Social trading broker and platform provider eToro has announced the expansion of its existing offering. After providing the option to mimic the trades made by experienced traders, the FCA regulated broker has gone one step further and is now offering ‘copy dividends’.
Copy dividends means that investors are now able to benefit from the profits generated by the trader or traders they are following by copying them in real time, as opposed to the previous setup whereby potential profits were transferred to copy traders only when the copy portfolio expired and closed.
The basic principle is very simple: whenever a followed trader withdraws money from his account, a proportional amount of money will be withdrawn from the balance of his follower. Let us take for example a trader who puts $1000 to follow a trader with $10,000. If the followed trader’s account reaches $12,000 and he withdraws $2,000, the equivalent balance of the follower would be $1,200 and $200 would be allocated back to his account.
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eToro will notify traders every time this happens as they log in. In addition, if followed traders add funds to their accounts, copying traders will be notified in case they would like to maintain the same proportions as before.
Tal Ben-Simon, VP Product at eToro commented on the new offering in the latest official blog post: “Copying traders is forming some sort of a relationship with them. Our traders take great pride in being copied, and care deeply for their copiers. As in any relationship, we came to realize that when two sides benefit at the same time, it helps the relationship flourish. So instead of realizing your profits only once, and at the price of ending the copy relationship, you can now enjoy profits while maintaining the copy relationship with your selected traders. Simple as that. Like many of our features, copy dividends is unparalleled in the social trading industry, and marks the beginning of a new era, full of endless possibilities.”
So far no other broker has offered such a solution when it comes to copy trading. eToro points out that in some cases, in order to protect the copy balance, the mechanism may not work. Copy dividend calculates Copy Stop Loss (CSL) for the copy portfolio. If its value gets to close to the CSL, then the transfer won’t be conducted.