eToro Fees Explained In Detail

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eToro Fees Explained In Detail

eToro is an online trading platform which has gained popularity across the globe. Known for keeping up with the latest investment developments, eToro offers investors access to a wide range of instruments and markets. This guide will focus primarily on eToro’s fees, often considered to be some of the most advantageous in the industry.

A Brief Overview of eToro

eToro is an Israeli fintech company established in 2007. Today, it has registered and licenced subsidiaries spread across the world, including the UK, Australia, and Cyprus. The main financial instrument offered by the company is the Contract for Difference (CFD), which allows investors to trade on margin and benefit from price movements of an asset without actually owning it.

In keeping with modern technology developments, eToro today specialises in cryptocurrency markets. Traders can invest in CFDs for the major cryptocurrencies, including Bitcoin and Ethereum, as well as smaller ones, such as EOS. Apart from cryptocurrencies, eToro also offers investment opportunities in stocks and forex.

One of the best-known features of the eToro trading platform is its Social Trading option. Ideal for novice investors, the Social Trading platform allows you to automatically emulate trades of successful traders, benefitting from their skill and experience. You can trade on eToro using the desktop app or the convenient mobile app, which is ranked amongst the best mobile applications for online trading.

Withdrawal Fees

Etoro Withdrawal Methods
Screenshots are shown for illustration purposes only. Actual product may vary.

eToro’s withdrawal fees are probably the easiest to explain since they consist of a single flat rate of $25 per withdrawal. Since this fee applies no matter the size of your withdrawal, it makes sense to wait and withdraw a larger sum rather than frequently withdrawing smaller amounts.

The platform supports three main methods of withdrawal:

  • Debit or Credit Cards
  • PayPal
  • Wire Transfer

75% of retail investor accounts lose money when trading CFDs with this provider

Currency Conversion Fees

Currency conversion fees are something you need to consider if you are funding your account using a payment method which is set to any other currency apart from USD. Therefore, if you deposit funds in EUR, GBP or any other currency or asset, you’ll need to consider the conversion fee. This fee takes the form of pips, and depends on your currency. To better understand how the fee is calculated, we’ve included the following example.

Conversion Fee Example

Imagine that you are investing £500 using a conversion rate of $1 = £0.7591. Funding your eToro account without a conversion fee would mean that you would have approximately $659 available to invest. The platform charges 50 pips for GBP to USD conversions, which is equal to 0.5%. This means that 0.5% of your investment capital, or $2.50, is taken away in conversion fees. This results in your starting capital totalling approximately $656.

When depositing funds in eToro using certain currencies it might be cheaper for you to convert them to USD at the source. Furthermore, this conversion fee is also applied to withdrawals.

Spread Fees

Etoro Buy Bitcoin
Screenshots are shown for illustration purposes only. Actual product may vary.

Spreads are commonly charged by trading brokers along with commissions. eToro is an exception and does not charge any commission fees. Spread fees on eToro are shown as part of the buying price for any market, such as cryptocurrencies or stocks. This fee varies considerably by market, with cryptocurrency spreads calculated as a percentage whilst commodity spread fees calculated in pips.

Spread Fee Example

Imagine you are buying Bitcoin, for which the spread fee is 0.75%. The buying price, seen on the Bitcoin ticker, is $7,178.09, whilst the selling price is $7,124.45. There are two investment strategies to trade Bitcoin on eToro. You can either buy long, in which case the spread fee would amount to 0.75% of $7,178.09, or $53.84. Alternatively, you can opt to short Bitcoin, in which case the spread fee would be calculated on the $7,124.45, and amount to $53.43.

The probability is that you will only buy a fraction of Bitcoin, so the spread fee would decrease accordingly. Using the above example, where our investment capital was approximately $656, the spread fee to buy Bitcoin using all the capital would be $4.92.

Overnight Fees

eToro charges overnight fees with some exceptions, such as with investments which do not use any leverage. For markets for which overnight fees apply, including cryptocurrencies, this fee is applied whenever you maintain an open position across from one trading day to the next. If you’re planning to day trade cryptocurrency, overnight fees shouldn’t affect you. However, if you decide to copy other traders or buy long, basing yourself on Trend Trading strategies, these fees can quickly add up.

In addition, the daily fee or credit is multiplied threefold for positions which are open on Wednesdays night. The overnight fee is charged or credited at 17.00 New York time. If you are looking to buy or sell Bitcoin CFDs and keep a position open overnight, the current fee would be $3.019691 per unit

75% of retail investor accounts lose money when trading CFDs with this provider

Inactivity Fees

eToro charges a fair inactivity fee of $10 per month when you don’t log into your account for 12 consecutive months. This fee is taken until your balance runs out, after which your account will most probably be closed. It is, therefore, a good idea to log into your account every now and then so as not to be charged this fee, even if you don’t plan on investing with eToro immediately.

eToro Fees Results

Etoro Spread Fees
Screenshots are shown for illustration purposes only. Actual product may vary.

Calculating all applicable eToro fees can be somewhat confusing at first, so the following will explain how you should go about working them out.

  • In our example above we began with a total investment capital of £500
  • If eToro handles the conversion, we are charged a $2.50 conversion rate, bringing out capital down to approximately $656
  • Next, let’s imagine that we invest the entire amount in Bitcoin
  • The spread for Bitcoin is 0.75%, which means a fee of $4.92
  • Let us consider that we decide to use eToro’s maximum leverage of 1:2 for cryptocurrencies, meaning that our investment is now $1,303
  • Since cryptocurrency trades are normally opened and close on the same day, we won’t factor in any overnight fees
  • Within a few hours, the price of Bitcoin increase by 5% of our purchase price
  • Here we decide to sell, incurring the sale spread fee of $10.26
  • After paying back the leverage we borrowed, we are left with $716
  • We decide to withdraw the funds, which means that we need to pay the $25 withdrawal fee
  • Since our account is in GBP, eToro converts our currency at a fee of $3.46
  • We receive the final balance into our account, £522, marking a profit of £22

Calculation Conclusion

Although with the above example fees resulting in 56% of the total profits, the initial investment capital was small. You need to keep in mind that the $25 withdrawal fee alone represented over 75% of these fees. When and if to withdraw is an important consideration to make before you start investing. In fact, before you commit any funds you should develop an investment strategy and calculate applicable fees accordingly.

eToro’s fee structure is one of the most transparent ones amongst online brokers. Although fees are ultimately seen as a cost by investors, they help maintain a safe and functional platform. Without fees, eToro would not be able to operate, keeping your funds and account safe from attacks and fraudsters. 

Trading with eToro

eToro is today one of the largest online brokers in the world and offers one of the most comprehensive lists of assets. The broker is celebrated, not only for not charging trading commissions but also for offering some truly impressive features, including the Social Trading platform and mobile app. In addition, advanced investors can use eToro to hedge their investments, although scalping is not permitted.

Opening an account with eToro is fast and simple, and whilst the company carries out due diligence in line with its licences the process is streamlined and very user-friendly.

75% of retail investor accounts lose money when trading CFDs with this provider

Whilst investing with eToro gives you access to margin trading, you should only use this feature if you fully understand the risks involved. When trading with margin you run a bigger risk of losing a larger portion of your investment, so you should only use leverage if you can afford it. Using leverage when trading cryptocurrencies is not required, and whilst eToro offers significantly higher leverages on other markets, such as forex, it has kept its crypto leverage relatively low.

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