Contents
eToro, an advisable online broker for those who are in South Africa and want to purchase Bitcoin Cash
Why do we recommend it?
- There are lots of investment options
- eToro offers leverage
- User-friendly and straightforward
- It uses other successful investment strategies so you can emulate them
- Allows you to go short
Official main site: www.etoro.com/bitcoin-cash
eToro is the best way to buy Bitcoin Cash from South Africa.
eToro is well-known for making “social trading” a trend, a revolutionary way of investing in which users can imitate the movements of other traders who have been making profits for a long time.
If you are a novice user or haven't gained much investment experience, eToro is great for you, because it automatizes your investment by imitating moves from those who have been doing it for years. Additionally, in case you are an investor, the platform pays for your knowledge.
Besides, the interface of the platform is so uncomplicated, great for those who want to begin in the Bitcoin Cash world, without getting crazy with lots of diagrams and figures.
About ETFs
Have you heard about Exchange-traded funds? They are passively managed funds, known for combining the advantages of stocks and mutual funds: they can be traded at any moment in the market, but offer much more diversity and considerably lower rates.
Currency market
Forex or currency trading is the exchange between a pair of currencies in order to obtain a profit.
If you decide to trade EUR and USD, for example, you speculate how many dollars it will take to buy a euro, thinking that the euro will rise compared to the dollar. Then, if you bought each euro for 1.15 USD and you sell them back when they are worth 1.20 USD, you'll be earning that margin.
You may be thinking that this form of trading requires investing considerable amounts, and you are not wrong, because increases in prices are never that dramatic, and if you use a lot of leverage to counter that, you will take a considerable risk. In case you are just starting in trading, it is not a good idea to begin with this market, because it's not the safest option.
eToro allows exchanging the most known currency pairs. However, consider that Forex trading works through contract for differences, which means the underlying asset won't be yours.
Shares
Stocks are the most popular financial assets. Some publicly traded corporations decide to split into fractions and have several shareholders. By investing money in them, you can own a portion of a company and obtain dividends.
We can categorize stocks into two main types: those of companies that distribute their earnings among the shareholders and those that don't pay regularly. Does that mean that you should only consider the former? No, of course not: if a company does not pay out dividends 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 payout, you will receive the funds into your eToro account, and you can withdraw them or invest back. However, you can benefit a lot from compound interest, so we would suggest reinvesting in the company.
If you invest in stocks on eToro, you can use leverage. However, it is not advisable, since it would be a CFD and you would not receive dividends. On top of that, shares are regularly long-term investments, and you have to pay fees as long as your position is open.
ETFs
Exchange-Traded Funds or ETFs are similar to index funds. They can be described as a combination of stocks and mutual 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.
Index Funds
In case you are interested in long-term investments, and you won't need to withdraw your money in at least five years, index funds can be the best alternative. This kind of investment is also great for beginners since it is more secure.
Unlike a lot of people think, beating the benchmark is far from being a piece of cake and very few fund managers achieve that, apart from some famous cases, like Warren Buffett's.
If someone brags about having beaten the benchmark, they probably have done it for a chor period or on a specific occasion, or perhaps the commissions are so high that indexing would be a better decision (with minimal commissions).
The good thing about index funds is that they perfectly solve both issues: their fees are insignificant and in the long term they almost always beat active managers.
Raw materials
Most people invest in raw materials because of their stability. While other assets present higher fluctuation, commodity prices vary less and offer security against inflation or market volatility. Nevertheless, prices are subject to supply and demand in the market, so if the fear of possible inflation provokes higher demand for a certain good, the price will also rise.
Take into account that, unlike stocks, raw materials don't pay dividends. Thus, the only prospective income would come from a future sale of the asset.
Commodities are usually categorized into two types: first, we have hard raw materials, which are precious metals (gold, silver, copper, and platinum), industrial metals, and oil; in second place are soft raw materials, which are agricultural products like sugar, cocoa, soybeans, among others.
By the way, do you know what leverage is? Just in case, we'll put it simply:
trading lets you invest higher amounts than you can have in a given time. That is, if you have $ 100 and you put them with x2 leverage, the amount of your investment will be $ 200.
Everything you need to know about leverage
Let's say that you have complete certainty that Bitcoin Cash will rise, and you want to “go long”, but you only have $ 1,000 available. However, you have the option of investing more and get higher profits.
There's the possibility of requesting a credit, but it is a process that takes time, and by the moment you receive the money, Bitcoin Cash might be already so expensive (if your guess was right) that investing wouldn't be convenient anymore.
Using leverage, you can get that amount of money really easily. It's like a loan, 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's wallet. As in the image below, you will see the different options you have:
Trading with other assets allows you to use even more leverage. This is because leverage is most common in short-term operations, and cryptocurrencies tend to be a medium or long-term investment. But let's see how this works with the previous example.
You begin with $ 1,000 and decide to use leverage x2, then you would really invest $ 2,000, since eToro would put the other $ 1,000.
A couple of days pass and turns out that you were right: Bitcoin Cash has risen 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 back.
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).
In conclusion, by investing $ 1000 and obtaining $ 400, your net profit would be 40%. That is quite good.
But there's always a drawback. If everything goes ok and the asset increases, you will make money. Nevertheless, if the price goes down, you will also lose more money in the blink of an eye.
