Contents
eToro, recommended online broker for those who are in New Zealand and want to buy Litecoin
Some of its advantages are:
- There are uncountable possibilities for investments
- Leverage is allowed
- Very intuitive and straightforward
- You can imitate other investment strategies
- You can go short
Homepage: www.etoro.com/litecoin
In case you are considering it, eToro is the best way to buy Litecoin from New Zealand.
“Social trading”, a relatively new investment method that consists in replicating techniques and strategies from other experienced investors, has become popular because of eToro.
If you are a beginner or do not have much investment experience, eToro is very useful, since it automatizes your investment by repeating strategies from those who have been doing it for years. Also, in case you are an investor, the platform pays for your knowledge.
It is also worth mentioning how accessible is the platform, perfect for new traders who are starting with Litecoin.
eToro Interface
We said before that eToro is very easy to manage. Anyone can start investing without having to read endless explanations.
If you are familiar with any of the most common social networks, you can perfectly manage eToro's interface.
We will explain, roughly, the registration steps and the different tabs that you will find.
First of all, you will have to fill in your personal data.
During the sign-up process, you will also find some questions about your previous investment activities.
However, it is not like you are answering an exam. It is only a way of finding out how much knowledge you have and what type of assets they can recommend. For instance, if you have never invested before, they will not suggest that you invest in futures.
Let's get to know the different sections of the platform.
With the “Set Price Alerts” tool, you'll be able to program an alarm when an asset is at a certain price. This is ideal in case you want to purchase 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 in this guide, the financial instruments available on are:
- Cryptocurrencies
- Exchange-Traded Funds
- Shares
- Commodities
- Forex
- Index funds
In the tab “People” are all the profiles and historical performances of other users, and you can replicate their movements with just one click. This is where the “social trading” concept is best applied.
Using the search bar, you can find the investors that you find more interesting: by average earnings, types of assets or risk level, for instance. Just indicate the amount you want to invest and eToro will replicate the movements of the selected investor, in proportion. “In proportion” means that if you have $ 1000 and the trader puts 10% of his or her balance in an asset, eToro will invest also 10% of your money (in this case $ 100) in that same asset.
In this section you will also see the three most popular types of CopyPortfolios, which are Top Trader, Market, and Partner.
The advantage of using CopyPortfolios instead of copying people is that this way you will diversify the risk. There are all kinds of portfolios that you can recognize easily and are divided by sectors. Therefore, in case you think a specific industry, like gaming or oil, has good chances to succeed, you can find that specific portfolio and do your investment.
Are you familiar with the term “leverage”? Just in case, we'll define it briefly:
the good thing about trading is that it lets you invest more money than what you really have. That is, if you get in with $ 100 and you put them with x2 leverage, the amount of your investment will be $ 200.
Everything you need to know about leverage
Assuming that, for instance, you are positive that Litecoin 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.
Perhaps you could go to your bank, ask for a loan, put an asset as collateral, wait for it to be accepted, wait for the money, and then buy Litecoin… But by then it is likely that your prediction was confirmed a long time ago, and Litecoin would be already so high that it is not worth trading.
Leverage is exactly like a loan, and you will only have to click a few times to get it! You will be able to invest (and earn) much more money than what you have on the platform's wallet. Before trading, you will be able to choose between the different leverage options as in the image:
Within other markets, the leverage you can choose is higher. This is because cryptocurrencies usually represent medium-long term investments. However, leverage is used mainly for day trading or short-term operations. But let's deepen a bit more on how all this works.
If for your investment of $ 1,000, you choose leverage x2, your investment is 2 * $ 1,000, that is to say, $ 2,000. eToro gives you the remaining amount to reach that figure.
A few days pass and turns out that you were right: Litecoin raises its price 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.
You will have to give back the $ 1,000 of leverage and the net profit would be $ 400 (since the other $ 1,000 was your initial investment).
By starting with $ 1000 and getting $ 400, you'll be earning 40% of your investment. That is pretty good.
But watch out: if everything goes ok and the asset increases, you will make money. Nevertheless, if the asset decreases, you will also lose more money really fast.
For example: if instead of increasing by 20%, the price falls by 10%, you won't lose $ 10, but twice (the leverage) that figure, that would be $ 20. Therefore, when operating with leverage it is essential to be familiar with two other concepts: 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 bought Litecoin at $ 100, you program eToro to close once 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 make you lose it all.
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). Always remember to establish a Stop Loss lower than that suggested by the broker.
