Contents
eToro, a reliable online brokerage for acquiring Stellar from Philippines
Why do we recommend it?
- There are tons of possibilities for investments
- Leverage is allowed
- It's really straightforward and manageable
- It offers techniques and moves from experienced traders so you can copy them
- Allows you to go short
Homepage: www.etoro.com/stellar
If you are thinking about investing in Stellar from Philippines, eToro is probably the best way to do it.
“Social trading”, an innovative way of investing by replicating techniques and moves from other experienced investors, has become popular because of eToro.
If you are still a rookie or haven't gained much experience in investments, eToro is very useful, because it automatizes your investment by repeating strategies from those who have been doing it for years and making profits. And for those skilled investors willing to share their techniques with the community, eToro pays for it.
Another thing to mention is how easy the platform is, which turns out perfect for new users that are learning all about Stellar.
About Contracts for Difference
If you already registered on eToro, you probably realized that the initials CFD appear all the time. Before we come back to this, you should know that cryptocurrency trading on eToro is only CFD when you short sell or choose leverage over x2 (nevertheless, the platform does not even allow this option).
We will also explain terms such as short-selling and leverage, in case you are considering day trading cryptocurrency or other more advanced practices.
eToro allows you not only to bet when you are “in the black”, but with CFDs you can also bet “in negative”. In a hypothetical case: you have the certitude that the Stellar will fall, so perhaps it is obvious to think “if it is going to depreciate (go down in price), I'll just wait until it does and then I'll bet”. However, if it actually falls, you can earn some money out of that.
You can accomplish that by “going short”. More or less, this is how it works:
- You ask for a loan of, let's say, 100 units of Stellar, which cost $ 5,000 at the moment (these numbers aren't real)
- You sell the 100 units and earn $ 5,000
- The Stellar devaluates from $ 50 to $ 30
- You get the 100 units again, but at $ 3,000
- Now you give back the 100 units
- You will have made $ 2000, since you keep the difference
It all seems more complex than it really is. Just take into account that by trading in Stellar on eToro, with CFDs you can make money if you anticipate downs in the price.
Futures Vs CFD
How are CFDs and Futures different?
- Counterparties
- Futures: operations are made with someone else, another investor.
- CFDs: you do not operate with someone else, but the counterparty is the brokerage platform, in this case, eToro.
- Date of expiration:
- Futures: there is an expiry date. When that date arrives, your position is closed even if you are in red.
- CFDs: there is no expiration date. You can wait for your position to rise before exiting.
- Variety:
- Futures: options are much more limited
- CFDs: a lot of variety, there are CFDs of practically anything
- Minimum investment amount or “trade size”:
- Futures: very high minimum investment
- CFDs: it is possible to enter with a low amount
- Costs and fees:
- Futures: being higher figures, rates are usually proportionally lower
- CFDs: fees are higher
- Leverage:
- Futures: absent leverage
- CFDs: completely available
In case you haven't heard about “leverage”, we'll put it short. When trading, it's the capacity of enlarging 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 and the importance of “Take Profit” and “Stop Loss”
Assuming that, for instance, you are certain that Stellar is going up, and that you have $ 1,000 for “going long”, you should know that you have the option of investing more and making more money.
You could consider requesting a loan, but it is a process that takes time, and when you receive the money, Stellar might be already so expensive (if your guess was right) that investing wouldn't be convenient anymore.
Leverage is like a credit, but it is only a few clicks away! eToro allows you to operate with much more than what you have on the platform's wallet. Before trading, you will how much leverage to use as in the image below:
Trading with other assets allows you to use higher leverage. Why? Because cryptocurrencies usually represent medium-long term investments. However, leverage is used primarily for day trading or short-term operations. Let's talk a bit more about how leverage works.
You begin with $ 1,000 and pick leverage x2, then you would really invest $ 2,000 (the extra $ 1,000 to reach $ 2,000 are “borrowed” from eToro).
A few days later, as you thought, Stellar increases by 20% and the value of your investment is now $ 2,400. Ok, don't be greedy, let's sell.
You will have to give back the $ 1,000 of leverage and you will have made $ 400 (since the other $ 1,000 was your initial investment).
As you can see, with $ 1000 you get $ 400, in other words, 40% more. That's not bad at all.
It may sound too good to be true. The thing is, it can also play against you. If everything goes as planned, you will earn more money in less time; but if the value of the asset goes down, you will also lose more in less time.
Supposing that the asset didn't increase by 20%, but it decreased also by 20%, you won't lose $ 20 but $ 40, because of the leverage. Therefore, when using leverage it is crucial 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 Stellar at $ 100 and ask eToro to close your position automatically when it reaches $ 120. It is very helpful to avoid being blinded by greed: we would all take a 20% profit in the beginning, but when you reach that 20% it is easy to want some more and put yourself at risk of losing money. It's like you got assured in advance that you will act prudently.
Stop Loss is even more necessary, especially if you trade with leverage, since a small loss with leverage can have a significant impact. For that reason, it is essential to set a Stop Loss lower than that suggested by the broker.
