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eToro, recommended broking platform for those in Kenya who want to obtain Litecoin
Why do we recommend it?
- It uses other successful investment strategies so you can emulate them
- Allows you to short sell
- User-friendly and straightforward
- eToro offers leverage
- There are uncountable goods you can invest in
Homepage: www.etoro.com/litecoin
You should absolutely consider eToro in case you are thinking about acquiring Litecoin from Kenya.
“Social trading”, a relatively new investment method that consists in replicating techniques and moves from other experienced investors, has become trendy thanks to eToro.
eToro is very helpful if you are still a novice user in trading. You can rest assured that you are making a smart investment since the site duplicates those from subjects with a great deal of expertise. Additionally, in case you are an investor, the platform pays for your knowledge.
Another thing to mention is how intuitive the interface is, which turns out perfect for new users that are just learning all about the trading world.
About Contracts for Difference
If you have entered eToro before, you probably realized that the initials CFD appear frequently. We will explain its meaning now, but you should know first that CFDs on eToro are only possible if you are short-selling.
If you want to know about day trading cryptocurrency or other advanced practices, we will also refer to concepts like leverage and “going short”.
With CFDs you can bet on the platform even if you are “in red” or don't have a positive balance. Let's say that you have the certitude that the Litecoin will fall, so you obviously think “if it is going to depreciate or go down in price, I simply wait and I'll go in when it has gone down”. However, if it really falls, it might mean extra money for you.
You can do that by “going short”. More or less, it works like this:
- You obtain from a loan 100 units of Litecoin, with a total value of $ 5,000 (these are completely fictional numbers)
- You make $ 5,000 by selling the 100 units
- As you supposed, the price falls, and the unit of Litecoin goes from $ 50 to $ 30
- You purchase the 100 units again, but their current value is now $ 3,000
- Now you give back the 100 units to whom made the loan
- The difference is yours, so, you will have earned $ 2000
It is really simple. Just remember that by trading in Litecoin on eToro, with CFDs you can earn money if you anticipate downs in the price.
Differences between futures and CFDs
Here are the main differences between CFDs and Futures, in case you want to know more:
- Counterparty
- Futures: the counterparty is someone else, another trader.
- CFDs: the counterparty is the brokerage, in this case, eToro. In other words: you don't “play” against or with another trader but the bank.
- Date of expiry:
- Futures: there is a date of expiry. Once the contract expires, it is closed and can't be reopened.
- CFDs: on the contrary, there is no expiration date. Thus, you can wait for your position to rise before closing.
- Options for trading:
- Futures: there are fewer options for investment
- CFDs: they include lots of different assets, commodities and currencies
- Minimum deposit:
- Futures: very high minimum investment
- CFDs: very low
- Trading costs and charges:
- Futures: costs are usually lower
- CFDs: higher (although not too much)
- Use of leverage:
- Futures: it isn't possible to leverage
- CFDs: existing and attainable
In case you still don't know what “leverage” is, we'll describe it briefly. When trading, it's the capacity of increasing 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 pretend that you are sure that Litecoin will raise its price, and you consider “going long, but you only have $ 1,000 available. However, it is possible to put more and earn higher profits.
Possibly, you could ask your bank for a loan, wait for it to be accepted, wait for the money, and then acquire Litecoin… Nevertheless, when you finish doing all that, probably Litecoin would be already much higher, and investing wouldn't be a good idea at that moment.
Leverage is just like a loan, but it is only a few clicks away! eToro allows you to invest (and earn) much higher amounts than what you actually have on the platform. Before trading, you will be able to choose between the different options as in the screenshot below:
Within other markets, the leverage you can use is higher. The reason: cryptocurrencies are usually medium-long term investments, and leverage is used mostly for short-term operations or day trading. Let's talk a bit more about 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, Litecoin does increases, as you assumed, and now the cost of your investment is $ 2,400 (20% higher), so you decide to sell back because you want to play it safe.
- The $ 1k of leverage will be deducted, and you will have $ 1,400 left; which means the net profit is $ 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 quite good.
