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eToro, our reccomended option for investing in Litecoin from USA
Pros:
- Really intuitive and straightforward
- It offers other successful investment strategies so you can replicate them
- Allows you to short sell
- Leverage is allowed
- There are tons of goods you can invest in
Homepage: www.etoro.com/litecoin
In case you are considering it, eToro is probably the best option today to purchase Litecoin from USA.
“Social trading”, an innovative investment method that consists in replicating techniques and moves from other experienced investors, has become popular thanks to eToro.
If you are still a rookie or do not have much experience in investments, eToro is great for you. You can rest assured that you are making a smart investment since the site duplicates those from subjects with a great deal of expertise. On the contrary, if you are an expert in the field and decide to share your techniques with others, eToro rewards you with money.
It is also worth mentioning how easy is the interface of this platform, ideal for beginners who are starting in the investment world.
How to use eToro
As we have mentioned previously, one of the best features of eToro is its extraordinary simplicity: anyone can use it without having to read endless explanations.
Everyone who has used Whatsapp, Facebook or any of the most common social networks, knows enough to use eToro.
We will explain the registration steps and the different tabs that you will see on eToro.
You will have to fill in some information requested when registering.
They will also ask you about your previous trade experience.
But don't feel intimidated. They only intend to find out about your previous experience and knowledge to determine which assets to recommend for you.
As soon as you are registered and have completed your profile, you will stop seeing the “incomplete profile” message.
Let's review the different functions of the interface.
“Set Price Alerts” allows you to put alerts on the price of certain assets. You only need to click on the three points at the end of the line and you will be able to program a price alarm. It is a very useful tool for when you are after an asset which price is decreasing, but perhaps you think that it has not finished falling yet.
The section “News Feed” allows users to interact and share their experiences and knowledge.
In “Discover” you will find the tabs: “Instruments”, “People” and “CopyPortfolios”. As we mentioned in this guide, the financial instruments that eToro offers are:
- Cryptocurrencies
- ETFs
- Stocks
- Commodities
- Forex trading
- Index funds
In “People”, you will find eToro users and their performances. This is where the term “social trading” makes sense since you can duplicate the strategies of your preferred traders.
You can search and find users according to your interests. You can apply filters like risk level, average profits, or financial market. When you choose an investor and indicate the amount you want to invest, eToro will automatically replicate their movements, proportionally. For example, if you invest $ 1000 and the trader puts 20% of their funds in an asset, eToro will also invest 20% of your money in the same asset, in this case, $ 200.
Finally, you will also see the CopyPortfolios divided into three main categories: “Top Trader”, “Market” and “Partner”.
The benefit of copying to CopyPortfolios instead of particular traders is that this way you will diversify the risk. There are all kinds of portfolios that you can identify easily and are classified by sectors. Thus, in case you think a specific industry, like biotechnology or oil, will have good incomes in the future, you can look for that specific portfolio and do your investment.
How to deposit funds on eToro
Among the payment options that eToro accepts you will find: credit card, PayPal, bank transfer, Neteller, and Skrill. There is not much to explain here: making a deposit with eToro is really simple. Just go to “Deposit funds”, type a number and choose a payment method from the previous ones.
(Consider that you should be the account or credit card owner, for security policies).
The minimum amount required is $ 200, and there is a maximum limit for unverified accounts. So, if you intend to operate with large amounts, you will need to verify your account previously.
You can make the deposit in any currency and eToro will automatically convert it to USD. But it is advisable to deposit directly in USD since the platform charges a commission for the conversion.
About ETFs
Exchange-Traded Funds or ETFs are similar to index funds. We can say that ETFs are halfway between stocks and funds: they can be traded like regular stocks, but include a wide diversity of assets and the rates are much lower than those of an actively managed fund.
Stocks
Stocks or equities are the most popular financial assets. Some publicly traded companies divide their capital into portions and have many shareholders. By investing money in them, you can own a fraction of a company and obtain dividends.
We can classify stocks into two main types: the ones that payout at the end of every fiscal year to the investors, and those that don't payout. 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.
In the case of eToro, if you choose a company that pay out dividends, you will receive them in your account, and you can withdraw your money or reinvest it. Our suggestion is, if you don't have financial urgencies, that you benefit from compound interest and reinvest it in the company.
If you trade with stocks on eToro, you will be able to use leverage. However, we don't recommend that, since it would be a CFD and you would not receive dividends. Also, shares are usually long-term investments, and you have to pay commissions during the time your position is open.
