Author: Eduardo Montero
In today’s article we will detail each of the fees and costs of eToro, a financial intermediary that has become the leader in its sector (Copy Trading), so by reading this you can get an idea of how this intermediary’s fees can affect your profitability.
But first of all, let’s learn a little more about the eToro broker, and understand why it has positioned itself as the best broker of its kind and a global benchmark.
EToro’s main features
To learn a little more about eToro we have brought you a summary of its main features taking into account various aspects, such as its security and reliability, its services, among other things.
eToro is a multinational financial services company founded in 2006 and regulated by the Cyprus Securities and Exchange Commission (CySEC), the UK’s Financial Conduct Authority ( FCA), the Australian Securities and Investments Commission (ASIC), and is also licensed by the Seychelles Financial Services Authority (FSAS), which directly makes it a trusted broker.
With eToro you can invest online and offline in a variety of financial assets, such as large company shares, currency pairs, and other instruments.
So far so different from other forex and CFD brokers, but what has set eToro apart (for good) from the rest is their innovative Copy Trading and Social Trading system, where you can copy other more experienced traders and take advantage of their profitability at the click of a button, at no cost, as their platform is completely free of charge. It’s like having trading and investment experts working for you for free.
Check out this other article on eToro’s customer reviews and feedback to learn more about the strengths and weaknesses of this online broker.
In addition, if you become a winning trader, and meet certain requirements you can earn money for each person who copies you.
Another thing that makes eToro stand out from the rest is its intuitive platform, which is getting more powerful and easier to use every day.
And if that wasn’t enough, it offers a free unlimited demo account where you can have a fictitious trading portfolio and also practice to familiarise yourself with the platform without risking your own capital.
Some non-favourable features that are also part of this broker are that:
- It does not offer the possibility to invest with Meta Trader 4 or 5.
- The base currency of the account can only be US dollars (USD).
- Has withdrawal fees and inactivity charges.
We have already seen a bit about eToro, it only remains for us to see a summary of all their fees and commissions and then take a closer look at this aspect that affects traders so much.
Overview of eToro’s main fees and commissions
Let’s take a look at a summary of what fees or commissions you will (or won’t) have to pay at eToro.
You will pay a fee for:
- Open and close buy or sell trades in CFDs (leveraged market) in the form of spread. Spot cryptocurrencies are included, in buy trades.
- Holding trades at night or on weekends on leveraged asset positions (CFDs), which is known as a swap or overnight rate.
- The maintenance of your account if it remains inactive (not logged in) for 12 months or more. This fee will be $10 USD.
- Currency conversion. This applies to non-USD deposits or withdrawals to non-USD accounts.
- Each withdrawal, which costs $5 USD.
You will not pay a fee for:
- Open an account with eToro.
- Make deposits in USD, or withdrawals to USD accounts.
- Trade real stocks and ETFs in buy trades (Spot market).
- Use your platform and its CopyTrading and CopyPortfolios features.
- Use your demo account with $100 000 virtual balance.
At this point it is worth noting that spreads and swaps vary widely depending on the type of asset being traded.
EToro Spreads and Commissions
eToro has a trading fee schedule similar to that of any other broker of its kind, where the type and size of the trading fee is determined by the type of market and asset traded, so this is how we will be looking at this aspect.
Stocks and ETFs (not leveraged, spot).
For company shares and ETFs, eToro makes it clear that it doesn’t charge any extra fees, meaning you pay the actual price of the share with no additional charges.
As shown below, where a practical example is included:
Just keep in mind that the minimum investment amount will be 10 USD.
Cryptocurrencies (unleveraged, spot)
In the case of cryptocurrencies, although you get the ownership of the cryptocurrency when you make the purchase, this time eToro does not charge any direct commission, but it does apply a spread fee.
The spread is the difference between the ask price (ASK) and bid price (BID) of a given asset.
As soon as you open a new trade, you will see that there is a “loss” on the position, this is due to the spread. However, the final calculation of the spread is made when you close the position and is adjusted at that precise moment according to the closing price.
Each asset has a different spread, in the following image you can see some examples of the most popular assets in this market.
We show you a practical example of how the spread is calculated using the most popular cryptocurrency of all time (BTC).
One thing you should know is that in this market (spot) you will not be able to open short positions, i.e. sell positions, without first having acquired the cryptocurrency in question through a purchase.
Selling transactions can only be carried out through contracts for difference (CFDs).
Contracts for Difference (CFDs)
Contracts for difference are a way in which you can invest in assets on a leveraged basis without owning the asset, so you can open both buy and sell trades at any time without owning the asset in question.
At eToro this market includes currency pairs (FOREX), commodities, indices, stocks, ETFs, and cryptocurrencies.
However, eToro does not charge any direct commission for these asset classes, but applies a spread fee as for the cryptocurrency (spot) market.
For currencies and commodities this spread will be calculated based on a certain amount of pips.
Pip stands for “percentage in points” and refers to the smallest price change an asset can make, and therefore refers to the last digit of a price.
It is used to measure the change in the price of one currency relative to another.
For indices the spread is determined in points, which refers to the price change to the left of the decimal point.
For example, if the S&P 500 moves from 4000.25 to 4300.00, it has moved 300 points up.
Let’s take a look at some examples of spreads on eToro by asset by market type.
In the case of equities, ETFs and cryptocurrencies (CFDs), spreads are calculated on a percentage basis as in cryptocurrencies (spot).
Swap fee (if you trade with leverage)
There are also other fees that eToro may charge you if you trade CFDs on a leveraged basis, these are the overnight fees, also known as swaps or rollover fees.
These fees are triggered when you hold an open position overnight or after the close of the trading session (which is 17:00 New York time, or 23:00 GMT).
