Contents
eToro, recommended online broker for those who want to buy Ethereum Classic from New Zealand
Why do we recommend it?
- There are uncountable goods you can invest in
- Leverage is allowed
- It is very easy to use
- It uses techniques and moves from experienced investors so you can replicate them
- Allows you to go short
Official homepage: www.etoro.com/ethereum-classic
In case you are considering purchasing Ethereum Classic from New Zealand, eToro is probably the best option nowadays.
“Social trading”, a relatively new way of investing by replicating techniques and moves from other experienced investors, has become trendy because of eToro.
eToro is very useful if you don't have much experience in trading, since it puts your investment on autopilot by repeating strategies from other experienced people with a long profit history. On the contrary, if you are an investor and decide to share your methods with the community, eToro pays up for it.
Besides, the interface of this platform is amazingly intuitive, ideal for users who want to start learning about Ethereum Classic and trading, without ending up overwhelmed with tons of diagrams and numbers.
About ETFs
What do you know about Exchange-traded funds? They are passively managed funds, known for combining the advantages of stocks and mutual funds, because they can be traded at any moment in the market, but include a much wider diversity of assets and the rates are significantly lower.
Equities
Let's discuss the most well-known instruments: stocks or shares. Stocks are the parts in which a company that chooses to go public is divided. You can own a proportion of a company and obtain a profit, but first, you should know where and how to invest your money.
We can group stocks into two main types: those that pay dividends and those that do not. Those that pay, at the end of the fiscal year, distribute profits among their shareholders; the latter, on the contrary, do not. Does that mean that you should only consider the former? No, of course not: if a company does not pay every year but has a lot of potential, it can still represent a good inversion, 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 pay out dividends, you will receive them into your account on eToro. Then, you can withdraw that money or you can choose to reinvest it. However, compound interest is magic, so we would suggest reinvesting.
If you invest in stocks on eToro, you can use leverage to “dope” your trades. But we don't recommend that, since it would be a CFD and you would not get dividends. On top of that, as equities tend to be long-term investments, you will have to pay fees.
About ETFs
ETFs or Exchange-Traded Funds are 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. Their main benefit is that they are more diversified compared to stocks, and the rates are much lower than those of an actively managed fund.
About Index Funds
This is the best option for people who can invest in the long term, mostly for beginners, because it is inexpensive, diversified, and safer.
Contrary to what it may seem, very few investors can beat the benchmark (yes, you have surely heard of investors who achieve huge returns).
But putting aside some unusual cases, not everything is as good as it sounds: if you hear of someone who has beaten the benchmark, they have probably done so for a short time, or charges so many commissions that it ends up being better for you to index (whit minimal commissions). Also, take into account that past performances do not ensure a future one.
Index funds offer these two great advantages: most of the time, they beat active managers in the long term, and the fees are minimal.
Forex trading
Currency trading or Forex consists, as the name says, in the exchange of currencies. In other words, is the conversion between currencies, and the aim is, evidently, to make a profit out of this.
If you want to exchange euros and dollars, you speculate how many dollars it will take to buy a euro, hoping that the euro will raise its price compared to the dollar. Then, 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.
As you may have deduced, trading with foreign exchange requires investing a lot, because prices never increase that much, or using much leverage, which could be incautious. In case you are new to the world of trading, it is not a good idea to begin with Forex, because it's not the safest alternative.
eToro allows trading with the most popular currency pairs but keep in mind that in this market sales are made through CFDs, therefore you won't own the real asset.
In case you still don't know what “leverage” is, we'll put it short. When trading, it's the capacity of increasing your investment without putting more money. For example, you can enter with $ 100, but if you leverage x2, your initial investment will be $ 200.
Leverage, Take Profit and Stop Loss
Suppose now that you know that the price of Ethereum Classic is going to raise its price, and you choose to “go long”.
You are positive that Ethereum Classic will go up, and you have $ 1,000 at that moment, but the fact is, you have the chance of investing more.
There's the possibility of requesting a credit at your bank, but you must know that all the process takes time, and by the moment you receive the money, Ethereum Classic might be already at a much higher price, so you wouldn't be able to invest the way you planned.
Using leverage, you can obtain that amount of money just by clicking your mouse. It's like borrowing money, but much easier and quicker, and with the benefit that you will be getting it directly from eToro which will let you invest much more than you have on the platform. As in the image below, you will see the different options you have:
When trading in different markets you can use more leverage. The reason is that leverage is most common in short-term operations or day trading, and cryptocurrencies tend to be a medium or long-term investment. 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 (remember that$ 1,000 was “borrowed” from eToro).
- Then, turns out that Ethereum Classic does increases, as you thought, and now the cost 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.
The trick is that the risk of losing out also increases. If everything goes according to plan and the price goes up, you will earn more money in less time; however, if the value of the asset goes in the opposite direction, you will also lose more in less time.
Let's suppose that the asset didn't increase by 20%, but it went down also by 20%, you won't lose $ 20 but double, $ 40. That is why to operate with leverage it is essential to know about Take Profit and Stop Loss.