Index Funds
If a long-term investment sounds like something you would do, and you won't need to withdraw your money in five years or maybe a decade, index funds can be the best alternative. This type of investment is also great for beginners since it is safer.
Contrary to common perception, it is very hard to beat the market (although you have probably heard of investors who obtain huge profits).
But putting aside some remarkable cases (like Warren Buffett's), all that glitters is not gold: if you hear of someone who has beaten the benchmark, they have probably done so for a short time, or the rates are so high that it ends up being better for you to index (whit minimal commissions). Also, past performances do not ensure a future one.
Index funds provide solutions to both concerns: their rates are insignificant and in the long term they almost always beat active managers.
Commodity market
The major attraction of trading with raw materials is that prices are more stable than those of other assets. In fact, their intrinsic security is what makes people often invest in raw materials, to take refuge from possible inflation or market volatility. Nonetheless, the prices of commodities are defined by their demand. Therefore, if a given economic situation provokes higher demand, the prices will also rise.
Keep in mind that the only intended profit from the investment in raw materials will be the hypothetical capital gain after selling them back: unlike stocks, these don't distribute dividends or pay interest.
There are two main kinds of commodities: hard raw materials and soft raw materials. The former are precious metals (such as gold, silver, copper, and platinum), industrial metals (for instance, iron, nickel, or aluminum), and oil; and the latter are agricultural products as sugar, coffee, corn, soy.
Differences between futures and CFDs
How are CFDs and Futures different?
- Which are the counterparties? With Futures, the counterparty is another investor. In CDFs, it’s the brokerage, in this case eToro
- Date of expiry Futures expire in a variable given date, while CFDs don’t expire
- Variety of options for trading The market for Futures is narrower. With CFDs you can trade in several different markets.
- Minimum deposit Being higher numbers, Futures require, proportionally, lower fees. Costs for CFDs are a bit higher, although not too much.
- Leverage With Futures, it isn’t possible; while with CFDs it is.
About Contracts for Difference
You probably have found the acronym CFD repeatedly if you already registered on eToro. We will come back to it, but you should know first that CFDs on eToro are only possible if you go short or select leverage higher than x2 (nevertheless, the platform does not even allow this).
If you want to know about day trading cryptocurrency or other advanced operations, you will also meet concepts such as short-selling and leverage.
With CFDs you can bet on the platform even if you are “in red” or don't have a positive balance. Let's say that you believe that the Litecoin will fall, so perhaps you think that it is better to refrain from getting in until it actually falls. But if you really think that it's going down, why not making some profits?
You can do that by “going short”. Basically, it functions like this:
- You obtain from a loan 100 units of Litecoin, which cost $ 5,000 (these numbers are fictional)
- Then, you sell them at their price at the moment, $ 5,000
- The price falls, as you calculated, and the unit of Litecoin now costs $ 30 instead of $ 50
- You get the 100 units again, but at $ 3,000
- You return the 100 units to the loaner
- The rest is yours, so, you will have made $ 2000
Take into account that it is much simpler than it sounds: we can just say that by trading in Litecoin you can also earn money if you foretell the downs.
Trading strategies
When trading cryptocurrencies, there are different possible methods or strategies, like day trading or buying and holding, for naming just a few.
My suggestion for those who are beginning to invest is something in the middle: placing a dynamic stop-loss (15-20% under the highest price) when you open your operation and wait for it to work.
Therefore, if for example you buy a cryptocurrency at $ 10, it reaches $ 20 and then falls to $ 12, your stop loss will take you out of the trade at $ 16-17 and you will have made a considerable profit.
Perhaps you are wondering: why not selling when the cost is at its peak? But unless you are a psychic, that is just not possible. The mentioned strategy can work perfectly and is much more realistic.
And when you have gained more experience, you will be ready for more advanced trading strategies, such as short-selling or using leverage.
Practice account: How does it work?
For those who still don't have much experience in investing, using a demo account can be very helpful. You just need to set the virtual mode and you can start practicing with an “imaginary” portfolio.
This can be a great way of gaining experience and confidence before starting to trade with real funds. You will have an amount of $ 100.000 (“fake” or virtual, of course) to begin with, and you can operate with a variety of assets, not just with Litecoin.
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 make a second attempt.
However, remember that you need to be prudent for trading, and using a demo account can have an adverse effect. It is not the same to risk your real savings than to operate with a fake balance which loss does not suppose any drama.
Finally, the virtual mode is kind of pointless if you intend to trade in the medium or long-term (with almost guaranteed returns only by replicating an index), since you would be wasting years to see the outcome. Demo accounts may be useful for trying out before investing in the short or medium-term.