In simple terms, an online broker is an entity that facilitates the buying and selling of securities over the internet or an electronic network.
Brokers served as intermediaries between the buyer and the seller of securities. Before there were online brokers, people who wanted to trade had to place their orders over the phone. At this time, it was common to have people who physically placed the trade for you.
In the mid-1990s, online brokers like the E*Trade Group became a big deal, and their rise rode on the backs of fast internet connections and high-performance computers. Online brokers increased fame for the convenience of trading from a personal computer and the absence of human bias.
Human bias was a drawback with hiring human brokers, and there were reports of some brokers using their clients’ portfolios to engage in inside trading.
There are many types of online brokers, like full-service brokers, robo-advisors, and discount brokers.
- Full-service brokers are online brokers that offer a wide range of services like investment advice, retirement plans, and trading. An example is Merrill Edge.
- Robo-Advisors are brokers that offer trading services driven by algorithms. The human involvement in processes is minimal. The process involves using data provided by the customer or client to prepare a profile and offer advice. An example is Personal Capital.
- Discount brokers offer brokerage at smaller fees compared to full-service brokers. These online brokers don’t offer the wide range of services that full-service brokers offer. An example of a popular discount broker is E-Trade.
- 1 Comparing AvaTrade and eToro
- 1.1 AvaTrade: Overview Benefits and Drawbacks
- 1.2 eToro: Overview, Benefits, and Drawbacks
- 1.3 Summary of Pros and Cons: AvaTrade vs. eToro
- 1.4 Analysis of Services: AvaTrade
- 1.5 Analysis of Services: eToro
- 1.6 Analysis of Fees: AvaTrade
- 1.7 Analysis of Fees: eToro
- 1.8 Analysis of Customer Support: AvaTrade
- 1.9 Analysis of Customer Support: eToro
- 2 Conclusion
Comparing AvaTrade and eToro
Traders are constantly comparing online brokers to see what is best for them. It is one of the most important decisions a new trader will make.
There are many online brokers, but this article focuses on two: AvaTrade and eToro.
AvaTrade: Overview Benefits and Drawbacks
AvaTrade was established in 2006 and has offices in over 11 countries. It has processed trades to a total of $1.47 trillion since its inception and places an average of 3 million trades each month.
AvaTrade is a licensed company holding regulatory licenses from various parts of the globe, so it has a high safety profile.
Using AvaTrade comes with the following benefits.
- AvaTrade has three tier-1 and three tier-2 jurisdiction licenses. Forex and CFD traders consider it a safe broker.
- AvaTrade has highly-rated propriety platforms like MetaTrader, WebTrader, and AvaTradeGo. These platforms cater to the needs of various traders under various circumstances.
- AvaOptions provides clients of AvaTrade with various forex trading options on mobile platforms.
- AvaTrade offers trade-copying solutions for beginners who want to copy the trading processes of experienced traders.
AvaTrade could be better, and some aspects could benefit from more work.
- AvaTrade’s desktop isn’t as fast as it can be, and the overall design isn’t modern. A quick and intuitive interface will improve the users’ trading experience.
- The daily articles and videos could be more, and research is limited to the Trading Central module.
- The price for retail accounts is about average in the industry but is behind industry leaders that give users a better deal.
eToro: Overview, Benefits, and Drawbacks
Three entrepreneurs launched eToro in Israel in 2007. The company started by providing only forex trading services but later expanded its services globally. 2010 was an important year in the company’s history because it launched a service called OpenBook. It was a service where less experienced traders copied the strategies of seasoned traders.
The company’s most important offering is CopyTrader, a service where traders find more experienced traders to copy. Experienced traders have a rating system that shows their success in influencing successful trades.
There are benefits to using eToro.
- Millions of users use the online broker in one way or the other. It has a global platform. Users from different backgrounds will have an experience that is similar all around.
- eToro offers fractional shares, which means that a user can pay for a portion of a much more expensive share. It allows clients to trade more expensive products.
- eToro has a great money management system that allows users to manage more of their finances in one place. There is access to cryptocurrency management; you can deposit and withdraw funds and receive and send money.
- Traders with little experience can easily copy the trading processes of more experienced traders with CopyTrader on eToro.
The broker isn’t perfect, and it comes with some drawbacks.
- In the United States, eToro is available in only 46 states. While the company has been expanding in the country, it is doing so slowly—residents in New York, Hawaii, Minnesota, and Nevada.
- The EFT and stock selections are limited to some traders. Etoro offers 220 EFTs and just over 2000 stock selections which are smaller than what the industry leaders like E*TRADE.
- The account types are very limited, with users only able to open brokerage accounts.
