Started by RoboForex, Apr 30, 2022, 06:43 am
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There are lots of instrumens in the financial market. Today's article is devoted to some least popular of them called derivatives: what they are, what types and differences exist, what the advantages and drawbacks are, and how they are used in trading.
A derivative is a financial instrument whose price depends on the base asset and is basically derived from it. This is a type of contract by which two parties agree on giving the asset to one the other under certain conditions, such as the time and price.
Example: today companies A and B sign an agreement on supply of certain goods in a month at 100 USD each item. As a result, no matter how the price of the good changes, the seller must supply it to the buyer exactly in a month's time and at 100 USD per item.
From this list, futures, options, and CFDs step forward: unlike forwards and swaps, their behaviour is easier to forecast without special knowledge.
Popular derivatives have no trading differences with base assets: to understand the market situation, traders use computer, technical, candlestick, and fundamental analyses.
Trading derivatives, one has to take account of the current market situation, and in case of agricultural produce, climat changes also matter.
To understand the market situation, using computer, technical, candlestick, and fundamental analyses. Keep in mind the peculiarities of derivatives, both advantages and disadvantages.
The post What Are Derivatives and How to Trade Them appeared first at R Blog - RoboForex.
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