About ETFs
Exchange-Traded Funds or ETFs are similar to index funds. They can be described as a combination of stocks and mutual funds, including the best of both. They can be traded like regular stocks, but include a wide diversity of assets and have lower fees.
Stocks
Stocks are the most popular securities. Some publicly traded companies divide their capital into portions: you can be one of those shareowners, but first, you should know where and how to make your investment.
We can categorize stocks into two main types: the ones that divide their earnings regularly among the shareholders, and those that don't. The former ones are great, obviously, but investing in the latter can also be a good idea since sometimes you can make even more money by selling the shares.
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, you can take advantage of compound interest, so our suggestion is that you reinvest if you don't need the money immediately.
If you trade with stocks on eToro, you can use leverage. But it is not advisable, since it would be a CFD and you would not get dividends. Also, shares are usually long-term investments, and you have to pay commissions during the time your operation is open.
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. However, their main benefit is that they offer more alternatives compared to stocks, and the rates are much lower than those of an actively managed fund.
Raw materials
The main benefit of investing in commodities is that their price varies less than that of other financial assets. Actually, their stability is what makes most people choose raw materials when facing market volatility or inflation. Nonetheless, the cost of commodities is determined by supply and demand, so if faced with the fear of inflation, demand rises a lot, so will the price.
Consider that the only intended income from the investment in raw materials will be the hypothetical capital gain after the sale since, unlike shares, these do not pay dividends.
Commodities are commonly categorized into hard raw materials, which include precious metals, industrial metals, and oil; and soft raw materials, which are basically agricultural goods, like soy, cocoa, corn, or rice.
Currency market
What is known as Forex trading consists in the exchange of currencies. It's the conversion of one currency to another to make a profit through the operation.
If you decide to trade EUR and USD, you speculate how many dollars it will take to buy a euro, with the expectation that after obtaining the first currency (the euro) it will revalue compared to the second (the dollar), to make a profit by selling it. Let's say you entered when a euro is worth 1.10 USD and you close when the price has gone up to 1.15: consequently, that margin will be yours once you sell back.
As you may have already inferred, trading with currencies usually implies a large capital, because prices never increase that much, or using much leverage, which is a bit like skating on thin ice. Our recommendation for those who are new in the world of trading is not to start with Forex, but with a safer and simpler market.
eToro allows exchanging the most known currency pairs but bear in mind that this market works through contract for differences, thus you will not be the owner of the underlying asset.
Virtual account: How does it work?
In case you are taking your first steps as an investor, the possibility to operate in “demo” mode may be useful. Setting a virtual account and trading with fictional funds is very easy.
This is a great tool for those who want to put their talents to the test before playing for real funds. 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 Stellar, you can also create a diverse portfolio.
The first attempt is not usually that good. But don't worry, since you can ask eToro to replenish the virtual $ 100k to your account.
Keep in mind that you should always be cold-minded when investing, and using a demo account 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, if you are interested in investing in the long or medium-term, there is no point in using the virtual mode and having to wait for years. But it can be ideal if you want to practice short and medium-term investment.
How to use eToro
We already mentioned that one of the best features of eToro is that the platform is very intuitive and easy to use. You don't need to read a lot or have previous knowledge to start trading.
Everyone who has used Twitter, Pinterest or any of the most common social networks, has enough knowledge to operate with the eToro interface.
Let's talk about the sign-up process and the different sections of eToro that you should know.
When you open your account, you will have to fill in all the information that eToro asks for: first and last name, address…
Before you end up with the sign-up process, you will also find some questions about your previous trading 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 financial instruments they can suggest. For example, if it is your first experience in the investment world, they will not suggest that you invest in futures.
You will see a bar that says “incomplete profile” until you complete all the requested information.
Let's see what the different sections of the site are.
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 purchase an asset and you are waiting for it to decrease.
“News Feed” is the more “social” section. There, traders can interact and share their knowledge.
“Instruments”, “People” and “CopyPortfolios” are within “Discover”. As we discussed before, the financial instruments that eToro offers are:
- Cryptocurrencies
- Exchange-Traded Funds
- Shares
- Commodities
- Forex
- Index funds
The concept “social trading” comes to life within “People”: there, you can duplicate the trading strategies of any investor you choose. You'll be able to see all their profiles and historical performances.
In this section, you will be able to search and find users according to your interests. When you select an investor and indicate the amount you want to invest, eToro will automatically replicate their movements, proportionally. For example, if you have $ 1000 and the user puts 20% of their funds in an asset, eToro will also invest 20% of your money in the same asset, in this case, $ 200.
You will also find the CopyPortfolios divided into three main kinds: “Top Trader”, “Market” and “Partner”.
Sometimes you might prefer copying to CopyPortfolios than to individuals, because the former offer more diversity. There are all kinds of portfolios that you can identify easily and are classified by sectors. Therefore, if you think a specific sector, like e-commerce or healthcare, has a good chance of prospering, you can look for that specific portfolio and invest in it.