classify stocks into two main types: those of companies that distribute their earnings among the shareholders and those that don't pay regularly. But that doesn't mean that the latter have less to offer. If a company does not pay every year but has a lot of potential, you should not discard that option, since the capital gain you will get from the sale of the shares can be much greater than what you would earn through dividends.
If you invest in shares that payout, you will receive the funds into your eToro account, and you can withdraw them or invest back. However, you can benefit a lot from compound interest, so we would suggest reinvesting if you don't need the money immediately.
If you invest in stocks on eToro, you will be able to use leverage. However, it is not advisable, since it would be a CFD and you would not get dividends. Besides, equities are usually long-term investments, and you have to pay fees.
Commodity market
The main benefit of trading with raw materials is that prices are more stable than those of other financial assets. Actually, their stability is what makes most people choose raw materials when facing market volatility or inflation. Even so, the cost of raw materials depends on supply and demand, so if faced with the fear of inflation, demand rises a lot, so will the price.
Consider that, unlike stocks, commodities don't pay dividends. Thus, by trading with these you will only have a further profit by selling them back.
Commodities can be classified into two main types: hard raw materials and soft raw materials. The former are precious metals (such as gold, silver, copper, and platinum), industrial metals (like iron, nickel, or aluminum), and oil; while the latter are agricultural products as sugar, coffee, corn, soy.
Investment strategies
There are different methods or ways for crypto trading, like day trading or buying and holding, for naming just a couple.
My recommendation for those who are beginning to invest is something in the middle: when you open your position, place a dynamic stop loss 15-20% below the top price, and forget about the operation.
This means that if, for instance, you purchase a cryptocurrency at $ 10, it goes up to $ 20 and then decreases to $ 12, your operation will be closed at $ 16-17 and you will have earned a decent profit.
You may be wondering: why not selling when the cost is at its highest? But that would only work for a psychic or a fortune-teller. The mentioned method is more down-to-earth and can work out perfectly if it is well applied.
Later on, you will be able to apply more sophisticated techniques, like going short or using leverage.
Virtual account: How does it work?
For those who still don't have much experience in investing, using a demo account can be very helpful. Just make sure the virtual mode is set in the upper left corner of the page and you can start trading with “fake” funds.
This can be a great way of gaining experience and confidence before trading with real money. You will have an amount of $ 100.000 (“fake” or virtual, of course) to begin with, and you will be able to operate with all the different instruments available on eToro, not only with Stellar.
The first attempt is not usually that good. But you can ask support to replenish the virtual $ 100k to your portfolio.
But remember that trading is mostly about being cautious, and using a practice account can have the opposite effect. It is not the same to risk your real savings than to operate with a fake balance which loss does not suppose any drama. Besides, investing virtual money can prevent you from learning to control your emotions, something you should be able to do when trading.
Evidently, the demo mode is kind of pointless if you intend 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 helpful for trying out short or medium-term investments.
How does eToro work?
As we have mentioned previously, one of the best features of eToro is its extraordinary simplicity: anyone can use it without having to read endless explanatory texts.
You won't have any problems with the interface if you have used any other social network, like Linkedin or Instagram.
Let's talk about the registration process and the different sections of eToro.
You will have to fill in some requested data when registering.
To complete your profile, you will see that they ask you some questions about your experience as an investor.
However, it's not like they're testing you or anything. They only intend to know how much knowledge you have and what type of assets they can recommend. For example, if it is your first experience in the investment world, they will not recommend that you invest in futures.
Let's review the different tabs of the platform.
“Set Price Alerts” allows you to set alerts on the price of certain assets. This is very helpful when you are after a security which price is decreasing, but perhaps you think 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.
“Discover” includes the tabs “Instruments”, “People” and “CopyPortfolios”. And we discussed previously in this guide the kinds of assets that are available on eToro:
- Cryptocurrencies
- ETFs
- Stocks
- Raw materials
- Forex trading
- Index funds
In the tab “People” are all the profiles and historical performances of other users, and you can replicate their strategies with just one click. This is where the “social trading” term is best applied.
Using the search bar, you can find the investors that you find more interesting: by average profits, market or risk level, for example. Just indicate the amount of your investment and eToro will replicate the movements made by the selected investor, in proportion. This means that if you have $ 1000 and the trader puts 10% in an asset, eToro will invest also 10% of your money (that is, $ 100) in that same asset.
Also, here you will see CopyPortfolios classified into: Top Trader, Market, and Partner.
The benefit of copying to CopyPortfolios instead of individual investors is that this way the risk will be more diversified. The portfolios are identified so you can recognize them easily: one about gaming, another about large drone companies, another about pharmacy … Do you suspect that a certain industry will prosper in the future? Then you will surely find a CopyPortfolio about it.