eToro, our favorite platform for purchasing Stellar from New Zealand
Why do we recommend it?
- It offers techniques and moves from skilled traders so you can copy them
- Allows short-selling
- It is uncomplicated and accessible
- eToro allows leverage
- Lets you invest in tons of different goods
Main site: www.etoro.com/stellar
eToro is probably the best way to buy Stellar from New Zealand.
“Social trading”, an innovative investment method that consists in replicating techniques and moves from other experienced investors, has become popular thanks to eToro.
If you are a beginner or do not have much experience in investments, eToro is very helpful, because it puts your investment on autopilot by repeating strategies from those who have been doing it for years. And for those skilled investors willing to share their techniques, eToro pays for it.
Another thing to mention is how manageable the interface is, which turns out perfect for new users that are learning all about the trading world.
ETFs or Exchange-Traded Funds are similar to index funds. We can say that ETFs are halfway between stocks and funds: they are publicly traded, that means they can be exchanged at any moment at market price. However, their main benefit is that they are more diversified compared to stocks, and their fees are much lower than those of an actively managed fund.
Foreign exchange trading or Forex consists, as the name says, in the trading of currencies. It's the conversion of one currency to another to make a profit through the operation.
If you decide to exchange euros and dollars, for example, you acquire euros and pay with dollars, with the expectation that the first currency (the euro) will increase compared to the second (the dollar), to make a profit by selling it. Assume you entered when the price of one euro is 1.10 USD and you leave when it reaches 1.15: that margin is yours once you sell again.
You may be thinking by now that this form of trading requires investing considerable amounts, and that is correct, since fluctuations are usually minimal, and if you use a lot of leverage to counter that, you will take a considerable risk. In case you are just starting to trade, we don't recommend beginning with this market, because it's not the safest option.
The most usual currency pairs are available on eToro. Nevertheless, consider that in this market sales are made through contract for differences, which means the underlying asset won't be yours.
Stocks or equities are the most popular securities. Some publicly traded enterprises decide to split into fractions and have many shareholders. By investing money in them, you can own a portion of a company and obtain dividends.
We could say that there are two basic types of shares: those that pay dividends and those that do not. Those that pay, at the end of the fiscal year, distribute profits among the stockholders; the latter, on the contrary, do not. Does that mean that you should only consider the former? No, of course not: if a company does not pay every year but has a lot of potential, you should not give it up just because it does not pay you every year, since selling the shares eventually could pay much more.
When trading on eToro, if you invest in equities that distribute dividends, these will be reflected in your balance, and you can collect them in cash or reinvest them. We recommend, if you don't have financial urgencies, that you don't renounce the magic of compound interest and reinvest it in the company itself.
Consider that when investing in shares on eToro you can use leverage to “dope” your trades, but in that case, you will not receive interest as it would be a CFD. For that reason, for long-term investments, it is better not to use leverage: you can end up losing money, since you will not get interest and also you will have to pay fees while your position is open.
ETFs or Exchange-Traded Funds are a type of passively managed fund, similar to index funds. We can say that ETFs are somewhere between stocks and funds: they can be traded like regular stocks, but include a wide diversity of assets and the rates are much lower than those of an actively managed fund.
Most people invest in raw materials due to their stability. While other assets tend to fluctuate more, raw materials prices vary less and offer security against inflation or market volatility. However, prices do depend on supply and demand in the market, so if the fear of possible inflation produces higher demand for a certain good, its cost will also rise.
Note that, unlike shares, raw materials don't pay dividends. Thus, by trading with these you will only have a further income by selling them back.
Commodities can be divided into two main types: hard raw materials and soft raw materials. The former include precious metals (such as gold, silver, copper, and platinum), industrial metals (like iron, nickel, or aluminum), and oil; while the latter are agricultural goods, like sugar, coffee, corn, soy, among many others.
BTW, do you know what leverage is? We'll put it simply:
trading allows you to invest more money than you can have in a given time. Let's say that you have $ 100 and you choose to leverage x2, the amount of your investment will be $ 200.
About leverage, Take Profit and Stop Loss
Assuming that, for instance, you are sure that Stellar is going up, and that you have $ 1,000 for “going long”, you must know that you can increase your investment and earn higher profits.
