Is eToro The Best Broker For Beginners?

One broker that is often recommended for beginner and intermediate level traders is eToro.

eToro is an STP broker that provides traders with guaranteed stop losses, trading advice & trading lessons, an unlimited demo/practice account, and a facility that allows traders to copy the trades of other eToro traders should they want to. In this article I will write about each of these features and whether they are really of use to Forex beginners.

The advantages of using an STP broker,

Straight Through Processing (STP) means exactly what it says, trades pass straight through the broker and onto their liquidity provider(s). For beginners, trading with an STP broker provides them with the comfort of knowing that their broker is never trading against them. Very few brokers actively trade against their clients and doing so would create a huge conflict of interest; however brokers who are market makers always have the option of holding on to their client’s trades and thereby betting against them and many traders, especially traders who are beginners, are uncomfortable with this. Since STP brokers pass their clients trades straight to a liquidity provider and profit from the spread they never have anything to gain from their client’s loses, in fact, quite the opposite is true. It is in an STP brokers interests that their clients are profitable as traders as they are more likely to continue trading with them. For beginners, it is a great benefit to know that their broker is effectively ‘on their side’ so to speak.

Guaranteed stop losses,

Most brokers do not guarantee their stop-losses so there is always the risk of debt if the market slips and a highly leveraged losing position is closed out at a worse price than the stop loss was set at. If that were to happen then the trader may very well end up owing money to their broker. With eToros guaranteed stops that cannot happen. Even if the market slips eToro still promises to guarantee their traders stop losses. And for beginners just testing the waters having a broker that does this is a huge plus. I do not know of any other Forex broker that does this although I have come across a spread betting company called IG Index that gives guaranteed stops in exchange for paying a higher spread.

Trading advice & trading lessons,

Whilst I would recommend that people learn to trade for themselves, take responsibility for their own trades and don’t take advice from anyone, trading lessons and online trading tutorials can be useful for beginners. A broker offering trading lessons for its customers is therefore a bonus for beginners, providing the lessons are good of course, and that they actually teach one to trade in manner that benefits the trader and not the broker. Sometimes, depending on the type of broker you are using, what is in your broker’s best interests necessarily isn’t in yours. For example, ECN brokers love scalpers and encourage scalping as scalpers tend to use high leverage and trade frequently generating lots of commission for the broker; but succeeding as a scalper is very hard and scalping is usually not a very good trading strategy. Or a market maker who bets against their clients for example would not want to be teaching their clients how to win at all. However, as we have already established, it is in an STP brokers interests that their clients are successful so any training they provide is quite likely to be useful.

Unlimited demo/practice accounts,

Demo accounts are of course very useful but almost all brokers offer them so eToro offering beginners a demo trading account in and of itself is no big deal. However, there are no time limits on eToro’s demo platform as eToro’s demo accounts do not expire which is better than most other brokers who only offer demo accounts for a limited period of time. One disadvantage of eToro’s demo account however is that they don’t (as far as I am aware) offer real cash prizes for results gained in a demo trading contest. If you’re interested in a demo trading contest with real cash prizes for demo trading Deltastock run one every month, you can enter Deltastock’s monthly demo trading contest by opening a demo account with them here.

The eToro trade copier,

eToro have a facility that allows traders to copy the trades of other traders, I personally see no value in this for beginners if learning to become a good trader for ones self is their goal. But others may like this feature although I personally would not use it.

If you think you might be interested in trading with eToro you can open a live account, open a practice account, or just get more information here.