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Derivatives are complex financial instruments that derive their value from an underlying asset, such as stocks, bonds, or commodities. They can serve various purposes, including hedging against risk, speculating on price movements, or enhancing portfolio returns. In this comprehensive guide, we will break down the different types of derivatives—such as futures, options, and swaps—and explain how they can be used effectively in trading strategies. We will also highlight the risks associated with trading derivatives and provide tips for managing those risks to ensure a successful trading experience.