etoro openbook sucks – although it is a great idea. 99% of new traders will only blow up their complete account at the end. What is the reason for this ? Let me explain.
Actually, etoro openbook is not a bad idea. But the problem is the implementation of that great idea. If etoro website properly analyze the best traders and rank them well in their website and monitor their activity and comments, then the copiers will surely benefit from it. But etoro will rank some worst traders as top traders and even accept their bad trading practices and spam and misleading comments.
truth about etoro gurus
For your information, all so called etoro gurus are just ordinary guys like you and me. Do you ever think that a professional traders who trade millions of dollars will ever want to become a etoro guru for just for few hundred dollars per month? But it doesn’t really matter if they have a good solid trading plan and risk management. However, 99% of those gurus doesn’t know much about trading and use the averaging down method which is considered as the easiest but worst trading practice ever. using averaging down approach you can be successful for a short period, but in the long run you ‘ll end up blowing up your account. But how could they be successful with that approach at etoro? let me explain.
Averaging down is a simple thing. Let’s say that the EUR/USD pair is currently trading at 1.3000. The trader start a buy (long) position with 100$ and move stop-loss far away from its default stop-loss of 100 pips (here 1.2900) to something like 1000 or even 2000 pips. If the market moves up, then they can close it with a small profit and register it as a winner. But if the trade goes against him and reach 1.2900, instead of getting out, he start another long (buy) position at 1.2900 while keeping the older trade intact. If market moves more 100 pips down to 1.2800 he buys more 100$ and so on – until the market finally reverse and moves significantly to the upside. When that happen, the trader can close all his trades at break even as a whole (I mean the resultant profit of all open trades is 0$ – no profit, no losses) or even with a small profit. This approach work well in ranging (non trending) market, but it is devastating when the market is trending. Most new traders use this method and become successful in short time. Most of them even begin to believe that this is the proper way of trading. But the truth is that they were just lucky to use that approach in a ranging market. However, when the market starts to trend, they will blowup their accounts. I have seen several such powerful trends with EUR/USD in last two years and so-called gurus who had thousand of copiers then and now only have 0 copiers. But How can etoro gurus get rid of them? They keep their trades open no matter how far the prices goes against him, because he has plenty of guru paid money for keep his loosing trades open and start more trades. even he would keep funding his account with his own money to keep his loosing trades open. However, copiers don’t have that option, and soon they will see the message “There is not enough funds to start this trade” – for automatic trades.
Let me explain this more. Etoro coping is done with exact percentages. If you copy a trader and the trader start with x% of his current account total, x% of your allocation for him will be used to start an automatic trade for you. For example if trader have 1000$ account and you have allocated 10000$ to copy him, when he start a trade with 100$ (10% of his account) , automatic trade with 1000$( 10% of your account) would be open for you.
Now let me explain how you could end up with an empty account with this approach.
- You start to copy a guru with your 100$ and guru has his current account balance 1000$.
- Guru start a trade with 100$ (10% of his account) . As a result 10$ (10% of your account) automatic trade would be open for you.
- guru down by 100 pips, he adds more 100$, automatically you add more 10$.
- guru will continue this until price reverses, If it reverses he will close the trade with small profit and make you happy.
- However, if the price moves against the guru 400 pips without any significant retracement (which is very common in today’s markets), he will be down (4*100$+3*100+2*100$+1*100$ =1000$ = 100%. As a result Your 100$ is washed off. However, guru would never want to loose so he can fund his account instantly before he hit 100% loss and continue this. However, there is no way at your end to keep track on your account like this and once the trade reach -400 pips your 100$ is washed off.
I tried the all top gurus listed at etoro website for more than a year with my real money and ended up loosing my all investments. But at etoro, there is no place for make aware other new innocent copiers about this and that is why i created this blog to make new traders aware about this.
Not only that, I have a guru with some wrong and misleading comments and spam link in his account comments, but seems like etoro never care about those things. He specifies amount of pips he gained in everyday and month (he never appear loose any pips – even any single day), but when we see his statics we can see he is down in long run. He keeps lots of his loosing trades open and does not include the losses of those trades into his losses. If he counted them, he would be actually down by thousands of pips every months. Even though he still use his false comments on his profile to mislead newbies to the Forex and attract them to copy him, no one from etoro community officials didn’t take any action against him. Funniest thing is that he has rated as a featured trader at etoro. If someone checks his statics in all 1 month, 3 month, 6 month, 1 Year period, he/she will understand that guru is a looser in the long run.
I really believe that the etoro copy trader is a good idea if used properly. I have no complaints against them other than this this, their customer support was very good, They are a reputable company, and their trading platform is very user-friendly. Up to this point, I didn’t have any problem with them. Etoro is a very good broker in my opinion but I never recommend any newbie to use copy trader option because that really doesn’t work. I hope the eroro management will take proper actions for better analyze the traders by monitoring their trading approaches and discouraging the bad trading practices in the future. If that happens in the future, I will definitely try it again.
I really recommend new traders to try their own traders at demo platform rather than putting your money at risk of the gurus hands. If you are really eager to trade with really money, trade yourself – that way even if you loose you will learn something (At least things you should not do in trading) . Copying gurus will not teach you anything and you will only call for a certain disaster. If you don’t believe me, then try it and LEARN THE HARD WAY!!!
I know still some guys are eager for use copytrader for them My recommendation is check the statics in all 1 month, 3 month, 6 month, 1 Year period for a given guru, and check if he is profitable in all in all those time frames. Also check their maximum drawdown and try to pick gurus with minimum drawdowns. I have seen some gurus who have lots 99.9% of their account and recover again because they have plenty of money to trade. However, the poor copiers who copied him must have probably ended-up loosing his whole investment.
I really appreciate any comment from anyone who have used open book before.