Summary of Pros and Cons: AvaTrade vs. eToro
- Has top-tier jurisdiction licenses
- Highly-rated platforms like MetaTrader
- Offers copy-trading options
- It is a global platform with millions of users
- Offers fractional shares
- Offers CopyTrader
- Has a great money management system
The desktop platform isn’t fast
Research is limited to the Trading Central Module
The price for retail accounts isn’t better than the competition
Services are limited to 46 states in the United States
Account types are limited to brokerage accounts
EFT and stock selections are limited
Analysis of Services: AvaTrade
The trading platform a customer or client chooses will influence the range of offerings they get when using AvaTrade. AvaTrade offers almost 1300 symbols in WebTrader and roughly the same amount in MT5. Note that there are more than a hundred symbols suspended.
Cryptocurrency trading is available at AvaTrade through CFDs. However, you cannot trade the underlying asset (for instance, buying Bitcoin). Note that this service isn’t available to UK residents or any UK entity.
AvaTrade offers forex trading but doesn’t offer US and international stock trading (non-CFDs).
One of AvaTrade’s more attractive offerings is its social trading. It has become a big attraction for less experienced traders because they might achieve success and learn more as they copy experts’ trading strategies.
Analysis of Services: eToro
eToro’s international platform has more offerings than the United States, putting it below the competition. eToro doesn’t provide mutual funds, forex trading, or futures contracts.
You can access 263 EFTs, over 2000 stocks, cash management, portfolio automation, fractional shares, and options trading. New users will also get access to $100,000 in virtual money to practice trading strategies before they are ready to trade for real.
Its Smart Portfolios is a good option for seasoned traders since they can choose an automated portfolio and let the platform invest their money using specific instructions.
Analysis of Fees: AvaTrade
AvaTrade’s spread is just under one pip*, which is standard for the industry but higher than some entry-level platforms like Tickmill.
*A pip refers to the change in exchange rates between two currencies. It is equivalent to $0.01.
When a trader is verified or classified as a professional trader, the spread drops to 0.6 pip which is competitively comparable to big hitters like FP Markets.
The minimum initial deposit for an account in AvaTrade is $100, and there are discounts for VIP traders. Note that there is third-party support for PayPal, Skrill, Mastercard/Visa, and wire transfers. However, all these payment options come at a fee.
Analysis of Fees: eToro
In most categories, eToro has fees that align with industry standards. However, there are a few key points regarding eToro’s fees:
Trading in crypto incurs a 1% fee. This fee applies to crypto that is bought or sold. There are no fees for transferring crypto to another eToro account, but there are fees for transferring it outside the platform.
eToro doesn’t charge for withdrawing funds; however, withdrawal must be above $30.
There is an inactivity fee for users who have been inactive for over a year. The fee is $10 per month for every month of inactivity following a year of not trading on the platform.
If you transfer your accounts elsewhere, you will be charged $75.
Analysis of Customer Support: AvaTrade
AvaTrade has a relatively great customer support system.
They have a great live chat within their various applications. The live chat doesn’t come with long waits, and speaking with a representative is almost instant. The answers you get will be helpful, not just a deflection of your problems.
In addition, you can chat in many other languages besides English, like Chinese, French, German, Arabic, and many more.
AvaTrade offers excellent phone support, with the ability to communicate in your preferred language. However, the success rate of connecting with a rep is lower than the live chat.
Email is a channel where AvaTrade shines because you will get a response within a day. In comparison to other companies, that is quick.
The only downside to AvaTrade’s customer support is its absence over the weekends. The broker operates a 24/5 customer support schedule.
Analysis of Customer Support: eToro
eToro shines in its self-service customer support. There is a large FAQ page where many potential questions are answered in sufficient detail to help customers solve their problems.
Aside from the FAQ system, eToro has a chat option where you can chat with a customer support representative in most languages.
The shortcomings of eToro’s customer support are visible in its phone and email channels. Finding the contact information for either is a chore on its website. If you can find the contact information, you can speak with a representative, but you might have to wait a while.
AvaTrade and eToro have their strengths and weaknesses, and the one you choose should suit your trading goals.
AvaTrade and eToro both provide copy-trading services, which are great for beginners. However, eToro offers fractional shares, which AvaTrade doesn’t. Also, for money management, eToro is a better option.
AvaTrade offers more account types and features, but the streamlined features eToro provides are highly rated.
To choose the right online broker, you should look for certain things.
You will need a broker that meets your needs. Have definite trading goals, and choose a broker that will help you meet those goals. Select an online broker that is regulated, safe, and a member of an organization like the SIPC.
Understand the various fees and choose a broker with acceptable fees. You should open a virtual account and test the online broker’s features, seeing if they meet your needs.
Find out if the broker has a good educational platform. See if there is enough material to help you start your trading journey. Figure out the ease of depositing and withdrawing funds. Test the customer support to see if it is satisfactory.
When you have figured out the best broker, take the next step and begin trading.
Fintech-Insight is dedicated to delivering unbiased and dependable insights into cryptocurrency, finance, trading, and stocks. However, we must clarify that we don't offer financial advice, and we strongly recommend users to perform their own research and due diligence.