Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

Derivative definition

A derivative is a financial product that enables traders to speculate on the price movement of assets without purchasing the assets themselves. Because there is nothing physical being traded when derivative positions are opened, they usually exist as a contract between two parties.

Most derivatives involve margin trading, and offer a larger amount of flexibility when it comes to using different trading strategies across a variety of asset classes. They allow the opportunity to trade on volatility itself, instead of relying on positive moves in an asset’s price.

Derivative products come in a variety of forms, with huge differences between them.

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