Contents
eToro, a reliable trading platform for those who are in India and want to buy Ethereum
Why do we recommend it?
- It is very user-friendly
- It offers strategies from successful traders so you can replicate them
- You can go short
- eToro allows leverage
- Lets you invest in countless of different goods
Main site: www.etoro.com/ethereum
In case you are considering obtaining Ethereum from India, eToro may be the best way to do it.
This broker is popular for making “social trading” a trend. Social trading is an ingenious form of investing in which traders can repeat the strategies of other investors who have been making earnings over time.
eToro is very useful if you don't have much experience in trading, because it automatizes your investment by repeating strategies from experienced traders with a very long profit history. Oppositely, if you are an expert in the field and decide to share your knowledge with the community, eToro rewards you with money.
Another thing to mention is how manageable the interface is, which turns out perfect for new users that are just learning all about the trading world.
About ETFs
What do you know about Exchange-traded funds or ETFs? They are similar to index funds and are known for merging the benefits of stocks and mutual funds: they can be traded regularly at market price, but offer much more variety and considerably lower rates.
Currency market
What is known as Forex trading consists in the trading of currencies. It is the conversion between 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 purchase euros at their price in dollars, with the expectation that the euro will raise its price compared to the dollar. Therefore, if you purchased each euro at 1.15 USD and you sell them back when their price is 1.20 USD, that margin will be yours.
You may be thinking by now that trading with currencies requires investing considerable amounts, and that is correct, because fluctuation in prices is never that dramatic, and often you will need to use a lot of leverage (which sometimes can be too much of a risk). Our advice for those who are new in the world of trading is not to start with Forex, but with a safer and more secure market.
You can exchange with almost every currency on eToro. Nevertheless, bear in mind that in Forex trading sales are made through CFDs, thus the underlying asset won't be yours.
Equities
The most common financial assets are stocks: these are the parts of publicly traded corporations. It is possible to own a proportion of a company and have returns, but first, you should know where and how to invest your money.
There are, essentially two types of stocks: those that pay dividends and those that do not. Those that pay, at the end of the fiscal year, distribute their profits among their shareholders; the latter, on the contrary, do not. But this is not to say that the latter have less to offer. If a company does not pay out dividends but has a lot of potential, it is also worth investing in it, since selling the shares in the future could pay much more.
When trading on eToro, if you invest in shares that give dividends, you will receive them in your account, and you can collect them in cash or reinvest them. We suggest, if you don't need the money right away, that you don't renounce the magic of compound interest and reinvest it in the company itself.
Take into account that when investing in shares on eToro you can use leverage to “dope” your trades, but in that case, you will not receive returns as the trade would be a contract for difference. For that reason, for long-term investments, it is not advisable to use leverage: not only because you lose dividends, but you will also have to pay commissions while the operation is open, and these can end up with your gains.
About ETFs
ETFs or Exchange-Traded Funds are similar to index funds. They can be described as a merge between stocks and mutual funds, including the best features of both. They are traded in the market like stocks, during the day. But their main benefit is that they are more diversified compared to stocks, and their fees are much lower than those of an actively managed fund.
Raw materials
The major benefit of investing in commodities is that prices are more stable than those of other assets. Actually, their stability is what makes most investors trade with raw materials when facing financial insecurities or market volatility. Despite that, the cost of raw materials is determined by supply and demand, so if faced with the fear of inflation, demand rises a lot, so will the price.
Take into account that raw materials don't pay dividends. So, by investing in them you will only have a further income by selling them back.
There are two main types of commodities: hard raw materials and soft raw materials. The former are precious metals (such as gold, silver, copper, and platinum), industrial metals, and oil; and the latter are agricultural products as wheat, soybeans, vegetables, or even dairy.
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. For example, if you start with $ 100 and you use x2 leverage, you will be investing $ 200.
Leverage, Take Profit and Stop Loss
Let's say now that you know that Ethereum is going to appreciate, thus you choose to “go long”.
