Contents
eToro, a great online broker for purchasing Bitcoin from USA
Advantages:
- Really intuitive and simple
- It offers other successful investment strategies so you can copy them
- You can short sell
- You can trade leveraged
- There are uncountable investment possibilities
Official homepage: www.etoro.com/bitcoin
You should absolutely consider eToro in case you are thinking about purchasing Bitcoin from USA.
This broker is popular for making “social trading” fashionable. Social trading is an ingenious form of investing in which investors can imitate the techniques of other traders who have been generating income for a long time.
eToro has solutions for you, especially if you are still a beginner in trading. You can rest assured that you are doing a smart investment move when replicating those from subjects with a long profit record. And for those skilled investors willing to share their techniques, eToro rewards your knowledge with money.
It is also very convenient how accessible is this platform, excellent for beginners who are taking their first steps in the investment world.
What's the difference between CFDs and futures?
What are the differences between Futures and CFDs?
- Counterparty
- Futures: operations are made with someone else, another trader.
- CFDs: the counterparty is eToro, the brokerage. In other words: you do not “play” against or with another individual but the bank.
- Expiration date:
- Futures: they expire on a given date. Once the contract expires, it is closed even if you have losses.
- CFDs: on the contrary, there is no expiration date. It is possible to wait until you rise up and then close.
- Trading markets:
- Futures: there are fewer options
- CFDs: there is an enormous amount of possibilities
- Minimum investment amount or “trade size”:
- Futures: you need to get in with a larger amount
- CFDs: you can start with a small initial deposit
- Trading costs and charges:
- Futures: costs are usually lower
- CFDs: higher (although they are not excessively high either)
- Possibility of leverage:
- Futures: it isn't possible to leverage
- CFDs: completely available
In case you still don't know what “leverage” is, we'll put it short. When trading, it's the capacity of enlarging your investment by borrowing money from the broker. For example, you can enter with $ 100, but if you use x2 leverage, you will be investing $ 200.
Leverage, Take Profit and Stop Loss
Let's assume that you know that the price of Bitcoin is about to raise its price, and you want to “go long”.
You are certain that Bitcoin will rise, but you only have $ 1,000 available. Despite that, why miss the opportunity to make more money?
You could consider requesting a loan, but it is a process that takes time, and when you receive the money, Bitcoin might be already at a much higher price, so you wouldn't be able to invest the way you planned.
Using leverage, you can get that amount really easily. It's like a loan, but much better: you will get it from eToro, which allows you to invest a lot 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 even more leverage. The reason: cryptocurrencies are a value that is invested in the medium-long term. However, leverage is used primarily for day trading or short-selling. 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 are a “loan” from eToro).
- Then, turns out that Bitcoin does increases, as you assumed, and now the price of your investment is $ 2,400 (20% higher), so you decide to sell back.
- 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 from the beginning.
As you can see, with $ 1000 you get $ 400 more, no less than a profit of 40%. That's not bad at all, right?
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.
Let's say 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 know about 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 purchased Bitcoin 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 wait a bit longer in case it keeps going up, which could make you lose it all.
Stop Loss is even more important, especially when operating with leverage, since a small loss could be tragic for your wallet. Always remember to mark a Stop Loss lower than that suggested by the platform.
Investment strategies
There are different methods or ways for crypto trading, such as day trading or buying and holding, for naming just a few.
My recommendation for those who are starting to invest is going halfway between the two options: when you open your position, set a stop-loss order 15-20% under the maximum price, and let the rest happen on its own.
This means that if, for example, you buy a cryptocurrency at $ 10, it reaches $ 20, and after that it falls to $ 12, your position will be closed at $ 16-17 and you will have made a decent profit.
It may sound more appealing to sell when the cost is at its maximum, right before corrections, but that is simply not possible. The mentioned method is much more realistic and it can give great results.
Later on, you will be able to apply more sophisticated strategies, like going short to profit from bear markets or using leverage.
Payment methods on eToro
When it comes to payment on eToro, there is not much to say, since it is really straightforward. Just click “Deposit funds”, type an amount, and choose your payment method. You can pay with PayPal (available for some countries), bank transfer, credit card, Skrill, or Neteller.
Consider that for security reasons, you must be the holder of the credit card or the account.
The minimum you can deposit is $ 200 and there is a limit of how much you can deposit if you are not verified. Therefore, in case you want to trade with higher amounts, you should verify your account previously.
eToro accepts transfers in any currency, but charges a commission for making the conversion to USD. That is why we suggest, if it is in your hands, using USD directly.
Is eToro reliable for purchasing Bitcoin?
eToro is very careful with the data about past performances from traders, and its reliability has been tested once and again by independent organizations.
The main office of eToro is located in Cyprus, and the platform is approved by the CySEC or Cyprus Securities Market Commission, which can cover up to € 20,000 from its client's debts, including those from USA. The platform complies, on the other hand, with all the strict policies of the European Union.
In Europe, it is backed 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, it should be mentioned that eToro has been active for fifteen years, with more than 20 million users around the world, so we can be sure that our funds are safe.
It is also important to mention the good functioning of its customer service. You can contact them by phone or use their online chat.
How does a virtual portfolio work?
Are you beginning in trading? Using a demo account can be useful. Just assure yourself that the virtual mode is set in the upper left corner of the page and you can start practicing with an “imaginary” portfolio.
This can be a great way of gaining experience and confidence before trading with real money. You will have 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 just with Bitcoin.
Don't worry, since if you lose all your virtual balance, you can contact support so they can add back the $ 100,000 to your portfolio and you can try again.
Take into account that you should always be cautious when investing, and using a virtual 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.
As you may suppose, the virtual mode is kind of absurd if you want to invest in the medium or long-term, since you would be wasting years. Virtual accounts may be ideal for trying out before investing in the short or medium-term.
How does eToro work?
We mentioned previously that eToro is very easy to manage. Anyone can start using it without having to read endless explanations.
If you are familiar with any of the most popular social networks today, you can perfectly manage this platform.
Now we will walk you through the registration process and the different sections of the eToro interface that you should familiarize yourself with.
First of all, you will have to fill in all the information that eToro asks for: first and last name, address…
Additionally, you will see that they ask you some questions about your experience at investing.
But don't feel intimidated. They only intend to find out about your previous experience and knowledge to determine which financial instruments to recommend for you.
Let's see what the different sections of the page are.
With the “Set Price Alerts” tool, you'll be able to program an alarm when an asset is at a certain price. This is helpful in case you want to purchase an asset that is falling but you believe it will decrease more to a certain point.
The section “News Feed” allows users to interact and share their experiences and knowledge.
In “Discover” you will find: “Instruments”, “People” and “CopyPortfolios”. And we already talked about the kinds of assets that are available on eToro:
- Cryptocurrencies
- Exchange-Traded Funds
- Stocks
- Raw materials
- Forex
- Index funds
The term “social trading” makes sense in the section “People”: that is where you can copy the trading strategies of the best investors. You'll be able to see all their profiles and performances.
Using the search box, you can find the investors that best suit your interests: by average profits, market or risk level, for instance. You just have to choose the amount you want to invest and eToro will replicate the movements of the investor you chose, in proportion. “In proportion” 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.
Finally, you will see the popular CopyPortfolios. There are three types: Top Trader, Market, and Partner.
Remember that in some cases, you might prefer copying to CopyPortfolios than to particular users, because the former offer more diversity. The portfolios are easily identifiable: one about gaming, another about large drone companies, another about pharmacy … Do you suspect that a certain sector will prosper in the future? Then you will surely find a CopyPortfolio about it.