CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

What Is a Derivative?

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  • A derivative is a type of financial instrument that is not a security, but whose value depends on the underlying instrument, e.g. the index, stock or bond price.
  • The value of the derivative is based on the fluctuation of the underlying, which means that the derivative itself has no value.

Where are derivatives listed?

Derivatives are traded both on the OTC market and the stock exchange, but interestingly, most of the trading is actually generated on the OTC market.

Why are derivatives used?

There are many reasons why derivatives are popular and used by investors:

  • Thanks to derivatives, it is easier to speculate on financial markets, where investors are looking for opportunities to make a profit on both the increases and decreases in the prices of financial instruments.
  • They are suitable for hedging [link], through which investors try to reduce the risk of their investments.

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