Take Profit is the automatic sell order that is above the entry price: you purchase Ethereum Classic at $ 100 and you ask eToro to close your position as soon as the price goes up to $ 120. It is very helpful to avoid being blinded by enthusiasm: we would all take a 20% profit when making the investment, but when you reach that 20% it is easy to ask yourself “what if this keeps going up and it is a mistake to exit?”. It's like you made sure now of not acting recklessly in the near future.
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). For that reason, it is vital to mark a Stop Loss lower than that suggested by the platform.
Can you trust eToro?
eToro is very rigorous with the information about past performances from investors, and its reliability has been independently tested several times.
Legally, eToro follows all the strict regulations required by the European Union. Its head office is in Cyprus, and it is certified by the CySEC or Cyprus Securities Market Commission, which can cover up to € 20,000 of the debts from its clients, including those from New Zealand.
eToro is backed by the European Financial Instruments Market or MiFID, and by the Financial Conduct Authority or FCA in the USA. You should also know that it has a trajectory of fifteen years, with more than 20 million users around the world. So, you can be sure that your money is safe.
No less important is their excellent customer service. You can reach them by phone or use their online chat.
Differences between futures and CFDs
What are the main differences between CFDs and Futures?
- Counterparty
- Futures: the exchange is made with someone else, another trader.
- CFDs: the counterparty is the brokerage platform (eToro). That means you don't “play” with someone else but with the bank.
- Date of expiry:
- Futures: they expire on a given date. As soon as that date arrives, the contract is closed even if you are in red.
- CFDs: they do not have an expiry date. Thus, you can wait until you get in a good position before exiting.
- Trading options:
- Futures: it is more restricted
- CFDs: they include lots of different assets, commodities and currencies
- Minimum deposit:
- Futures: you need a larger initial investment
- CFDs: it is very low
- Trading costs:
- Futures: costs are usually lower
- CFDs: costs are higher
- Leverage:
- Futures: you can't leverage
- CFDs: completely available
How to use eToro
We said previously that eToro is very easy to manage. Anyone can start investing without previous experience or long explanations.
You won't have any issues with the interface if you are familiar with any of the most common social networks, like Linkedin or Instagram.
We will explain, roughly, the registration steps and the different tabs that you will see on the platform.
First, you will have to fill in all the information that eToro asks for: first and last name, address…
Also, you will have to answer some questions about your experience as an investor.
But don't feel like you are taking an exam. They only intend to find out how much you know and which financial instruments to recommend for you.
Let's get to know the fundamental sections of the site.
With the “Set Price Alerts” tool, you'll be able to program an alert when a security is at a certain price. Just click the tab and you will be able to set it. This is helpful if you want to buy a security and you are waiting for its price to fall.
The section “News Feed” allows users to interact and learn from each other by sharing their opinion and experiences.
“Instruments”, “People” and “CopyPortfolios” are within “Discover”. As we mentioned before, the financial instruments available on are:
- Cryptocurrencies
- ETFs
- Stocks
- Commodities
- Currencies
- Index funds
The term “social trading” makes sense within “People”: that is where you can replicate the movements of the best investors. You'll be able to see all their profiles and performances.
You can search for those investors that best suit your interests: by risk level, types of financial instruments, average earnings… You just have to choose the amount of your investment and eToro itself will be in charge of replicating the movements of the investor you chose, 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 (in this case $ 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 people is that this way you will diversify the risk. The different portfolios are easily identifiable: one about gaming, another about large drone companies, another about pharmacy … You think that a certain industry will prosper anytime soon? Then you will surely find a CopyPortfolio about it.
Trading strategies
You can operate cryptocurrencies in many different ways: from purchasing and waiting to day trading using volatility of the market in your favor.
My recommendation for those who are starting to invest is going halfway between the two options: placing a dynamic stop-loss (15-20% under the highest price) and wait for it to work its magic.
This means that if, for instance, you acquire a cryptocurrency at $ 10, it reaches $ 20 and then decreases to $ 12, your operation will be closed at $ 16-17 and you will obtain a pretty good profit.
I know it might sound more appealing to sell when the price is at its peak, but that is simply not possible. The above strategy is much more realistic and, well applied, it can work very well.
Later on, you will be able to apply more complex strategies, like using leverage or going short.
How does a demo account work?
Are you beginning in trading? Using a demo account can be very helpful. You just need to set the virtual mode and you can start practicing with a “fictional” portfolio.
This tool is ideal for those who want to give it a few tries before trading with 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 Ethereum Classic, you can also work with a diverse portfolio with a variety of assets.
If your performance is not that good and you lose your funds, there is always a possibility to replenish your virtual balance. You'll probably do better on the second attempt.
Keep in mind that trading is mainly about being cautious, and perhaps using a demo account can make you a bit impulsive. It is not the same to operate with your own money than with fake funds, which you can lose without any consequences.
As you may suppose, if you intend to invest in the medium or long-term, with profits almost guaranteed only by duplicating a strategy, it is absurd that you waste years investing with a virtual account. On the contrary, the virtual mode can be helpful to experiment with short or medium-term trading.