But watch out: if all goes as you intended and the price goes up, you will make money. However, if the price goes down, you will also lose more money than you invested.
For example: if instead of increasing by 20%, the price falls by 10%, you won't lose $ 10, but twice that figure, which means $ 20, because of the leverage. That is why to operate with leverage it is fundamental to take into account Take Profit and Stop Loss.
Take Profit is a limit you can set when trading: you set the platform to sell your assets once they get to a point above the entry price. For instance, you can buy Litecoin at $ 100 and request that your position is closed automatically when it reaches $ 120. It is very useful to avoid being blinded by enthusiasm: a 20% profit is usually very good, but once you see the price has risen, you might think you can earn even more, which is not always the case. Consequently, you might lose money if you don't close on time. So, Take Profit helps you reduce risks when trading.
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.
Can you rely on eToro?
Many tests from independent consultants have been applied to eToro to prove its fidelity in displaying previous performance statistics. And it has been confirmed every time that eToro is meticulous with the information.
The main headquarters of eToro is located in Cyprus, and therefore the broker is approved by the Cyprus Securities Market Commission (known as CySEC), which can cover up to € 20,000 from its client's debts. On the other hand, eToro meets all the strict policies of the European Union.
It is also supported by the European Financial Instruments Market (MiFID), and in the USA it responds to the Financial Conduct Authority (FCA). Besides all these regulations, it should be mentioned that eToro has more than 20 million users around the world, and it has been operating for fifteen years. To sum up, we can be confident that our money is in safe hands.
It is also important to mention the great customer service. You can use the ticketing system, an online chat, and they also have a phone number available for assistance.
Virtual portfolio: How does it work?
If you are taking your first steps as an investor, you can start by practicing with a “demo” option. You just have to set the “virtual” option” in the upper left corner and your operations will be carried out with an imaginary balance.
This can be a great way of practicing 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 trade with all the different assets available on eToro, not only with Litecoin.
The first attempt is not usually that good. But you can ask eToro to deposit back the virtual funds to your portfolio.
Take into account that you should always be prudent when investing, and perhaps a demo account can make you a bit impulsive. It is not the same to operate with your own money than with virtual funds, which you can lose without a problem.
As you may suppose, the virtual mode is kind of pointless if you intend to trade in the medium or long-term (which almost assures you a profit only by replicating an index), since you would be wasting years to see the results. Demo accounts may be useful for trying out before investing in the short or medium-term.
How to use eToro
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.
You won't have any issues with the interface if you have used any other social network, like Pinterest or Twitter.
We will explain the registration process and the different tabs that you will see.
First of all, you will have to fill in all the information that eToro asks for: first and last name, address…
They will also ask you about your previous experience as an investor.
But don't worry: it's not about passing an exam. It is only a way of finding out how much knowledge you have and what type of assets they can suggest. For instance, if you have never invested before, they will not recommend that you invest in futures.
When you finish with all the requested information, the annoying “incomplete profile” bar will disappear.
Let's see what the different sections of the platform are.
“Set Price Alerts” allows you to put alarms on the price of certain securities. You only need 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 want to buy an asset which price is decreasing, but it seems to you that it has not finished falling yet.
“News Feed” is for social purposes. This is the section where users can share opinions and information.
“Discover” includes the tabs “Instruments”, “People” and “CopyPortfolios”. As we discussed in this guide, the six types of instruments on eToro are:
- Cryptocurrencies
- ETFs
- Shares
- Commodities
- Forex trading
- Index funds
In the tab “People”, you can find eToro users and their performances. This is where you can duplicate the movements of your preferred traders.
You will be able to search and find users according to your interests. You can apply filters like risk level, average profits, or financial market. When you select an investor and indicate how much you want to invest, eToro will automatically replicate their movements, in proportion. For example, if you invest $ 1000 and the trader puts 20% of their funds in an asset, eToro 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”.
Remember that in some cases, you might prefer copying to CopyPortfolios than to individuals, because you avoid putting all your eggs in one basket, or in other words, risk is 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 sector will prosper in the future? Then look, because surely there is a CopyPortfolio about it.