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Spreads & fees at eToro at a glance
A crucial question for traders when assessing brokers is what costs are incurred in connection with trading. This is true for both regular securities brokers and more specialized providers such as Forex and CFD brokers. If you want to trade forex pairs or CFDs, you will usually find special cost factors with the corresponding brokers. This is also the case with the broker eToro, which we’d like to take a closer look at in detail regarding their costs.
Cost overview with the broker eToro
The broker eToro, known for its social trading, offers both currency pair trading and Contracts For Difference (CFDs). There are a total of three different cost factors for the customer to consider. First of all it’s worth mentioning that there are no costs for opening the trading account or for using it later. However, this is the case with virtually every CFD and Forex broker, as a custody account fee is usually only charged by ordinary online brokers.
The three cost factors mentioned above are the following elements, but they may not apply to every trader, with the exception of the estimated spreads:
- Financing costs
- Fees for withdrawals
In the following, we would like to explain the costs listed above in more detail and give you tips, among other things, on how you can perhaps reduce or even completely avoid some of these costs.
Spreads as the main cost factor
For virtually every CFD and Forex broker, the spreads quoted by the provider are the main cost factor. Some newcomers who are new to trading currency pairs and CFDs for the first time may not even know what the cost of spreads is. Therefore, we would like to briefly explain the characteristics of spreads, and how most brokers charge for them. Basically, you can remember that the spread is a difference. Specifically, the difference between the buying and selling rate of a currency pair, as estimated by the broker, is called the spread. The real-time prices provided by the broker provide you with information on how the current buy price of a currency pair is quoted, among other things. In addition, you are also informed about the selling price, so that you can calculate the spread from the difference. The size of the spread depends primarily on which two currencies are involved in a currency pair.
Most brokers divide the offered currency pairs into the following three groups:
Spreads also move in this order, so that you will find relatively small differences between buying and selling prices, especially for the majors. These are often in the range between below 1.0 and up to 5.0 pips. The Minors are slightly more expensive. Particularly with the more exotic currency pairs, you can expect spreads in the range between ten and more than 20 pips.
Broker eToro also has this spread breakdown by currency pairs. A customer-friendly feature is that the provider provides a complete list of tradable currency pairs on their website with the corresponding spreads, which are of course given in pips. So below are just a few of the most commonly traded currency pairs with their corresponding spreads that eToro estimates.
Spreads with etoro
|Euro/US Dollar||EUR/USD||3 Pips|
|Australian Dollar/Swiss Franc||AUD/CHF||4 Pips|
|Australian Dollar/Canadian Dollar||AUD/CAD||4 Pips|
|Australian Dollar/New Zealand Dollar||AUD/NZD||4 Pips|
|British Pound/US Dollar||GBP/USD||4 Pips|
|New Zealand Dollar/US Dollar||NZD/USD||5 Pips|
|US Dollar/Canadian Dollar||USD/CAD||3 Pips|
|US Dollar/Japanese Yen||USD/JPY||2 Pips|
|US Dollar/Swiss Franc||USD/CHF||3 Pips|
|Australian Dollar/US Dollar||AUD/USD||4 Pips|
|Euro/British Pound||EUR/GBP||4 Pips|
|Euro/Swiss Franc||EUR/CHF||5 Pips|
|Euro/Japanese Yen||EUR/JPY||4 Pips|
|British Pound/Japanese Yen||GBP/JPY||6 Pips|
|Euro/Australian Dollar||EUR/AUD||7 Pips|
|Euro/Canadian Dollar||EUR/CAD||7 Pips|
|Australian Dollar/Japanese Yen||AUD/JPY||5 Pips|
|New Zealand Dollar/Canadian Dollar||NZD/CAD||4 Pips|
|New Zealand Dollar/Swiss Franc||NZD/CHF||4 Pips|
|New Zealand Dollar/Japanese Yen||NZD/JPY||4 Pips|
|Canadian Dollar/Swiss Franc||CAD/CHF||14 Pips|
|Canadian Dollar/Japanese Yen||CAD/JPY||6 Pips|
|Swiss Franc/Japanese Yen||CHF/JPY||6 Pips|
|US Dollar/Hong Kong Dollar||USD/HKD||7 Pips|
|US Dollar/Ruble||USD/RUB*||3 Pips|
|US Dollar/Yuan||USD/CNH*||10 Pips|
|Euro/New Zealand Dollar||EUR/NZD||4 Pips|
|British Pound/Australian Dollar||GBP/AUD||4 Pips|
|British Pound/Swiss Franc||GBP/CHF||4 Pips|
|British Pound/New Zealand Dollar||GBP/NZD||4 Pips|
With a spread of three pips, the broker is already among the providers with the highest spreads on the most frequently traded currency pair, the euro / US dollar pair. This may still be okay for traders who mostly hold their positions for the medium to long term. For traders who tend to trade short-term and open and close several positions daily, this is definitely too expensive and makes lucrative trading almost impossible. Here there are much cheaper alternatives such as GKFX or IG.
