Contents
eToro, our reccomended broker for acquiring Stellar in Nigeria
Why do we recommend it?
- There are tons of investment options
- eToro offers leverage
- It is uncomplicated and accessible
- It uses techniques and moves from successful investors so you can copy them
- Allows you to go short
Main site: www.etoro.com/stellar
You should definitely consider eToro if you are thinking about acquiring Stellar from Nigeria.
This broker is popular for making “social trading” fashionable, a revolutionary form of investing in which traders can repeat the strategies of other investors who have been generating income over time.
eToro is very helpful if you don't have much experience in trading, since it automatizes your investment by imitating moves from those who have been doing it for years and making profits. Additionally, in case you do have experience in investment, the platform pays you for sharing it.
Besides, the platform is so uncomplicated, great for users who want to begin in the Stellar world, without stressing over lots of graphs and figures.
Is eToro safe for purchasing Stellar?
Many tests from independent consultants have been applied to the platform to validate its reliability in the handling of data from previous users. Every time, it has been confirmed that eToro is rigorous with the information.
eToro follows all the strict policies required by the European Union. Specifically, its main offices are in Cyprus, and it is validated by the CySEC or Cyprus Securities Market Commission, which protects up to € 20,000 of the debts from its clients, including those from Nigeria.
It is also supported by the European Financial Instruments Market or MiFID, and in the USA it is under the control of the Financial Conduct Authority (FCA). In addition to all these regulations, you should know that eToro has been active for fifteen years and that it has more than 20 million users, so we can be sure that our funds are in good hands.
Their customer service functions perfectly. You can use the online chat, and they also have a phone number available for assistance.
What's the difference between CFDs and futures?
How are CFDs and Futures different?
- Counterparties
- Futures: the exchange is made with another trader.
- CFDs: the counterparty is the brokerage, in this case, eToro.
- Expiry:
- Futures: they have an expiration date. Once the contract expires, it is closed and can't be reopened.
- CFDs: there is no expiration date. As a result, you can wait for your position to rise before closing.
- Trading options:
- Futures: there are limited options
- CFDs: a lot of variety, there is a huge diversity and types of CFDs
- Minimum deposit:
- Futures: you have to invest much more
- CFDs: very low
- Trading costs:
- Futures: as you need to invest more, rates are lower
- CFDs: higher (although not excessively)
- Use of leverage:
- Futures: you can't leverage
- CFDs: fully available
Have you heard about “leverage”? Just in case, we'll define it briefly:
trading allows you to invest more money than what you really have. Let's say that you have $ 100 and you put them with x2 leverage, the amount of your investment will be $ 200.
Leverage and the importance of “Take Profit” and “Stop Loss”
Assuming that, for instance, you are positive that Stellar 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 go to your bank, request a credit, wait for it to be accepted and receiving the money, send the money to eToro, confirm that it arrived, and then obtain Stellar… But by then it is possible that your prediction was confirmed already and Stellar is at such a high value that it is not worth trading.
Using leverage, you can obtain that amount just by moving a finger. It's like borrowing money, but much better: from eToro itself. You can get financing to operate with much more money than you actually have on the eToro Wallet. Before trading, you will be able to choose between the different options as in the image:
Trading with other assets allows you to use more leverage. The reason: 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.
You start with $ 1,000 and pick leverage x2, then you would really invest $ 2,000, since eToro would put the other $ 1,000 (which is double your initial amount).
A few days later, as you thought, Stellar has risen 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.
First of all, the 1k $ of the leverage will be deducted. You have $ 1,400 left, of which $ 1000 is the money you put in yourself, so the net profit is $ 400.
By starting with $ 1000 and getting $ 400, you'll be earning 40% of your investment.
But watch out: if all goes as you intended and the asset increases, you will make money. However, if the asset decreases, you will also lose more money really fast.
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. That is why to operate with leverage it is essential to take into account Take Profit and Stop Loss.
Take Profit is an automatic order of selling once the asset achieves a certain price: you buy Stellar at $ 100 and you ask eToro to close your operation as soon as the price reaches $ 120. It is very helpful to avoid being blinded by enthusiasm: a 20% profit is usually very good, but once you see it goes up, you might want to gain a bit more and decide to wait, but this could be a mistake. So, Take Profit helps you to trade more safely.
On the other hand, when operating with leverage you also have to use Stop Loss, because a small fall in the price of an asset can have a big impact on your wallet. You always need to set a Stop Loss lower than that suggested by the broker.
What are ETFs?
Have you heard about Exchange-traded funds or ETFs? They are similar to index funds and are known for combining the advantages of stocks and mutual funds, because they can be exchanged at any moment in the market, but include a much wider diversity of assets and the rates are significantly lower.
Commodity market
Most people invest in raw materials because of their stability. While other assets present higher fluctuation, commodity prices vary less and offer safety against inflation or market volatility. Nevertheless, prices are subject to supply and demand, so if the fear of possible inflation produces greater demand for a certain good, the price will also rise.
