eToro Fees: What You Need to Know Before You Start Trading

How much does trading on eToro actually cost? This is the question that every trader asks when they first step into the platform. But, the answer isn't as simple as you'd think. While eToro markets itself as a "commission-free" platform, there are indeed a number of fees that come into play—fees that can surprise even seasoned traders if they’re not fully aware.

Hidden Fees? Not Quite, But Be Cautious
When eToro mentions "zero commission," it refers to the fact that there are no fees for buying and selling stocks. However, other costs do exist—costs that, if ignored, can eat into your returns. One of the most critical fees is the spread, which is the difference between the buying and selling price. Spreads vary depending on the asset, and while stocks may come with lower spreads, cryptocurrency, for example, tends to have higher ones.

Spread Fees: The Unseen Cost

The spread on eToro is essentially how they make their money from your trades. For stocks and ETFs, the spread is typically 0.09%, which might seem insignificant at first glance. But over time and with frequent trading, this fee can add up. Cryptocurrencies, on the other hand, have a wider spread, often around 1% or more depending on market volatility.

Moreover, Forex trades come with their own spread fees. For instance, EUR/USD can have a spread as low as 1 pip, while other less liquid currency pairs may see significantly higher spreads.

Overnight Fees: An Unexpected Hit

If you're planning to hold positions overnight, especially in leveraged trades, beware of overnight or rollover fees. These fees can take a chunk out of your profits if your positions remain open for days or even weeks. The overnight fee is essentially an interest payment on the leverage you’re borrowing from the platform to hold your position.

The longer you hold, the more you pay, and with CFDs (Contracts for Difference), this fee becomes particularly prominent. For instance, if you hold a CFD position overnight, expect a daily charge, which can vary based on the asset and the leverage used.

Withdrawal Fees: Moving Your Money

While depositing funds on eToro is generally free, withdrawing your money isn’t. The platform charges a $5 withdrawal fee, which may seem minor. However, if you frequently move funds in and out of your account, this fee adds up.

Additionally, currency conversion fees apply if you're depositing or withdrawing in a currency other than USD. eToro automatically converts funds to USD, and this can lead to extra costs, especially when dealing with foreign currencies. The conversion fee can range from 50 pips to 150 pips, depending on the currency pair.

Inactivity Fees: Paying for Doing Nothing

If your account has been inactive for 12 months, meaning you haven’t made any trades or logged in, eToro charges an inactivity fee of $10 per month. This fee is deducted from your available balance, not from your open positions. The good news is, if you don’t have any funds in your account, you won’t be charged. However, it’s a reminder to stay active or close your account to avoid unnecessary charges.

CopyTrader Fees: Any Hidden Costs?

One of eToro’s most attractive features is its CopyTrader system, allowing users to mimic the trades of seasoned investors. While this system doesn’t come with a direct fee, you still incur the spread and overnight fees that apply to each trade. So, if the trader you're copying uses leveraged trades or holds positions overnight, those fees will be reflected in your account as well.

How to Minimize Your Fees on eToro

The best way to keep your fees under control is to understand where they come from and plan your trades accordingly. Here are some quick tips:

• Trade without leverage to avoid overnight fees on stock positions.
• Withdraw less frequently to avoid multiple withdrawal fees.
• Stay active to avoid inactivity fees.
• Keep an eye on spreads, especially for more volatile assets like cryptocurrencies or certain forex pairs.

What Can We Conclude?

While eToro is indeed a user-friendly platform with a commission-free model for stock trading, there are still a number of fees that can impact your trading returns. By being aware of the spread fees, overnight charges, withdrawal fees, and inactivity fees, you can make better decisions and avoid unnecessary surprises.

Understanding these fees is essential to maintaining profitability and optimizing your trading strategy. Be mindful of the hidden costs, and your trading experience on eToro can remain smooth and cost-effective.