Spreads at eToro are based on the currency pair
With the broker eToro, the size of the spreads is primarily determined by which currency pair you trade. So from the so-called majors to the more exotic currency pairs there are sometimes spread differences of more than 20 pips. Especially with larger trading volumes, these costs can be a deciding factor in whether you choose eToro or another provider.
Not only for currency pairs but also for CFDs the spread is used as a cost factor. This is true for index, commodity and stock CFDs provided by the broker. In this regard, we would just like to briefly note that the provider’s website also provides a detailed list in this area. This list shows not only the current buy and sell price, but also the typical spread for these financial products.
Financing costs as a further cost factor
In addition to spreads there is another cost factor which affects you, but only if you leave a position open with the broker eToro overnight. These are the so-called financing costs which are basically simply the interest you have to pay at a bank for a loan you have taken out. With financing costs, the interest rate is usually based on a certain key interest rate, such as EURIBOR or sometimes the ECB key interest rate. Of course, the broker usually charges a small surcharge, so that the financing costs are currently often between three and five percent. These financing costs only apply to a long position, because only then have you borrowed money from the broker through the leverage.
Financing costs (swaps) with eToro
(per 10,000 units)
|Australian Dollar/Swiss Franc||AUD/CHF||-0.72||0.52|
|Australian Dollar/Canadian Dollar||AUD/CAD||-0.45||0.27|
|Australian Dollar/New Zealand Dollar||AUD/NZD||0.08||-0.18|
|British Pound/US Dollar||GBP/USD||-0.3||-0.15|
|New Zealand Dollar/US Dollar||NZD/USD||-1.35||0.15|
|US Dollar/Canadian Dollar||USD/CAD||-0.2||-0.2|
|US Dollar/Japanese Yen||USD/JPY||-0.28||0.01|
|US Dollar/Swiss Franc||USD/CHF||-1.4||0.09|
|Australian Dollar/US Dollar||AUD/USD||-1.00||0.12|
|British Pound/Japanese Yen||GBP/JPY||-1||0.03|
|Australian Dollar/Japanese Yen||AUD/JPY||-1.8||0.16|
|New Zealand Dollar/Canadian Dollar||NZD/CAD||-0.55||0.34|
|New Zealand Dollar/Swiss Franc||NZD/CHF||-0.82||0.53|
|New Zealand Dollar/Japanese Yen||NZD/JPY||-0.65||0.42|
|Canadian Dollar/Swiss Franc||CAD/CHF||-0.36||0.2|
|Canadian Dollar/Japanese Yen||CAD/JPY||-0.51||0|
|Swiss Franc/Japanese Yen||CHF/JPY||0.04||-0.7|
|US Dollar/Hong Kong Dollar||USD/HKD||-0.98||-0.5|
|Euro/New Zealand Dollar||EUR/NZD||0.75||-1.17|
|British Pound/Australian Dollar||GBP/AUD||0.52||-0.83|
|British Pound/Swiss Franc||GBP/CHF||-0.63||0.43|
|British Pound/New Zealand Dollar||GBP/NZD||0.76||-1.1|
This fee factor is not insignificant, because the interest costs are naturally calculated from the total trading volume of the position and not only from your own share. However, for most traders, financing costs are not a significant factor because the position is rarely held for a long period of time. For example, if you have to pay three percent interest on a trading volume or position equivalent of $100,000 US dollars, the calculation is of course only based on a whole year. In this case, financing costs of EUR 3,000 would initially be incurred once a year. However, if you now calculate this down to a holding period for the position of, say, three days, the financing costs would only amount to around 30 euros. These costs are therefore not very significant if you make a profit of several thousand euros.
Note fees for payouts!
A third cost factor that we at the broker eToro do not want to leave unmentioned is the possible fees for withdrawals from your trading account. These costs, as well as the funding costs, do not automatically apply to all traders, but depend on the frequency of withdrawals you choose to make and the amount of the withdrawal. Unfortunately with the broker eToro all available payout methods are subject to fees. These fees are based on the payout amount and range from a minimum of five to a maximum of 25 US dollars.
Withdrawal fees with etoro
|Withdrawal Amount||Withdrawal Fee|
For example, a payout of 500 Euros will result in a fee of 25 Euros, which is a hefty five percent. Our tip is therefore that you should always carefully consider whether the intended payout from your trading account is really necessary or whether you will need the amount for another investment in the foreseeable future anyway.
Conclusion on costs with the broker eToro
At broker eToro you will find the cost factors typical for forex and CFD brokers. This is especially true for the spreads, which are mainly based on the currency pair being traded. Unfortunately, eToro’s spreads are far too high compared to many other forex brokers, for example 3 pips in EUR/USD. For casual or long term oriented traders this may still be too much to bear. For multi-traders or short term oriented investors such a high spread in the majors is normally a KO criterion. The situation is similar with financing costs. While these are normal for forex and CFD brokers if you want to hold your position overnight, here too the size of the spread is critical and we think eToro is a bit too much for some currency pairs. The payout fees are also a bit out of the ordinary as eToro unfortunately does not provide a free payout method yet. With fees between five and 25 euros you should therefore think carefully about how often you want to withdraw from your trading account.