For instance: if the price falls by 10%, you won't lose $ 10, but $ 20, because of the leverage. For that reason, the terms “Take Profit” and “Stop Loss” are so important when trading with leverage.
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 Bitcoin Cash at $ 100, you program eToro to close once it reaches $ 120. That way, you make sure you won't change your mind and decide to keep waiting in case it keeps going up, which could make you lose it all.
On the other hand, when using leverage you should always use Stop Loss, because a small decrease in the price of an asset can have a big impact on your wallet. For that reason, it is vital to establish a Stop Loss lower than that suggested by the platform.
Payment methods on eToro
Among the payment options that you will find on eToro are: credit card, PayPal, bank transfer, Neteller, and Skrill. There is not much to say here: making a deposit with eToro is really simple. Just go to “Deposit funds”, type a number and select your preferred method.
Of course, take into consideration that for security policies, you should be the account or credit card holder.
The minimum amount allowed is $ 200, and there is a maximum limit for unverified accounts. Thus, if you intend to operate with large amounts, you will need to verify your account previously.
The platform accepts transfers in any currency, but charges a commission for making the conversion to USD. That is why we suggest, if possible, depositing in USD from the beginning.
About Contracts for Difference
If you browsed eToro before, you probably realized that the initials CFD appear all the time. Before we come back to it, we must say that CFDs on eToro are only possible if you short sell or choose leverage over x2 (although the platform does not even allow this).
If you want to know about day trading cryptocurrency and other more advanced operations, we will also cover terms such as leverage and “going short”.
eToro allows you to bet both “in the black” and “in negative”. Let's say that you have the conviction that the Bitcoin Cash will fall, so the logical thing is to think “if it is going to depreciate or go down, I'll just wait until it does and then I'll go in”. However, if it really falls, it might mean extra money for you.
The practice known as “going short” will allow you to do that. It functions, pretty much, like this:
- You get from a loan 100 units of Bitcoin Cash, which cost $ 5,000 (these numbers are entirely made up)
- You get $ 5,000 by selling them at the market price
- The Bitcoin Cash devaluates from $ 50 to $ 30
- You get the 100 units again, but at $ 3,000
- Then you return the 100 units to the loaner
- The $ 2000 difference is yours
Consider that it is much easier than it sounds: we can just say that by trading in Bitcoin Cash you can also make money if you anticipate it will fall.
How to use eToro
As we have mentioned previously, one of the best things about eToro is its extraordinary simplicity: anyone can invest without having to read endless guides.
You won't have any problems with the interface if you have used any of the most common social networks.
We will talk about how to register and the different sections of eToro that you should know.
You will have to fill in some information requested when registering.
They will also ask you about your previous experience as an investor.
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 suggest. For instance, if you have never invested before, they will not recommend that you invest in futures.
Let's get to know the fundamental sections of the interface.
With the “Set Price Alerts” tool, you'll be able to program an alert when an asset is at a certain price. This is helpful if you want to purchase an asset that is falling but you believe it will decrease more to a certain point.
In “News Feed”, users interact and share opinions, tips, and other valuable information.
“Instruments”, “People” and “CopyPortfolios” are within “Discover”. As we mentioned in this guide, the different financial instruments available on are:
- Cryptocurrencies
- ETFs
- Stocks
- Raw materials
- Forex trading
- Index funds
The concept “social trading” comes to life within “People”: there, you can duplicate the movements of any investor you choose with just one click.
In this section, you can 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 invest $ 1000 and the user puts 20% of their funds in an asset, eToro will invest $ 200 of your funds in the same asset or company as well.
Finally, you will also find the CopyPortfolios divided into three main kinds: “Top Trader”, “Market” and “Partner”.
The benefit of using CopyPortfolios instead of copying individuals is that this way you will diversify the risk. The portfolios are identified so you can recognize them easily: one about gaming, another about large drone companies, another about pharmacy … Do you suspect that a certain sector is going to have success anytime soon? Then you will surely find a CopyPortfolio about it.
Trading strategies
When trading cryptocurrencies, there are different possible methods or strategies, such as day trading or buying and holding, for naming just a couple.
In case you are new in the world of investment, I suggest something in the middle: when you open your Bitcoin Cash position, set a dynamic stop loss 15-20% below the highest price, and forget about the operation.
For instance, if you purchase a cryptocurrency when its price is $ 15, then it rises up to $ 25 and decreases again to $17, the stop-loss will allow your operation to be closed, perhaps at $ 21 or $ 22. Hence, you will get a satisfactory income.
Perhaps you are wondering: why not selling when the cost is at its peak? But that would only work for a psychic or a fortune-teller. The mentioned strategy is more down-to-earth and can work out perfectly if it is well applied.
Eventually, you will be ready for applying more advanced investment techniques, like short-selling or using leverage.
How does a virtual account work?
Are you taking your first steps in trading? Using a demo account can be useful. You just need to set the virtual mode and you can start operating with fictional funds.
A virtual account can help you to practice and gain experience before starting to trade with real funds. When you create your demo account, you will begin with a virtual balance of $ 100.000, to trade with a variety of financial instruments available on the platform, besides Bitcoin Cash.
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.
Take into account that you should always be cold-minded when investing, and using a virtual portfolio might have the opposite effect. It will never be the same as risking your own money.
As you may suppose, the demo mode is kind of absurd if you want to invest in the medium or long-term, since you would be wasting years to see the outcome. Virtual accounts may be useful for trying out short or medium-term investments.