Contents
eToro is an outstanding brokerage for those who are in South Africa and want to obtain Tezos
Why do we recommend it?
- It offers other successful investment strategies so you can emulate them
- You can short sell
- User-friendly and simple
- Leverage is allowed
- There are uncountable investment options
Homepage: www.etoro.com/tezos
eToro is probably the best option to purchase Tezos from South Africa.
“Social trading”, an innovative investment method that consists in replicating techniques and strategies from other experienced investors, has become popular thanks to eToro.
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 great deal of expertise. And for those skilled investors willing to share their techniques with the community, eToro rewards your knowledge with money.
Another advantage is how manageable the platform is, which turns out perfect for new users that are learning all about Tezos.
How to use eToro
We already said that one of the best things about eToro is how simple it is. You don't need to read a lot or have previous knowledge to start investing.
You won't have any issues with the interface if you are familiar with any of the most common social networks.
Now we will detail the sign-up process and the different sections of the eToro interface that you should familiarize yourself with.
First, you will have to fill in all the information that eToro asks for: first and last name, address…
Additionally, you will have to answer some questions about your experience at investing.
But don't feel like you are taking an exam. The objective is to know more about you and determine which financial instruments they should recommend according to your knowledge and experience.
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.
“Set Price Alerts” allows you to set alerts on the price of certain securities. You just have to click on the three points at the end of the line and you will be able to program a price alert. It is a very useful tool for when you are after a security that is falling, but perhaps you think that it will decrease even more.
“News Feed” is for social purposes. This is the section where users can share opinions and information.
In “Discover” you will find: “Instruments”, “People” and “CopyPortfolios”. And we discussed previously in this guide the kinds of assets that are available on eToro:
- Cryptocurrencies
- ETFs
- Stocks
- Commodities
- Currencies
- Index funds
The concept “social trading” makes sense within “People”: there, you can copy the strategies of any user you choose.
You will be able to find those users that you find more interesting. You can search by risk level, trading market, or average profits, among other filters. 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, the platform will invest $ 200 of your funds in the same asset or company as well.
You will also see the three main types of CopyPortfolios, which are “Top Trader”, “Market” and “Partner”.
In some cases, you might prefer copying to CopyPortfolios than to other traders, because the former offer more diversity. There are all kinds of portfolios that you can identify easily and are classified by sectors. Thus, in case you suspect a specific sector, like biotechnology or drones, has a good chance of prospering, you can find that specific portfolio and invest in it.
Can you trust eToro?
eToro has been independently tested many times to validate its integrity in the treatment of data from previous users. Every time, results have shown that eToro is very meticulous with the information.
The main office of eToro is located in Cyprus, and therefore the broker is certified by the CySEC or Cyprus Securities Market Commission, which can cover up to € 20,000 from its client's debts, including those from South Africa. Furthermore, eToro follows all the strict requirements of the European Union.
eToro responds to the European Financial Instruments Market or MiFID in Europe, and to the Financial Conduct Authority or FCA in the USA. Apart from the above, it has a trajectory of fifteen years, with more than 20 million users all over the world. So, yes, it is a safe broker.
It is also important to mention the great customer service. You can use the ticketing system, an online chat, and they also have a phone number available for assistance.
In case you still don't know what “leverage” is, we'll describe it briefly. When trading, it's the capacity of multiplying your investment without putting more money. That way, if you start with $ 100 and you leverage x2, your initial investment will be $ 200.
Leverage and the importance of “Take Profit” and “Stop Loss”
Let's pretend that you have complete certainty that Tezos will rise, and you want to “go long”. You have $ 1,000, but you actually can invest more and make more money.
Perhaps you could go to your bank, ask for a credit, wait for it to be accepted and receiving the money, send the money to eToro, confirm that it arrived, and then purchase Tezos… Nevertheless, when you finish doing all that, probably Tezos would be already at a much higher price (if your prediction got confirmed), and it wouldn't be a good idea to invest.
Leverage is like a loan, but it is only a few clicks away! eToro allows you to invest (and earn) much higher amounts than what you actually have on the platform. Before trading, you will how much leverage to use as in the image:
Within other markets, the leverage you can use is higher. Why? Because leverage is most common in short-term operations or day trading, and cryptocurrencies tend to be a medium or long-term investment. Let's talk a bit more about how leverage works.
You begin with $ 1,000 and pick leverage x2, then you would have $ 2,000 to invest (the extra $ 1,000 to reach $ 2,000 are “borrowed” from eToro).
A couple of days later, as you thought, Tezos raises its price by 20% and your money has appreciated reaching $ 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).
With $ 1000 you get a profit of $ 400, no less than a profit of 40%. That's not bad at all.
But watch out: if everything goes ok and the price goes up, you will make money. However, if the price falls, you will also lose more money really fast.
Let's suppose that the asset didn't increase by 20%, but it went down also by 20%, you won't lose $ 20 but double, $ 40. Because of that, the terms “Take Profit” and “Stop Loss” are crucial when operating 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 Tezos at $ 100, you request eToro to close your operation when it reaches $ 120. That way, you make sure you won't change your mind and decide to keep waiting in case it keeps rising, which could make you lose it all.