You are certain that Ethereum will go up, but you only have $ 1,000 to invest. Despite that, why miss the opportunity to make more money?
You could consider asking for a credit at your bank or other financial company, but it is a process that takes time, and by the moment 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.
Thanks to leverage, you can obtain that amount with two clicks. It's like borrowing money, 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. Before trading, you will be able to choose between the different options as in the screenshot below:
When trading in different markets you can use higher leverage. The reason: leverage is most common in short-term operations, and cryptocurrencies tend to be a medium or long-term investment. But let's see how leverage works:
- If you want to invest $ 1,000 and you use leverage x2, you will be starting with $ 2,000 ($ 1,000 was “borrowed” from eToro).
- Then, turns out that Ethereum does rises, as you assumed, and now the price of your investment is $ 2,400 (20% higher), so you decide to sell back because you want to play it safe.
- Once the $ 1k from leverage is deducted, you will have $ 1,400 left; which means the net profit is $ 400, since the other $1,000 was yours from the beginning.
In conclusion, by investing $ 1000 you can make a profit of 40% (in the case you earn $ 400). That is pretty decent.
But watch out: if all goes as you planned and the asset increases, you will make profits. However, if the asset decreases, you will also lose more money than you invested.
Supposing 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 operating with leverage it is crucial 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 purchased Ethereum at $ 100, you can ask eToro to close your operation when it reaches $ 120. That way, you make sure you won't be blinded by greed and decide to keep waiting in case it keeps rising, which could be a mistake since the price could go down again really fast.
Stop Loss is even more important, especially if you trade with leverage, since a small loss with leverage can be tragic for your wallet. You always need to establish a Stop Loss lower than that suggested by the broker.
Is eToro reliable for purchasing Ethereum?
eToro is very meticulous with the information about past performances from traders, and its reliability has been independently tested several times.
eToro follows all the strict policies requested by the European Union, legislation in which it is found. Its main headquarters is in Cyprus, where it is certified by the CySEC or Cyprus Securities Market Commission, which protects up to € 20,000 of the debts from its clients (those from India included).
eToro is backed by the European Financial Instruments Market (MiFID) in Europe, and by the Financial Conduct Authority (FCA) in the U.S. Apart from the above, it has a trajectory of fifteen years, with more than 20 million users around the globe. So, you can be sure that your money is safe.
Finally, their customer service functions perfectly. You can contact them by phone or use their live chat.
How to deposit funds on eToro
When it comes to depositing money on eToro, there isn't really much to say, since it is really straightforward. Just click “Deposit funds”, put an amount, and choose your payment method. You can use PayPal, bank transfer, credit card (Visa, MasterCard, Diners, Visa Electron and Maestro), Skrill, or Neteller.
Consider that for security policies, you need to be the holder of the account or the credit card.
The lowest amount is $ 200, and there is a maximum authorized if you are not verified, so if you want to trade with larger sums, contact Support previously to verify your account.
The platform accepts deposits or transfers in any currency, but you will have to pay a fee for the conversion to USD. That is why we recommend, if possible, depositing in USD directly.
How are CFDs and futures different?
How are Futures and CFDs different?
- Counterparty
- Futures: operations are made with someone else, another trader.
- CFDs: the counterparty is the brokerage, in this case, eToro.
- Expiry:
- Futures: they expire. As soon as that date arrives, the contract is ended even if you are in losses.
- CFDs: on the contrary, there is no expiration date. It is possible to wait until you rise up and then exit.
- Options for trading:
- Futures: there are limited options for investment
- CFDs: you have plenty of options, there are CFDs of practically anything
- Minimum investment amount or “trade size”:
- Futures: very high minimum investment
- CFDs: you can start with a lower minimum trade size
- Cost of trading and charges:
- Futures: as you have to pay more in the first place, costs are lower
- CFDs: higher (although they are not excessively high either)
- Leverage:
- Futures: you can't leverage
- CFDs: it is always possible to leverage
How do Contracts for Difference Function?
