Can You Short On eToro?
Short selling is an effective strategy to profit when the market is down. You can implement this strategy to have a position that increases in value. But, the price of the asset gets reduced in this position. You can use short selling as a hedging tool. However, can you short on eToro?
A brief guide to short selling on eToro will be helpful to you.
What is Short Selling, and How To Short On eToro?
Short selling is an advanced strategy used by experienced investors and traders. It occurs when traders borrow the security to sell it on the market. They also decide to buy it later at a lower rate. The risk/reward ratio for short selling is high.
Let’s check how to short on eToro
The platform enables you to open a position for short-selling an asset. It takes a few clicks to make short selling successful on eToro.
Visit the official page of the chosen stock to be sold.
Hit the Trade button
Click on the toggle button to choose SELL instead of the BUY option.
Select an option that allows you to mention the amount and rate.
Stop loss can also be defined in this step.
As you are now ready for short selling, you can click on the Open Trade option as you are prepared for short selling.
Manage this position in your portfolio.
Short Selling of CFDs
CFD (Contracts for Difference) short selling is a popular choice for retail traders. CFD is a financial product acting as a contract between traders and brokers.
It has gained attention because you can find a short position easily against different assets. Traders at eToro also benefit from other CFDs. The broker platform provides comprehensive analytics on how to locate short-selling stocks.
eToro is good for CFD because you can share strategies and discuss trading with other users.
eToro CFD fees
Before applying CFD short-selling strategy, you need to know eToro CFD fees. The fee will vary with the chosen assets.
Crypto CFD charges are not different from the fees charged for non-CFD crypto. For instance, CFD short-selling can be done for
Commodities like oil and gold- From 2 PIPs
Stocks such as, AIG and AAPL- 0.15%
Currencies like EUR AND GBP - From 1 PIP
Indices (SPX500 and NSDQ100) - From 0.75 Points
Shorting A Currency
Short selling on Forex can be done on the eToro platform. However, it differs from the stock market, as there is a limited risk. Currencies found in a particular currency pair have an international relationship between them.
While trading on Forex, you sell or buy currency pairs. In other words, you can buy the quote currency and sell the base currency. For instance, while going short EUR/USD, you can purchase Euros and sell US dollars.
eToro Short selling Currency Fees
You need to pay an amount for opening trade on CFDs. At eToro, you have to pay overnight fees and spread.
The spread is the amount obtained by deducing the BUY price from the SELL price. It varies with the market conditions.
You have to pay overnight fees when the positions are open after standard trading hours.
Example of Short Selling for a Profit
To apply a short-selling strategy, you need to borrow a security that seems to lose its value. You can then sell it on the market. Let’s clarify the concept with an example.
Trade in stock at a share of $50. Borrow 100 shares at first. Sell those shares for around $5,000. But, the price gets reduced to $25 per share. So, you can buy 100 shares and replace the borrowed ones. The net amount will be $2,500.
Pros and Cons of Short Selling on eToro
👍 Advantages:
• Thanks to CFDs, eToro lets you take a short position on different assets.
• Your portfolio will have a hedge, and you can manage positions to earn money.
• By shorting assets on eToro, you can earn more enormous profits.
• Trading fees are highly competitive on the eToro platform.
• There is a big community to connect you with other traders for social trading.
👎 Disadvantages:
• You may lose your investment and get indebted to the broker.
• In some cases, short-sellers encounter liquidity issues.
•eToro service is only available in some places.
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. 76% 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 does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk.
Cryptoasset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
"Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more"
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.
FAQs
Can You Short Crypto On eToro?
Yes. eToro is a user-friendly trading platform where you can short-sell cryptocurrencies. A separate BUY and SELL button let you open the trade. You can borrow an amount from the exchange and buy cryptocurrency.
What Is Intentional Short Selling?
It is an illegal way to sell a security without borrowing shares. It can adversely affect the stock price. eToro facilitates legitimate short-selling activities.
How Does A Short Position Differ From An Extended Position?
A short position occurs when you sell an asset not owned by you. You anticipate depreciation of the price of the asset. You can again purchase this asset at a lower price.
You will be the owner of an underlying asset in an extended position. You can hold the long position for several decades or for a few minutes.
Long selling is always bullish, while short selling involves a bearish pattern. Furthermore, short sellers must know how to buy/sell stocks for a short period.
Why Should You Include Short Selling In Your Online Trading Strategy?
To diversify your trading strategy, you have to involve in short selling. It is easy to earn money with your short-selling stock. Both hedgers and speculators prefer this trading activity to limit the risk of losses. They also take short and long positions simultaneously on an asset.
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