eToro Trading Thread

[pingu393]

La Liga said:

Consider using a low-cost tracker if that's what you want. The chances of you out-performing it over the long-term are probably close to zero.

Good tip. I'll look into this.



For info, I've found the IG investment site and it looks like I'll need around 2.25% growth to cover spread and fees on a £2,500 share purchase. It could be less, but it would require me to plan the timing of my trades to suit IG's discounts(*) rather than the share price.

(*) £24 custody fee reduced to £0 if I do 3+ trades per quarter.
(*) £8 IG commission reduced to £3 if I traded 3 times the previous calendar month.

[DonkeyApple]

So that rules IG out for what you want to do as well as etoro. Neither broker offers the product that you need.

For IG you're not active or large enough, their pricing tells you that they don't want your sort of business. For etoro, there's nothing that meets your needs. They can't even offer you an account in your base currency and the absence of stamp duty suggests that you're not remotely close to trading physical onto an exchange.

You'll find similar with most trading houses. Their business is built upon high activity and you are wanting a broker who caters for low activity.

What you probably want to find is a sipp/isa broker who is discounting GIA share dealing as a means to lure in customers so they can upsell the tax wrappers and get an AUM. Someone trying to carve a book of business from the likes of Hargreaves. As with all brokers you need to be alert to the upselling as you don't want to find yourself suddenly buying expensive funds in tax wrappers you don't need or investing in dynamic up and coming businesses, or more accurately throwing your hard earned away on worthless junk like a lonely pensioner.

[pingu393]

DonkeyApple said:

So that rules IG out for what you want to do as well as etoro. Neither broker offers the product that you need.

For IG you're not active or large enough, their pricing tells you that they don't want your sort of business. For etoro, there's nothing that meets your needs. They can't even offer you an account in your base currency and the absence of stamp duty suggests that you're not remotely close to trading physical onto an exchange.

You'll find similar with most trading houses. Their business is built upon high activity and you are wanting a broker who caters for low activity.

What you probably want to find is a sipp/isa broker who is discounting GIA share dealing as a means to lure in customers so they can upsell the tax wrappers and get an AUM. Someone trying to carve a book of business from the likes of Hargreaves. As with all brokers you need to be alert to the upselling as you don't want to find yourself suddenly buying expensive funds in tax wrappers you don't need or investing in dynamic up and coming businesses, or more accurately throwing your hard earned away on worthless junk like a lonely pensioner.

I'm quickly coming to the conclusion that you're right. Just like my homeland, I'm too wee and too poor .

I was hoping to "have a flutter", but it looks like the favorite in the 3.15 at Chepstow will give better returns than playing the stock market .

Good news is - it's better to realise it now than when I have £10k+ in the hole.

[DonkeyApple]

pingu393 said:

I'm quickly coming to the conclusion that you're right. Just like my homeland, I'm too wee and too poor .

I was hoping to "have a flutter", but it looks like the favorite in the 3.15 at Chepstow will give better returns than playing the stock market .

Good news is - it's better to realise it now than when I have £10k+ in the hole.

It's not that you're too small. If you're considering a £10k a/c. That's massive for etoro but normal for IG but with IG it's your activity that's too low.

There are thousands of brokers and they target different retail clients. All you need to do is find one that actually favours investors not traders.

Plus, as you're only targeting a 5% annual return and already picking quality companies you have already surpassed the average person who enters the markets by decades.

The very crude stats are that while 99% of trader lose, 99% of proper investors win. You win by picking the right tools, picking the boring investments and adding time.

[eyebeebe]

DonkeyApple said:

Revolut, well that's Russian owned. 'Nuff said. Nothing ever changes in that front and nothing ever will. For small sums is absolutely fine but you won't ever receive favourable execution or find it easy to drill down to the real costs.

O/T slightly... what do you call small sums? I‘m going to assume that I‘m in that zone, but would be interested to get your view.

Living in Switzerland the retail market is savage for fees. FX transactions on credit cards are generally Amex/Visa/MC rate plus c. 2% commission, FX cash purchases from the bank have a large spread (even with employee discounts) and international transfers aren‘t much better, so Revolut rates are far cheaper for day to day things like this. I never keep much with them and transfer money to them if I know I‘m going to be using it and a few hundred a month standing order that is used for some GBP commitments.

However, CHF denominated funds, ETFs and equities generally aren‘t of huge interest to me, mainly due to a lack of choice (or if it is available in CHF it‘s hedged). For compliance reasons I have to make any trades with my employer, but where I source the currency from is of no concern to them. So rather than pay my employer‘s FX rates I‘ll transfer to Revolut, buy at market and send it straight back. This yields a far better exchange rate. My RM has confirmed they won’t move their rates to take the commission instead of it going to Revolut. With a buy and hold strategy for the investments, I‘ll be exchanging between CHF 10-50k at a time maybe 5 times a year. Is there a better way of doing it than I‘m doing it now and am I missing a counterparty or other risk that I should be concerned about?

[DonkeyApple]

You're risk on Fx is time in transit and price. You'd be very unlucky to get caught out on the former bit it's not unheard of. For price you need to have a real spot price bid and offer running on a screen in order to check that you're actually getting a fair price as the main retail physical GC trick is to skew your spot against the buyer or seller, that's where you make the real money.

Personally, I think Transferwise is more kosher and the bid and offer that IG publish on their website is an amalgamation of half a dozen prime broker rates so about as good an indication of a fair value as we can get for free.

