Contents
Why we reccomend eToro for trading with Stellar in Australia?
Why do we recommend it?
- There are tons of possibilities for investments
- You can leverage
- Very user-friendly and simple
- You are able to replicate investment strategies
- Allows short-trading
Official site in English: www.etoro.com/stellar
You should consider eToro if you are interested in purchasing Stellar from Australia.
This broker is well-known for making “social trading” fashionable. Social trading is an ingenious form of investing in which traders can repeat the moves of other investors who have been generating income for years.
eToro has solutions for you, even if you don't have much experience in trading, since it puts your investment on autopilot by imitating moves from experienced traders with a very long profit history. Oppositely, if you are an investor and want to share your methods with the community, eToro rewards you with money.
Besides, the platform is so uncomplicated, great for a user who wants to begin in the Stellar world, without ending up overwhelmed with tons of diagrams and numbers.
How does eToro work?
We said before that eToro is very easy to manage. Anyone can start using it without previous experience or long explanations.
You won't have any issues with the interface if you have used any of the most common social networks.
We will explain the registration steps and the different tabs that you will find on eToro.
First of all, you will have to enter all the information that eToro asks for: first and last name, address…
To complete your profile, you will see that they ask you some questions about your experience at investing.
But don't feel intimidated. The objective is to know more about you and determine which financial instruments they should recommend according to your knowledge and experience.
As soon as you are registered and have completed your profile, the annoying “incomplete profile” bar will disappear.
Let's see what the different sections of the platform are.
With the “Set Price Alerts” tool, you'll be able to program an alarm when a security is at a certain price. This is ideal if you want to buy a security that is falling but you believe 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”. As we mentioned previously, the six types of instruments on eToro are:
- Cryptocurrencies
- Exchange-Traded Funds
- Shares
- Raw materials
- Forex trading
- Index funds
The concept “social trading” comes to life in the section “People”: that is where you can duplicate the trading strategies of the best investors with just one click.
You will be able to search for those traders that you find more interesting. When you select an investor and indicate the amount you want to invest, eToro will automatically replicate their movements, proportionally. If you have $ 1000 and the user puts 20% of their funds in an asset, the platform will also invest 20% of your money in the same company or instrument, in this case, $ 200.
Finally, you will also find the CopyPortfolios divided into three main kinds: “Top Trader”, “Market” and “Partner”.
The advantage of using CopyPortfolios instead of copying specific investors is that this way you will diversify the risk. The portfolios are identified so you can recognize them easily: one about gaming, another about large drone companies, another about pharmacy … You think that a certain sector is going to succeed in the future? Then look, because surely there is a CopyPortfolio about it.
Have you heard about “leverage”? We'll put it simply:
the good thing about trading is that it lets you invest even more than you can have in a given time. For instance, if you get in with $ 100 and you use x2 leverage, you will be really investing $ 200.
Leverage and the importance of “Take Profit” and “Stop Loss”
Let's say now that you are sure that Stellar is going to appreciate, and you are thinking about “going long”.
You are completely sure that Stellar will rise, but you only have $ 1,000 to invest. Despite that, why miss the opportunity to make more money?
Possibly, you could ask a financial company for a credit, put an asset as collateral, wait for it to be accepted and receiving the money, and then obtain Stellar… Nevertheless, when you finish doing all that, probably Stellar would be already much higher, and it wouldn't be a good idea to invest.
Leverage is like a credit, and you will only have to click a few times! eToro allows you to operate with much more than what you have on the platform. Before trading, you will be able to choose between the different options as in the image:
When operating with other kinds of assets you can use higher leverage. Why? Because leverage is most used for short-term operations or day trading, and cryptocurrencies tend to be a medium or long-term investment. That said, I'm going to explain better how leverage works:
- If you decide to invest $ 1,000 and you use leverage x2, you will be starting with $ 2,000 ($ 1,000 was borrowed from eToro).
- A few days later, Stellar does rises, as you assumed, and now the price of your investment is $ 2,400 (20% higher), so you decide to sell back.
- Once the $ 1k from leverage is deducted, you will have $ 1,400 left; which means you've earned $ 400, since the other $1,000 was yours initially.