ETFs
ETFs or Exchange-Traded Funds are similar to index funds. We can say that ETFs are halfway between stocks and funds: they are publicly traded, that means they can be commercialized at any time at market price. But their main benefit is that they offer more alternatives compared to stocks, and have lower fees.
Forex trading
What is known as Forex trading consists in the exchange of currencies. It's the conversion between currencies to make a profit through the operation.
If you decide to trade the EUR/USD pair, you speculate how many dollars it will take to buy a euro, with the expectation that the first currency (the euro) will raise its price compared to the second (the dollar), to make a profit by selling it. Assume you entered when the price of one euro is 1.10 USD and you leave when the price has gone up to 1.15: that difference is yours once you make the operation.
Perhaps you already deducted this, but this kind of trading usually implies investing a lot, since variations tend to be low, or using a lot of leverage, which could be incautious, as you know. Our recommendation for those starting in the world of trading is to choose another market to begin with, since Forex is not the safest.
You can trade with the most common currency pairs on eToro. However, remember that in this market sales are always made through CFDs, which means the underlying asset won't be yours.
Equities
The most popular financial instruments are stocks or shares: these are portions in which an enterprise can be divided. You may get dividends through third-party companies just by putting your money in them. But of course, you have to know how to invest.
We can classify stocks into two main types: the ones that divide their earnings regularly among the investors, and those that don't payout. The former ones are great, of course, but investing in the latter can be a good idea too since sometimes you can make even more money by selling the shares.
When trading on eToro, if you choose a company that pay out dividends, you will receive them in your account, and you can collect them in cash or reinvest them. Our suggestion is, if you don't have financial urgencies, that you benefit from compound interest and reinvest it in the company.
Take into account that when investing in shares on eToro you can “dope” your trades with leverage, but in that case, you will not receive interest as it would be a CFD. For that reason, for long-term investments, it is better not to use leverage: you can end up losing money, since you will not get interest and also you will have to pay commissions while your operation is open.
What is an ETF?
Have you heard about Exchange-traded funds or ETFs? They are similar to index funds and are known for merging the benefits of stocks and mutual funds, because they can be exchanged at any moment in the market, but have much more investment possibilities and the fees are significantly lower.
About Index Funds
If a long-term investment sounds good to you, and you won't need to take back your money in five years or maybe a decade, index funds can be the best alternative. This type of investment is also suitable for beginners since it is safer. Besides, they offer more diversity.
Unlike a lot of people think, benchmark returns are very difficult to beat and very few fund managers achieve that, apart from some specific cases, like Warren Buffett's.
If a fund manager brags about having beaten the index, they probably did it for a short time or on a specific occasion, or perhaps the fees are so high that indexing would be a better decision.
Index funds offer these two great advantages: they usually beat active managers in the long term, and the charges are minimal.
Futures Vs CFD
What are the main differences between CFDs and Futures?
- Counterparty
- Futures: the counterparty is someone else, another investor.
- CFDs: you do not operate with another individual, the counterparty is the brokerage, in this case, eToro.
- Date of expiry:
- Futures: there is a date of expiration. Once the contract expires, it is closed even if you have losses.
- CFDs: on the contrary, they don't expire. This means that you can wait for your position to rise before exiting.
- Trading options:
- Futures: it is more restricted
- CFDs: they include lots of different assets, commodities and currencies
- Minimum investment amount:
- Futures: you need a larger initial investment
- CFDs: you can get in with a lower trade size
- Trading costs:
- Futures: as you need to pay more in the first place, rates are lower
- CFDs: fees are higher
- Use of leverage:
- Futures: it isn't possible to leverage
- CFDs: totally available
Virtual account: How does it work?
In case you are taking your first steps as an investor, the option to operate in “demo” mode will be useful. You just have to make sure that the “Virtual” option is set in the upper left corner and you will be able to operate with “imaginary” funds.
This tool is perfect for those who want to give it a few tries before trading with real funds. When you create your account, you will start with $ 100,000 of virtual balance to do all the operations that you can think of: not just with Litecoin, you can also create a diverse portfolio.
The first attempt is not usually that good. But you can ask eToro to replenish the virtual $ 100k to your account, and the second try you should do better.
Take into account that you should always be prudent when investing, however, using a virtual portfolio might have the opposite effect. It is not the same to operate with your own money than with virtual funds, which you can lose without any consequences.
Finally, the virtual mode is kind of pointless if you intend to trade in the medium or long-term, since you would be wasting years. Virtual accounts may be ideal for practicing short or medium-term investments.