[eyebeebe]

DonkeyApple said:

You're risk on Fx is time in transit and price. You'd be very unlucky to get caught out on the former bit it's not unheard of. For price you need to have a real spot price bid and offer running on a screen in order to check that you're actually getting a fair price as the main retail physical GC trick is to skew your spot against the buyer or seller, that's where you make the real money.

Personally, I think Transferwise is more kosher and the bid and offer that IG publish on their website is an amalgamation of half a dozen prime broker rates so about as good an indication of a fair value as we can get for free.

Thanks for answering. I guess I‘ve been naive in looking at the tight spread and thinking they were quoting a spread off mid-rate. I probably need to think about this some more but how can they give a bid and an offer simultaneously and skew it against the punter?

Nevertheless, I‘ll get a colleague with live pricing to quote me on Monday and compare that to what Revolut is showing.

[DonkeyApple]

The key with physical FX is that it's not regulated like financial instruments which means the execution doesn't need to be carried out under FSCS protection nor does a two way quote need to be issued. At the same time, there is no exchange so 'spot' is meaningless as it can be whatever you want it to be.

On top of this the typical consumer has no true understanding of how the particular market works and due to legacy operators the concept of fair value is naturally clouded.

In recent years the new operators have drastically cut the worst practices but the legacies of hiding commissions while advertising zero commissions does remain as do the practices of actually asking the customer which direction they want to trade in before delivering an executable quote along with the deception of spot.

The key is to do what you plan and obtain a true 'spot by getting a real two way quote and calculating the mid point. You then don't want your execution price to be much more than 10 bips off that, 20 at most and with no additional charges.

[pingu393]

DonkeyApple said:

...obtain a true 'spot by getting a real two way quote and calculating the mid point. You then don't want your execution price to be much more than 10 bips off that, 20 at most and with no additional charges.

Is there anywhere that a low volume, low activity user is going to get that good a deal?

I did some graphs yesterday, and I would need around 1% growth to cover charges on £10,000 investment in a 10000p stock. Less investment or lower priced share adds to the costs.

http://www.porterbility.co.uk/Files/JPG/Pistonhead...

Edited by pingu393 on Sunday 14th March 14:31

[DonkeyApple]

pingu393 said:

Is there anywhere that a low volume, low activity user is going to get that good a deal?

I did some graphs yesterday, and I would need around 1% growth to cover charges on £10,000 investment in a 10000p stock. Less investment or lower priced share adds to the costs.

http://www.porterbility.co.uk/Files/JPG/Pistonhead...

Edited by pingu393 on Sunday 14th March 14:31

Someone like Transferwise is about the best at the moment. But it may depend on the currency pair as fx firms can tend to be less competitive in some. Plus, re the broker side for equities you'd need one that could receive via the fx broker or you'll have to open a currency account with a bank. Most cheap brokers don't as they want to force the fx business through them.

Also, why would the value of the stock have any impact on the fx cost?

[pingu393]

Thanks for the tip, I'll have a look at TransferWise during the next few days

DonkeyApple said:

... why would the value of the stock have any impact on the fx cost?

IG have a 0.5p spread on each share, so that is 50p on a single 10000p share, or £5000 on 10000x 1p shares.

I really don't think they want you doing penny shares .

https://www.ig.com/uk/investments/share-dealing/co...

Scroll to the bottom and click on "Share dealing costs and charges example"

[DonkeyApple]

pingu393 said:

Thanks for the tip, I'll have a look at TransferWise during the next few days

DonkeyApple said:

... why would the value of the stock have any impact on the fx cost?

IG have a 0.5p spread on each share, so that is 50p on a single 10000p share, or £5000 on 10000x 1p shares.

I really don't think they want you doing penny shares .

https://www.ig.com/uk/investments/share-dealing/co...

Scroll to the bottom and click on "Share dealing costs and charges example"

The market defines the spread. It's different for every share and every moment in time.

That page details their charges on top, what they earn.

The fx is totally separate and would only be relevant if you didn't hold that currency on account.

[pingu393]

DonkeyApple said:

The market defines the spread. It's different for every share and every moment in time.

Another lesson learned .

I thought the market defined the price and the broker/platform defined the spread.

Out of curiosity, who gets paid the spread? I assume the stock exchange (LSE, NYSE, NASDAQ, or whoever)

I just did a quick sum, and Flutter Entertainment is "buy at 16966" and "sell at 16944" (0.13% spread). Who gets that 0.13%?

Melrose is "buy at 182.45" and "sell at 182.6" (0.08% spread).

I assume there are more people trading Melrose, so LSE can drop the price they get per trade and still maintain a similar turnover.

[DonkeyApple]

pingu393 said:

DonkeyApple said:

The market defines the spread. It's different for every share and every moment in time.

Another lesson learned .

I thought the market defined the price and the broker/platform defined the spread.

Out of curiosity, who gets paid the spread? I assume the stock exchange (LSE, NYSE, NASDAQ, or whoever)

I just did a quick sum, and Flutter Entertainment is "buy at 16966" and "sell at 16944" (0.13% spread). Who gets that 0.13%?

Melrose is "buy at 182.45" and "sell at 182.6" (0.08% spread).

I assume there are more people trading Melrose, so LSE can drop the price they get per trade and still maintain a similar turnover.

No one. Unless you're taking the flow onto your own book or selling it to a book. If it's being passed into an exchange for execution the spread is simply the gap between where the buyers are and where the sellers are. The less liquid the stock the wider the spread is because there are fewer orders at that moment in time.

The discount brokers go out of their way to delude customers with regards to how it works. To the point that they use different names and invent entirely new terms. Whether etoro still do, I don't know, but they didn't even used to call equities, equities.