In conclusion, by investing $ 1000 and obtaining $ 400, your net profit would be 40%. That is pretty decent.
But there's always a drawback. If everything goes ok and the asset increases, you will make profits. However, if the asset decreases, you will also lose more money really fast.
Let's say that the price didn't increase by 20%, but it went down also by 20%, you won't lose $ 20 but double, $ 40. That is why the terms “Take Profit” and “Stop Loss” are fundamental when operating with leverage.
Take Profit is a trading limit you can set for your assets: you program your operation and ask the platform to sell them once they get to a point above the entry price. For instance, you can buy Stellar at $ 100 and ask eToro to close your position automatically when it goes up to $ 120. It is very helpful to avoid being blinded by greed: a 20% profit is usually very good, but once you see it goes up, you might think you can make higher profits, which is not always the case. As a result, you might lose money if you don't close on time. So, Take Profit helps you to trade more safely.
On the other hand, when using leverage you should always use Stop Loss, because a small fall in the price of an asset can have a big impact on your wallet. Always remember to establish a Stop Loss lower than that suggested by the platform.
Futures Vs CFD
How are CFDs and Futures different?
- Which are the counterparties? In the case of Futures, the counterparty is another trader. In CDFs, it’s the broker (eToro)
- Date of expiry Futures have a determined expirationdate, while CFDs don’t expire
- Markets available for trading Futures include fewer options to trade. CFDs include a wide range of possibilities.
- Minimum investment amount or “trade size” Costs for Futures are higher than costs for CFDs.
- Leverage With Futures, you can’t leverage; while with CFDs it is always possible.
About Contracts for Difference
You probably have seen the acronym CFD repeatedly if you entered eToro before. Before we explain this further, you should know that cryptocurrency operations on eToro are only CFDs if you are short-selling.
We will also explain concepts such as short-selling and leverage, in case you are thinking about day trading cryptocurrency or other more advanced operations.
eToro allows you to bet both “in the black” and “in red”. Let's say that you believe that the Stellar will go down, so you clearly think “if it is going to depreciate, I'll just wait and go when it has gone down”. But if it really goes down, it is possible to make some profits out of that.
You can do that by “going short”. Basically, this is how it works:
- Someone lends you, for example, 100 units of Stellar, with a total price of $ 5,000 (these numbers are fictional)
- Then, you earn $ 5,000 by selling them at the market price
- The Stellar goes from $ 50 to $ 30 (as you predicted, it devaluates)
- Again, you buy the 100 units, but now their value is $ 3,000
- You give back the 100 units
- You will have made $ 2000, since you keep the difference
Take into account that it seems much more tricky than how eToro CFDs actually work: we can just say that by trading in Stellar you can also make money if you anticipate it will fall.
Investment strategies
There are different methods or ways for crypto trading, like day trading or buying and holding, for naming just a few.
If you are just starting in the world of investment, my recommendation is something in between: placing a dynamic stop-loss (15-20% under the highest price) when you open your operation and wait for it to work.
For example, if you buy a cryptocurrency when it is worth $ 15, it rises up to $ 25 and falls again to $17, the stop-loss will allow your operation to be closed, perhaps at $ 21 or $ 22. Therefore, you will get a pretty good income.
Perhaps you are wondering: why not selling back when the cost is at its maximum? 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.
At some point, you will be ready for more advanced investment techniques, like going short or using leverage.
How does a demo account work?
Are you beginning as an investor? Using a demo account can be useful. You just need to set the virtual mode and you can start operating with “fake” funds.
This is a great tool for those who want to put their talents to the test before playing for real money. When you create your account, you will start with $ 100,000 of virtual funds to do all the operations that you can think of: not just with Stellar, you can also create a diverse portfolio with a variety of assets.
The first attempt is not usually that good. But don't worry, because you can ask support to replenish the virtual $ 100k to your account, and the second time you should do better.
Keep in mind that trading is mainly about being cold-minded, and using a demo account might have the opposite effect. It will never be the same as risking your own money.
Evidently, if you are interested in trading in the long or medium-term, there is no point in using the virtual mode and having to wait for years. But it can be ideal if you want to practice short and medium-term investment.