Note that commodities don't pay dividends. Therefore, by trading with these you will only have a further profit by selling them back.
Raw materials are generally classified into two types: first, we have hard raw materials, which are precious metals (gold, silver, copper, and platinum), industrial metals, and oil; in second place are soft raw materials, which are agricultural products like sugar, cocoa, soybeans, among others.
About ETFs
ETFs or Exchange-Traded Funds are a kind of passively managed fund, similar to index funds. They can be described as a combination of stocks and mutual funds. They are traded in the market like stocks, during the day. But their advantage is that they are more diversified compared to stocks, and their fees are much lower than those of an actively managed fund.
About Contracts for Difference
You probably have found the initials CFD now and then if you entered eToro before. We will come back to it, but you should know first that CFDs on eToro are only possible if you go short or choose leverage over x2 (but the platform does not even allow this option).
We will also explain concepts like going short and leverage, in case you are interested in day trading cryptocurrency or other more advanced practices.
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 Stellar will go down, 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”. Nevertheless, if it really goes down, it is possible to make some profits out of that.
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 Stellar, which cost $ 5,000 at the moment (these figures aren't real)
- You make $ 5,000 by selling the 100 units
- The Stellar devaluates from $ 50 to $ 30
- Again, you purchase the 100 units, but at the current price, $ 3,000
- You return the 100 units to the loaner
- The rest is yours, so, you will have earned $ 2000
Take into account that it is much easier than it sounds: we can summarize this whole operation by saying that by trading in Stellar you can also earn money if you predict the downs.
How to use eToro
As we have mentioned among the positive aspects of eToro, the best thing about this online broker is its extraordinary simplicity: anyone can invest without having to read endless explanations.
If you have used any of the most popular social networks today, you can perfectly use this platform.
We will explain, roughly, the registration steps and the different sections that you will see.
You will have to fill in some information requested when registering.
To complete your registration, you will have to answer some questions about your 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 financial instruments they can suggest. For example, if it is your first experience in the investment world, they will not recommend that you invest in futures.
As soon as you are registered and have completed your profile, you will stop seeing the “incomplete profile” message.
Let's review the different tabs of the platform.
“Set Price Alerts” allows you to set alerts on the price of certain securities. It is a very useful tool for when you want to purchase an asset which price is decreasing, but it seems to you that it has not finished falling yet.
In “News Feed”, users interact and share opinions, tips, and other valuable information.
“Discover” includes the tabs “Instruments”, “People” and “CopyPortfolios”. And we already discussed the different financial instruments that are available on eToro:
- Cryptocurrencies
- ETFs
- Shares
- Raw materials
- Currencies
- Index funds
The concept “social trading” makes sense in the section “People”: that is where you can copy the movements of any user you choose. You'll be able to see all their profiles and historical performances.
You can search for those investors that best suit your interests: by risk level, types of financial assets, average earnings… You just have to type the amount you want to invest and eToro will replicate the movements of the investor you selected, in proportion. This means that if you have $ 1000 and the trader puts 10% of his or her balance in an asset, the platform will invest also 10% of your funds (in this case $ 100) in that same asset.
Also, here you will see CopyPortfolios classified into: Top Trader, Market, and Partner.
Sometimes it might be better to copy from CopyPortfolios than to individuals, because the former offer more diversity. There are all kinds of portfolios that you can identify easily and are divided by sectors. So, if you suspect a specific sector, such as e-commerce or healthcare, has good chances to succeed, you should look for that specific portfolio.
Investment strategies
You can operate cryptocurrencies using several different methods: for example, you can buy and hold, or you can day trade using price volatility to your advantage.
My recommendation for those who are starting to invest is going for a middle point: placing a dynamic stop-loss (15-20% under the highest price) when you open your Stellar operation and wait for it to work its magic.
Therefore, if for example you buy a cryptocurrency at $ 10, it reaches $ 20 and then decreases to $ 12, your position will be closed at $ 16-17 and you will make a pretty good profit.
I know it might sound more appealing to sell when the price is at its highest, right before corrections, but that is simply not possible. The above strategy is much more realistic and it can give great results.
Eventually, you will be ready for using advanced investment techniques, such as short-selling or using leverage.
Virtual portfolio
For those who still don't have much experience in investing, using a demo account can be useful. Just make sure the virtual mode is set and you can start practicing with an “imaginary” portfolio.
This can be a great way of practicing before trading with real money. The platform will give you an amount of $ 100.000 (“fake” or virtual, of course) to begin with, and you can trade with all the different assets available on eToro, not only with Stellar.
Don't worry, since if you lose all your virtual balance, you can contact support so they can add them back to your demo account and you can try again.
Nevertheless, remember that you need to be prudent for trading, and demo account trading can have an adverse effect. It is completely different to risk your own money than to do operations with virtual funds that you don't mind losing.
And of course, if you intend to invest in the medium or long-term, with earnings almost assured just by duplicating a strategy, it is absurd that you invest in the virtual mode and wait for years. On the contrary, the virtual mode can be helpful to practice with short or medium-term trading.