Possibly, you could ask your bank for a credit, wait for it to be accepted and receiving the money, and then obtain Stellar… However, when you finish doing all that, probably Stellar would be already much higher (if your prediction got confirmed), and it wouldn't be a good idea to invest.
Thanks to leverage, you can get that amount with two clicks. It's exactly like borrowing money, but much better: from eToro itself. You can get financing to operate with much more money than you actually have on the eToro Wallet. Before trading, you will be able to choose between the different leverage options as in the screenshot below:
Trading with other assets allows you to use higher leverage. The reason is that cryptocurrencies are a value that is invested in the medium-long term, and leverage is used especially for day trading or short-selling. Let's talk a bit more about how leverage works.
You start with $ 1,000 and pick leverage x2, which means you would really invest $ 2,000, since eToro would put the other $ 1,000 (which is double your initial amount).
A couple of days later, as you thought, Stellar has risen by 20% and the value of your investment is now $ 2,400. But you don't want to take too much risk, so it's time to sell back.
You will have to give back the $ 1,000 of leverage and the net profit would be $ 400 (since the other $ 1,000 was your initial investment).
In conclusion, by investing $ 1000 you can make a profit of 40% (in the case you earn $ 400). That is quite good.
Does it sound too wonderful? The trick is that the risk of losing out also increases. If everything goes as you planned, you will make more money in less time; however, if the value of the asset goes down, you will also lose more in less time.
Supposing that the asset didn't increase by 20%, but it went down also by 20%, you won't lose $ 20 but double, $ 40. For that reason, the terms “Take Profit” and “Stop Loss” are crucial when trading with leverage.
Take Profit is a limit you can set when trading: you set the platform to sell your assets once they get to a point above the entry price. For instance, you can buy Stellar at $ 100 and ask eToro to close your position automatically when it goes up to $ 120. It is very helpful to avoid being blinded by enthusiasm: we would all take a 20% profit when making the investment, but when you reach that 20% it is easy to want some more and risk losing it all. It's like you got assured in advance of not doing anything dumb in the future.
Stop Loss is even more necessary, especially if you use leverage, because a small loss with leverage can have a significant impact on your wallet. For that reason, it is vital to establish a Stop Loss lower than that suggested by eToro.
Is eToro reliable for purchasing Stellar?
eToro is very careful with the data about past performances from users, and its integrity has been independently tested several times.
In the legal aspect, eToro complies with all the demanding policies of the European Union, legislation in which it is found. Its main headquarters is in Cyprus, and it is approved by the CySEC or Cyprus Securities Market Commission, which protects up to € 20,000 of the debts from its clients (those from New Zealand included).
In Europe, it is backed by the European Financial Instruments Market (MiFID), and in the USA it is under the control of the Financial Conduct Authority (FCA). In addition to all these regulations, it should be mentioned that eToro has worked for fifteen years, with more than 20 million users around the world, so we can be sure that our funds are in good hands.
It is also important to mention the good functioning of its customer service. They have a phone number for assistance, a ticketing system to track any claim, and a live chat.
Payment methods on eToro
Among the payment methods available on eToro are: bank transfer, PayPal, credit card, Neteller, and Skrill. There is not much to explain here: making a deposit with eToro is very easy. You just need to click “Deposit funds”, type a number and select your preferred method.
Consider that for security reasons, you need to be the holder of the credit card or the account.
The minimum amount you can deposit is $ 200 and there is a limit of how much you can deposit if you are not verified, so if you plan to operate with larger sums, you should verify your account previously.
eToro allows deposits or transfers in any currency, but you will have to pay a fee for the conversion to USD. So it is better to use USD from the beginning.
How are CFDs and futures different?
How are Futures and CFDs different?
- Futures: operations are made with someone else, another trader.
- CFDs: you do not operate with someone else, but the counterparty is the brokerage.
- Date of expiration:
- Futures: they expire. Once the contract expires, it is closed even if you are in red.
- CFDs: on the contrary, they don't expire. You can wait until you get in a good position before exiting.