You probably have seen the initials CFD all the time if you already registered on eToro. We will come back to it, but first, you should know that CFDs on eToro are only possible when you short sell or leverage higher than x2 (nevertheless, this is not even available on the platform).
We will also explain concepts such as leverage and “going short”, in case you are considering day trading cryptocurrency or other more advanced operations.
eToro allows you not only to bet “in the black”, but with CFDs you can also bet “in red”. For instance, you have the conviction that the Ethereum will go down, so the logical thing is to think “if it is going to depreciate, I'll simply wait until it does and then I'll bet”. But if you are convinced that it is going down, why not take advantage of that and earn money?
You can do this through a practice known as “going short”. Its operation, roughly, consists in the following:
- They lend you, for example, 100 units of Ethereum, with a total value of $ 5,000 (these are completely fictional figures)
- You make $ 5,000 by selling the 100 units
- The Ethereum devaluates from $ 50 to $ 30
- You obtain the 100 units again, but at $ 3,000
- You return the 100 units
- You keep the $ 2000 difference!
Keep in mind that it seems much more complicated than how eToro CFDs actually work: we can summarize this whole operation by saying that by trading in Ethereum you can also make money if you anticipate it will go down.
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. It isn't necessary to read a lot or have previous knowledge to start investing.
If you have used any of the most popular social networks today, you can perfectly use eToro's interface.
We will explain the registration steps and the different sections that you will find.
When you open your account, you will have to fill in your personal data, like first name, last name, address….
Additionally, you will see that they ask you some questions about your experience as an investor.
But don't worry: it is not an exam. It is only a way of finding out how much knowledge you have and what type of financial instruments they can suggest. For instance, if it is your first experience in the investment world, they will not recommend that you invest in futures.
Let's see what the different sections of the page are.
In the “Set Price Alerts” tab you can set alarms on the price of certain assets. You just have to click on the three points at the end of the line and you will be able to program a price alarm. It is a very useful tool for when you are after an asset which price is decreasing, but it seems to you that it will decrease even more.
In the “News Feed” tab is the most social part of eToro: where users are interacting all day and sharing opinions, tips, and other valuable information.
“Instruments”, “People” and “CopyPortfolios” are within “Discover”. And we already mentioned the different financial instruments that are available on eToro:
- Cryptocurrencies
- ETFs
- Stocks
- Commodities
- Currencies
- Index funds
The term “social trading” comes to life in the section “People”: there, you can copy the trading strategies of the investors you find most inspiring.
Using the search bar, you can find the investors that you find more interesting: by average profits, types of instruments or risk level, for instance. You just have to type the amount of your investment and eToro itself will be in charge of replicating the movements made by 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, the platform will invest also 10% of your money (that is, $ 100) in that same asset.
Also, here you will see CopyPortfolios classified into three categories, Top Trader, Market, and Partner.
Sometimes it might be preferable to copy from CopyPortfolios than to particular users, because you avoid putting all your eggs in one basket, or in other words, risk is more diversified. There are all kinds of portfolios that you can find easily and are classified by sectors. So, in case you think a specific industry, like biotechnology or pharmacy, will prosper in the future, you should look for that specific portfolio.
Trading strategies
When trading cryptocurrencies, there are different possible methods or strategies, such as buying and holding or day trading (and using market fluctuation to your advantage), for naming just a few.
In case you don't have much experience trading, my recommendation is a middle point: placing a dynamic stop-loss (15-20% under the highest price) and wait for it to work.
For instance, if you purchase a cryptocurrency when its price is $ 15, then it rises up to $ 25 and decreases again to $17, the stop-loss will close your position at $ 21 or $ 22. Therefore, you will get a pretty good income.
Perhaps you are 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 completely realistic and can work out perfectly.
Later on, you will be able to apply more sophisticated techniques, such as going short to profit from bear markets or using leverage.