Trading financial markets is difficult, which is why only a few traders and investors make a profit. For this reason, there’s no shame in receiving a little help from already successful traders. Several brokers now provide a copy trading platform for its users to allow for safer and more reliable copy trading, including eToro and Darwinex.
Both of these companies are market leaders with a focus on copy trading to promote higher returns for their users. Nevertheless, they are also individually unique in the way they offer a copy trading platform and other additional services. Therefore, you need to understand how they differ so that you can choose the best one for you.
eToro is one of the most popular online trading platforms and is recognised around the world. According to its website, it has over 30 million users from 100 different countries including the US where most online brokers are not allowed to operate. It’s not surprising considering that the company has been around for 16 years since being founded in 2007 and reported AUM (assets under management) of 5.8 billion USD in the final quarter (Q4) of 2022 and a valuation of $3.5 billion.
Perhaps the main reason behind eToro’s success has been its copy trading platform named CopyTrader. It allows all 30+ million users on eToro to share trading ideas and copy each others’ trades on the same platform. This large user base and variety of tradeable assets makes it possible to increase one’s performance whether you’re a beginner or expert.
Darwinex doesn’t receive as much hype as eToro probably because it’s primarily based in Europe. Headquartered in London, Darwinex was launched in 2012 after raising 9 million EUR in three growth funding rounds. It would later open an office in Madrid to expand its scope of operations and is now available in 80+ countries.
During the time it has existed, Darwinex has made many strides forward and now boasts of having over 100 million EUR in AUM, growing by 45% in 2022 alone. Now it has over 10,000 users who have most likely been attracted by the company’s copy trading features that rely on proprietary technology rather than direct trader-to-trader copying. This proves that the copy trading platform has been reliable considering the growing number of AUM and users.
eToro vs. Darwinex: How each copy trading platform works
Although both of these companies provide copy trading facilities, they have taken different approaches to achieve this goal. eToro’s system is the simplest to understand because it just involves selecting a trader whose activities you would want to mimic. CopyTrader shows the trading performance of any trader on eToro opted into the service, then allows anyone else to copy their trades as their own to achieve similar performance.
Copiers don’t pay any fees for copying others’ trades thus get to keep all profits made from the trades. This makes the feature attractive because you can have higher returns without any additional costs. Meanwhile, top performing traders get paid monthly when their activities are copied from 2 USD per copier up to 2% annually in AUC (assets under copy). It is therefore a good way to receive passive income and complement your earnings.
On Darwinex however when you want to broadcast your trading activities, they are packaged into an index referred to as a DARWIN. It is similar to a typical index on, say, a stock exchange, but instead replicates your own trades. Darwinex states that this is to protect your IP (intellectual property) by hiding your individual trades that could have been used by copiers on alternative platforms without you receiving credit for it.
Speaking of credit, a 20% success fee is charged on all profits generated from using a trading index and a further 1.2% management fee. The trader running the trading index receives 15% of this while 5% goes to Darwinex, which can be a pretty decent return. Additionally, Darwinex funds the top 150 indices with up to 10 million EUR every month to encourage better performance and higher returns.
You can trade multiple financial asset classes on either eToro or Darwinex meaning that you can diversify your portfolio, hedge the markets, and protect your capital from extended drawdowns.
eToro has over 3,000 assets you can trade ranging from currencies to stocks, indices, commodities, ETFs, and cryptocurrencies. Through a partnership with Delta, users can also explore Web3 and gain access to the NFT market. These assets can be offered as either real assets, CFDs, or both.
Stocks, ETFs, and cryptocurrencies can be traded as both CFDs and real assets depending on your preference. Real means you get to own the actual underlying asset but it is stored on your behalf in a segregated omnibus account so it can’t be transferred to another person or broker although you still receive dividends and even voting rights for US stocks.
The advantage of real assets is that there are no commissions charged regardless of the value of their trade. On the other hand, CFDs provide more flexibility by allowing for short selling and leverage that can be as high as 20x on certain assets such as gold. That can significantly increase your returns, but you must also be aware of the risks involved with margin trading.