These fees reflect the forces of supply and demand that drive the financial markets, including covering the costs associated with your position, and is considered a rollover fee, as it is a product of trading with borrowed money (leverage).
how is the swap rate calculated?
The formula for calculating this fee is as follows:
(eToro fee + Libor) / 365 x Units x Price in $
Where Libor is the reference rate used by international banks when granting short-term loans to each other.
LIBOR stands for London Interbank Offered Rate. A total of 35 different LIBOR rates are published each day, varying from one-day to 12-month maturities, and are calculated in five different currencies.
eToro uses the one-month LIBOR rate for the calculation of overnight commissions on shares.
Below are some examples of swap rates for popular assets in different markets.
As you can see, although in very few cases, the swap fee can be positive, i.e. instead of subtracting from your balance sheet, it adds to it. This happens when the interest rate is positive.
While you can learn how to calculate the overnight fee yourself, with eToro you don’t have to, because before you open each position, it specifies how much you will pay each rollover day (including the weekend), so you can decide whether or not to open the position.
Another thing worth noting is that the weekend commission (x3) is charged on Fridays for most stock CFDs, ETFs and indices, and on Wednesdays for most commodities and currencies.
Overnight commissions for oil and natural gas are charged on Fridays. Overnight fees for cryptocurrencies are charged daily.
With this we have finished with the operational fees and commissions, i.e. those that are derived from our day-to-day trading.
From now on we will talk about non-operating fees, which are generated regardless of whether you trade on the platform or not.
EToro’s exchange rate commission
We start with the exchange rate fee, which is quite common at eToro due to the fact that you can only have your account in US Dollars (USD), so if you use a different currency to deposit or even withdraw, you’ll be directly affected by these types of fees.
The size of the exchange rate fee will depend on the currency pair you are exchanging and the payment method you are using.
For example, exchanging EUR to USD is not the same as exchanging AUD to USD, nor is exchanging EUR to USD using PayPal the same as exchanging EUR to USD using bank transfer.
Below is an image showing some of the exchange rates that eToro applies for different currencies and payment methods:
But the numbers you see are not given in USD, but in pips. To make it easier to understand, let’s see an example:
Deposit in a currency other than USD: £2,000 (GBP)
Currency pair involved in the trade: GBP/USD
Quote for GBP/USD: 1.3800 / 1.3802
Swap cost: 50 pips (0.0050)
Conversion rate: (1.3800 – 0.0050) = 1.3750
Amount converted to USD: (£2,000 * 1.3750) = $2,750
Conversion cost: ((£2,000 * 1.38) – $2,750) = $10
In other words, if you deposit: £2,000 GBP at eToro, as the rate is 50 pips, at the current rate you would be paying a $10 USD exchange rate fee, and the same if you withdraw the same amount to an account in that currency (GBP).
It is also worth noting that Diamond Club members are fully exempt from the pips on transactions, meaning that they do not pay exchange rate fees.
Platinum and Platinum Plus members receive a 50% discount on transaction pips.
But please note that club discounts do not apply in the following cases:
- Transactions via PayPal in GBP, EUR and AUD
- Credit Cards
Inactivity fee on your eToro account
There are brokers that do not charge a fee for leaving your account inactive for a period of time, this is not the case with eToro, as they charge a $10 USD fee if you do not log in to your account for a period of 12 months or more, which is logical enough, as sometimes there are brokers that charge this after 3 months or even less.
This fee will be deducted from your available balance, so no positions will be closed to cover it.
For withdrawals, eToro charges a small mixed fee of $5.00 USD per withdrawal, which cannot be less than $30.00 USD.
Some customers are unhappy with this fee, but one way to reduce this charge is to (if possible) bundle as many withdrawals as possible into one withdrawal, so that you pay less for your withdrawals.
Other eToro broker fees
eToro are very transparent with their costs and fees, and make it clear that in addition to the usual fees we’ve seen throughout the article, they don’t charge any other fees for any of the following:
- Use of your platform
- Account opening
- Deposits in USD
- Tools, guides or tutorials
- Using the CopyTrader and CopyPortfolios function or managing them.
- Demo account with $100 000 virtual USD
is eToro an expensive or cheap broker?
Based on a detailed analysis of this broker’s commissions, and given our experience and knowledge of other similar brokers, we agree with many of its clients that eToro is neither cheap nor expensive, i.e. somewhere in between.
While it is true that some fees such as spreads and swaps are above average, other fees such as those usually charged for trading stocks are non-existent.
On the other hand, eToro’s flagship product is the CopyTrade and CopyPortfolios function and the availability of these tools also compensates somewhat for the above average operating costs.
We hope this article has given you an insight into each and every one of the fees and commissions you’ll have to deal with if you decide to trade with eToro.
Remember that you have the option to open a free demo account with this broker to try out their platform and see their commissions in detail without risking your money.
Feel free to share this article with your friends via your social networks. And leave a comment below about any information, opinion or doubt about it.
Warning: eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Past performance is not an indication of future results. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision.
Copy trading is a portfolio management service, provided by eToro (Europe) Ltd., which is authorised and regulated by the Cyprus Securities and Exchange Commission.
Cryptoasset investing is unregulated in some EU countries and the UK. No consumer protection. Your capital is at risk.
eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro.
This post is also available in Spanish: comisiones etoro
Author: Eduardo Montero
Welcome to Mundo-Forex.com: I'm Eduardo Montero, I work professionally in IT. I started trading in the financial markets (mainly Forex) more than 10 years ago. I'm the author of the articles on this website and of many others published on other websites specialised in stock market investment and finance in general. Learn more about me here: About the author.