More than 6 million registered traders in over 140 countries have taken a new approach to investing their hard-earned money. Through the eToro Social Trading Network, traders and investors can buy and sell a wide variety of financial instruments, while following and automatically copying the investment decisions of other successful traders in real time. This makes their trading experience more social, simple, enjoyable, and transparent. In early 2015, eToro moved the bulk of its platform from on-premises datacenters to Microsoft Azure. Soon after that, it added Azure analytics tools, including Microsoft R Server and Azure Machine Learning, to expand its new CopyFunds offerings. With the machine learning version of CopyFunds, investors can automatically duplicate market strategies and actual investment decisions of successful traders in the eToro network to use in their own portfolios.
Sela has a track record of over 3 decades in leading the consulting and technology knowledge in Israel. Sela, as an MSP helped eToro reaching their business goals on Microsoft Azure
What if you could automatically align your investments with those of highly successful investors who have similar philosophies and risk tolerance, without having to pay a huge consulting fee? Millions of traders all over the world are doing just that through the eToro social investment network. Unlike traditional online trading—where investors must learn, understand, and develop their own individual investing strategy—the eToro platform offers CopyTrader technology that combines online investing tools with social media, so investors can share their own trading activities and see and copy the strategy of other members.
“In the eToro platform, you can identify network members who are in line with your investment philosophy, risk appetite, and/or specific industry sectors of interest, and immediately start learning from, interacting with, and even automatically copying those individuals in real time,” says Israel Kalush, VP of Engineering at eToro.
eToro was founded in 2007 with the promise of making trading available for the masses by transforming it into a simple, transparent, and enjoyable experience. Three years later, the company launched eToro OpenBook social investment platform, combining online investing with social media to help investors at all levels apply the approach used by the most successful traders. With a wide range of mobile and web-based social trading tools, eToro appeals to every level of trading expertise and helps new investors gain valuable insight into how successful investors operate.
The results can be quite remarkable. In 2015, more than 80 percent of the 124 million copied trades transacted through eToro posted a profit. Of course, past performance is no guarantee of future results and eToro continuously reminds members that trading involves risk.
To help reduce that risk, copy traders can set a stop-loss threshold, so if their losses exceed that amount, the system automatically closes the copy process. The system also assigns a risk score to each trader, so users can copy those who match their risk appetite. Furthermore, the platform does not allow copying high-risk traders (risk score 8 and above), which helps protect novices. In addition, eToro encourages beginners to practice through a virtual portfolio before using real money for their trades. The firm complies with regulatory standards from the Financial Conduct Authority in the UK and Cyprus Security and Exchange Commission.
SEEKING CLOUD SCALE OPPORTUNITIES
In 2015, eToro moved to Microsoft Azure to increase reliability, scalability, and development agility, and to reduce support requirements to pave the way for its next level of growth. The ability to run open source solutions in Azure also played a big role in the decision.
“We use several open source solutions, including Redis Cache, and our front end is based on Node.js and AngularJS. So it’s a big plus to be able to use those technologies inside the Azure platform,” says Kalush. “Every developer we have comes with a strong knowledge of open source technologies. The ability to leverage that knowledge and go with open source where it makes sense, and with Microsoft native solutions where they make sense, makes our lives much easier.”
Working with Microsoft and with the help of Sela’s experts, it took the firm about a year to develop the new eToro platform. Part of that time was spent rebuilding some of the existing elements to optimize them for the cloud. But a large part of that time was spent creating new features and capabilities to take advantage of the Azure platform.
HARNESSING THE WISDOM OF SUCCESSFUL TRADERS
Not long after moving to Azure, eToro began developing its latest breakthrough product, called CopyFunds, which are customized portfolios based on a specific theme or industry (also known as thematic investments). “Investors only have to decide what theme they want to invest in—such as banking, technology, or more recently, cryptocurrencies—and how much money they want to invest,” says Kalush. “From that point on, the system does the work.”
Investors can choose from two types of CopyFunds:
- Market CopyFunds™ consist of specially selected instruments such as stocks, commodities, or ETFs managed either by eToro or a select group of third-party partners. These portfolios allow investors to track an array of sectors around a defined market strategy.
- Top Trader CopyFunds™ consist of the best-performing and most sustainable traders in the eToro network, who are selected by various means, based on the CopyFund strategy and risk factors. For example, the MomentumDD CopyFund uses Microsoft R Server on Azure HDInsight, and Azure Machine Learning technologies.
“Instead of investing directly in markets and in assets, our machine learning CopyFunds invest in talent that exists within our community, basically copy trading that talent,” says Kalush. “So when you open the CopyFunds portfolio, you will see that it's composed solely of traders in our community. The magic behind it is that the CopyFund, using Microsoft R Server and Azure Machine Learning, essentially handpicks the talent in that group so you have the wisdom of the crowd working for you instead of trying to beat the market by yourself.”
eToro uses Microsoft R Server to unlock knowledge related to trends, behaviors, and predictions in conjunction with Apache Spark for Azure HDInsight, which it uses to execute deep-learning algorithms that help uncover new insights. Through the algorithm, the CopyFund selects the group of investors and decides how to invest and how much money to allocate for each of those individual’s portfolios, factoring in how much risk each investor contributes to the CopyFund as a whole. The algorithm is executed periodically to keep the portfolio of traders efficient and current.
“We are obviously picking the best talent that we have in our network, but our algorithm also takes into consideration that each individual component is a risk factor,” says Moti Goldklang, Director of Trading Systems R&D; for eToro. All the while, investors have complete visibility into what's going on in the CopyFund and can see both the investors and the actual trades that were executed by them.
Kalush says, “We started a year ago with almost no machine learning experience, and now we are running quite an impressive machine learning operation, thanks to the Azure platform itself and the expertise and advice that our partners from Microsoft provided along the way.”
As part of the CopyFunds project eToro built a simulation platform, using Azure Web Apps and Microsoft Power BI for both the presentation layer and for data manipulation, to analyze the performance of the platform. This allows eToro to run various types of machine learning experiments and analyze how each affects the performance of the algorithmic CopyFunds.
“What made the biggest difference for us in this project was that Microsoft really treated us as a partner,” says Kalush. “They took our company, which at that point relied on legacy systems and technologies, and helped us through a not trivial ramp-up to the cloud tech stack. Through the entire journey, we found Microsoft to be way more than just a vendor and much more like a partner that helped us pick the right technologies, design our solutions, and made the journey to the cloud much more feasible, economical, and pleasant.”