- Futures: there are limited options
- CFDs: there is an enormous amount of options for trading
- Minimum investment amount or “trade size”:
- Futures: you have to invest much more
- CFDs: you can enter with a low amount
- Trading costs:
- Futures: being higher figures, rates are usually proportionally lower
- CFDs: costs are higher
- Use of leverage:
- Futures: you can't leverage
- CFDs: totally available
How do Contracts for Difference Function?
It is possible that you have seen the acronym CFD repeatedly if you entered eToro before. Before we explain this further, you should know that CFDs on eToro are only possible if you short sell or leverage over x2 (and this is not even available on the platform).
For the record, and if you want to try at some point day trading cryptocurrency or other trading practices, you will also meet terms such as leverage and “going short”.
With CFDs you can operate on the platform even if you are not “in the black” or having a negative balance. For instance, you are sure that the Stellar will go down, so perhaps you consider that the best thing to do is refrain from getting in until it does. Nevertheless, if you really think that it's going down, why not making some profits out of that?
You can accomplish that by “going short”. Basically, it functions like this:
- Someone lends you, let's say, 100 units of Stellar, valued at a total of $ 5,000 (these numbers are imaginary)
- You sell the 100 units and earn $ 5,000
- The Stellar devaluates from $ 50 to $ 30
- You purchase the 100 units again, but at their current price, $ 3,000
- Now you return the 100 units to whoever loaned them to you
- The difference is yours, so, you will have earned $ 2000
Consider that it is much easier than it sounds: we can just say that by trading in Stellar you can also make money if you anticipate it will fall.
How to use eToro
We mentioned before that eToro is very easy to manage. Anyone can start investing without previous knowledge or long explanations.
You won't have any issues with the interface if you are familiar with any other social network, like Whatsapp or Linkedin.
We will explain the registration process and the different sections that you will see.
You will have to fill in some information requested when registering.
Before you end up with the sign-up process, you will also have to answer some questions about your previous investment activities.
But don't feel like you are taking an exam. The only intention is to know more about you and determine which financial instruments they should recommend according to your knowledge and experience.
Let's get to know the different sections of the interface.
In “Set Price Alerts” you can set alarms on the price of certain securities. You only need to click on the three points at the end of the line and you will be able to program a price alert. This is very useful when you want to buy an asset which price is decreasing, but it seems to you that it has not finished falling yet.
In the “News Feed” tab is the most social part of eToro: where users are interacting all day and sharing valuable information.
“Discover” includes the tabs “Instruments”, “People” and “CopyPortfolios”. As we discussed in this guide, the six types of instruments on eToro are:
- Exchange-Traded Funds
- Raw materials
- Index funds
In the tab “People”, you will find eToro users and their historical performance. This is where you can copy the movements of your preferred traders.
You will be able to search and find users according to your interests. When you select an investor and indicate the amount you want to invest, eToro will automatically replicate their movements, in proportion. If you invest $ 1000 and the trader puts 20% of their funds in an asset, the platform will also invest 20% of your money in the same company or instrument, in this case, $ 200.
You will also see the three main types of CopyPortfolios, which are classified into “Top Trader”, “Market” and “Partner”.
Sometimes you might prefer copying to CopyPortfolios than to other traders, because the former offer more diversity. Besides, the different portfolios are easily identifiable: one about gaming, another about large drone companies, another about pharmacy … You think that a certain industry will prosper anytime soon? Then you will surely find a CopyPortfolio about it.
How does a virtual account work?
Are you beginning as an investor? Using a demo account can be very helpful. You just need to set the virtual mode and you can start operating with fictional funds.
A virtual account can help you to practice and gain experience before starting to operate with real funds. When you open your demo account, you will begin with a virtual balance of $ 100.000, to trade with a variety of financial instruments available on eToro, besides Stellar.
The first attempt is not usually that good. But you can ask eToro to deposit back the virtual funds to your portfolio, and the second time you should do better.
But keep in mind that trading is mainly about being cold-minded, and using a demo account can have the opposite effect. It is completely different to risk your own money than to trade with a fake balance that you don't mind losing. Also, investing virtual money can prevent you from learning to control your emotions, something you should be able to do when trading.
And of course, the demo mode is kind of absurd if you want to invest in the medium or long-term (with almost guaranteed returns only by replicating an index), since you would be wasting years. Demo accounts may be useful for trying out short or medium-term operations.