Stop Loss is even more important, mostly when operating with leverage, since a small loss could have a significant impact. Consider that eToro will recommend a limit for Stop Loss, but it is better to place it lower than that.
eToro payment methods
Among the payment options accepted on eToro you will find: bank transfer, PayPal, credit card, Neteller, and Skrill. Depositing funds on eToro is so simple: go to “Deposit funds”, type the amount and select your preferred method.
Consider that for security policies, you need to be the owner of the credit card or the account.
You can start with a $ 200 deposit, and there is a limited maximum for unverified accounts. Thus, if you intend to trade with much more, you should contact Support to verify your account first.
Additionally, know that you can make the deposit in any currency you want since eToro will make the conversion automatically to USD, although it charges a fee, so it is preferable to make the transfer directly in USD.
Exchange-Traded Funds
Exchange-Traded Funds or ETFs are a kind of passively managed fund, 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 the rates are much lower than those of an actively managed fund.
Currency market
Foreign exchange trading or Forex consists, as the name says, in the exchange of currencies. In other words, is the conversion between two currencies, and the aim is, evidently, to make a profit out of this.
If you decide to exchange the EUR/USD pair, you acquire euros and pay with dollars, expecting that the euro will rise compared to the dollar. Therefore, if you purchased each euro at 1.15 USD and you sell them back when their price is 1.20 USD, you'll be keeping that difference.
You may be thinking by now that this form of trading requires investing considerable amounts, and you are not wrong, because fluctuation in prices is never that dramatic, and often you will need to use a lot of leverage (which sometimes can be too much of a risk). Our advice for those who are new in the world of trading is not to start with Forex, but with a safer and more secure market.
You can exchange with almost every currency on eToro. Still, keep in mind that in this market sales are made through CFDs, thus you will not be the owner of the real asset.
Index Funds
Index funds are most adequate for those interested in long-term trading, especially for beginners. If you don't need to use the amount of money you'll invest in less than five or ten years, index funds offer you security and diversity.
You may think differently, but beating the benchmark is far from being a piece of cake and very few fund managers achieve that, apart from some specific cases, like Warren Buffett's.
If someone brags about having beaten the index, they probably have done it for a chor period or on particular occasions, or perhaps the rates are so high that indexing would be a better decision (with minimal commissions).
The great advantage of index funds is that they perfectly solve both issues: their fees are minor and they beat active managers most of the time, although in the long term.
Commodity market
Most investors trade with raw materials because of their stability. While other assets tend to fluctuate more, raw materials prices vary less and offer security against inflation or market volatility. However, prices are subject to supply and demand, so if the fear of possible inflation produces greater demand for a certain good, its cost will also increase.
Keep in mind that the only intended profit from the investment in raw materials will be the hypothetical capital gain after the sale since, unlike shares, these don't give returns or pay interest.
Commodities can be divided into two main categories: hard raw materials and soft raw materials. The former include precious metals (such as gold, silver, copper, and platinum), industrial metals (for instance, aluminum, iron, or zinc), and oil; and the latter are agricultural resources, like wheat, soybeans, vegetables, or even dairy, among many others.
How are CFDs and futures different?
How are CFDs and Futures different?
- Counterparties
- Futures: the exchange is made with another trader.
- CFDs: the counterparty is the broker (eToro). In other words: you don't “play” against or with another trader but the bank.
- Date of expiry:
- Futures: there is a date of expiry. At that moment, the contract is closed even if you are in losses.
- CFDs: they do not have an expiry date. You can wait for your position to rise before exiting.
- Options for trading:
- Futures: there are fewer options
- CFDs: you have plenty of options to choose from, there is a huge diversity of CFDs
- Minimum investment amount or “trade size”:
- Futures: you need to start with a higher amount
- CFDs: very low
- Trading costs and charges:
- Futures: as you have to pay more in the first place, costs are lower
- CFDs: rates are higher
- Leverage:
- Futures: absent leverage
- CFDs: it is always possible to leverage
Trading strategies
There are different methods or ways for crypto trading, like buying and holding or day trading, for naming just a few.
In case you are a beginner in the world of trading, I recommend something in between: placing a dynamic stop-loss (15-20% under the highest price) and wait for it to work.
This means that if, for example, you acquire a cryptocurrency at $ 10, it reaches $ 20 and then decreases to $ 12, your operation will be closed at $ 16-17 and you will obtain a pretty good profit.
Perhaps you are wondering: why not selling back when the cost is at its maximum? But unless you are a psychic, that is just not possible. The mentioned strategy can work perfectly and give good results.
Later on, you will be able to apply more complex strategies, such as using leverage or going short to profit from bear markets.
Virtual portfolio
If you do not have much experience investing, you can start by practicing with a “demo” option. You only need to set a virtual account and your operations will be carried out with “imaginary” funds.
A virtual account can help you to practice and gain experience before starting to trade with real funds. When you open your demo account, you will begin with a virtual amount of $ 100.000, to operate with a variety of assets available on eToro (not just with Tezos).
The first attempt is not usually that good. But don't worry, since you can ask support to deposit back the virtual $ 100k to your account, and the second try you should do better.
Keep in mind that you should always be cold-minded when trading, and perhaps using a demo account can make you a bit impulsive. It will never be the same as risking your own money.
And of course, the virtual mode is kind of absurd if you intend to trade in the medium or long-term (which almost assures you a profit only by replicating an index), since you would be wasting years to see the outcome. Demo accounts may be ideal for practicing before investing in the short or medium-term.