Like eToro, Darwinex also offers both real assets and CFDs albeit through different platforms. Over 800 real stocks and 63 futures contracts can be bought via webtrader, TWS (Trader Workstation, NinjaTrader, MultiCharts and more. Only US stocks and futures are currently available but Darwinex claims it will include European assets soon.
For CFDs, you can trade currencies, indices, commodities, and US stocks. Like with most CFDs, you can get leverage amounting up to 2x on certain assets such as currencies. To get higher leverage up to 100x, you can sign up for a professional account but this disqualifies you from the Financial Services Compensation Scheme (FSCS).
Comparing the two, it’s clear that eToro has a wider range of markets to trade compared to Darwinex. It should then be preferable for active traders who want to access more assets, but that’s not to say that the latter is significantly lacking.
Trading costs can make the difference between success and failure because, if too high, they can eat into your profits. Of course, online trading platforms still need to make a profit too, the key is to find the most competitive fees you’re comfortable paying.
When you buy real assets on eToro, you’re not charged any fees whatsoever. However, you will be charged when trading CFDs through spreads that vary by market condition. Our review showed that eToro has quite high spreads compared to the rest of the market. For instance, the minimum spread on the EUR/USD pair is 1 pip while many other brokers offer lower spreads.
An additional 5 USD withdrawal fee is charged for all withdrawals and a 10 USD inactivity fee if your account has had no activity for 12 months. Fortunately, you will not be charged for deposits and there are no management fees when using the copy trading platform.
Real stocks and futures contracts bought through this platform will attract a commission on each trade. The commission will vary from one asset to another with the minimum being 0.02 USD for US stocks and futures. Because many online brokers now offer 0% commission investing, these commissions make Darwinex costlier to use for investing.
As for CFDs on Darwinex, the spread is a lot more affordable with the current spread on EUR/USD being 0.3 pips. However, you will be charged for deposits/withdrawals depending on the method you use. For instance, a 0.5% commission is charged for deposits using Skrill while withdrawals by credit card or Skrill cost 2 EUR/USD/GBP.
Ease of use
eToro primarily uses proprietary software to give access to the features it offers through desktop and mobile. On a desktop computer, this is the eToro web platform accessible through a web browser. The eToro mobile app is available for iOS and Android devices and both are available in 19 languages to ensure all of its users will be comfortable using the platform.
Simplicity and user-friendliness is clearly what eToro seems to be going for and it works brilliantly. Whether on desktop or mobile, all features are easy to access and use without compromising on functionality. Even the 10 – 200 USD minimum deposit (10,000 USD for Israel) is testament to how eToro encourages easier access.
Darwinex meanwhile is more suited to professional traders who want to use the most advanced trading platforms. That is why you can invest using the webtrader, TWS, Ninjatrader, MultiCharts, Zorro IB Bridge, and the IB Gateway. It’s also only available in 3 different languages so a lot of users may have difficulty.
Fortunately, you can also use MetaTrader 4 and MetaTrader 5 which are the most common trading platforms but you will have to deposit at least 500 EUR/USD/GBP. Because of this, Darwinex may not be the most user-friendly, especially for beginners.
Regulations and risks
Thanks to eToro’s global presence, it happens to be licensed by multiple regulators including the FCA (UK), Cyprus (Europe), SEC and FINRA (US), ASIC (Australia), FSAS (International). All these licenses make it possible for eToro to operate legally in most countries around the world while making traders confident because of the protection it offers.
|Financial Conduct Authority (FCA)||United Kingdom (UK)||85,000 GBP|
|Cyprus Securities and Exchange Commission (CySEC)||Europe||20,000 EUR|
|Securities and Exchange Commission (SEC)||United States (US)||500,000 USD|
|Australian Securities & Investments Commission (ASIC)||Australia||500,000 AUD|
Darwinex is only licensed by two regulators – the FCA and Comisión Nacional del Mercado de Valores (CNMV) of Spain. This is why the copy trading platform is not available in as many countries as eToro and cannot be used by, say, US residents. So, for additional protection, Darwinex has an additional insurance policy from Lloyds that further covers all FSCS-eligible clients up to 5,000,000 GBP per client.