Finance and Accounting · Investing and portfolio management
Trading, markets and derivatives
Trading is short-horizon buying and selling, often with borrowed exposure through futures, options or contracts for difference. Professionals do it inside banks and funds under risk limits; retail traders do it on apps. European regulators restricted CFDs sold to retail clients and obliged providers to show what share of their retail accounts lose money. This page explains how the instruments work and never recommends a trade, a broker or a system.
Why this topic exists: Order flow, leverage, futures, options and CFDs, with technical analysis as the retail practice: the CFA topic Derivatives and Risk Management, FRM's Financial Markets and Products; regulators' loss warnings apply to every retail course here.
Read this first
Getting Digital does not recommend trades, brokers, signals or systems. Leveraged products magnify losses as well as gains. In 2018 ESMA prohibited the sale of binary options to retail clients and restricted contracts for difference, requiring every provider to publish how many of its own retail accounts lose money. Look for that figure before anything else.
Trading differs from investing in horizon and in intent. An investor buys an asset for what it will earn over years; a trader takes a position for a price move over days, hours or minutes, and usually closes it before any income arrives. Professional trading happens at banks, market makers and funds, under position limits, risk systems and supervisors watching the book. Retail trading happens on apps, often with leverage, and without most of that apparatus.
Market structure deserves attention before any instrument does: exchanges and dealers, bid and ask prices, order types, and the spread paid on every round trip. For a short-horizon trader those costs recur on each position, which is why they weigh far more on trading than on buying and holding.
The instruments
| Instrument | What it is | Where it trades |
|---|---|---|
| Future | A standardised agreement to buy or sell an asset at a set price on a set date | On an exchange, with daily margin |
| Option | The right, without the obligation, to buy (a call) or sell (a put) at a fixed price | On exchanges and over the counter |
| Swap | An exchange of payment streams, such as fixed interest for floating | Mostly over the counter, between institutions |
| Contract for difference | A cash-settled bet on a price change, with no ownership of the asset | Offered by brokers to retail clients, restricted in the EU since 2018 |
What the ESMA measures set
ESMA's restrictions on CFDs for retail clients are a compact lesson in where leverage hurts.
- Leverage caps by underlying: 30:1 on major currency pairs; 20:1 on other currency pairs, gold and major indices; 10:1 on commodities and other equity indices; 5:1 on single shares; 2:1 on crypto-assets.
- Margin close-out: positions are closed once the account falls to half the minimum margin required.
- Negative balance protection: a retail client's losses are capped at the money in the account.
- Limits on incentives that providers may offer to get clients trading.
- A standard risk warning that includes the provider's own loss rate on retail accounts.
The professional syllabi treat the same instruments as tools for pricing and hedging. The CFA Program's Derivatives and Risk Management topic and the FRM's Financial Markets and Products area cover how they are valued and how they transfer risk between parties. Technical analysis, the chart-reading at the centre of most retail trading material, appears in neither body's list of topic areas. Measuring and limiting the exposure continues in financial risk and compliance, and the longer-horizon view in investing and portfolio management.
Concepts to know
Glossary entries with the reason each one matters here.
- Leverage
Margin, CFDs and the ESMA and FCA retail caps.
- Derivative
Forwards, futures, options, swaps and the IFRS 9 test.
Certifications that test it
Vendor exams and free certificates; facts, cost and the preparation path are on each page, and the certifications hub has them all.
Tools of the trade
- Python
Backtests and quantitative strategies are written in it.
Frequently asked
- Is trading a career?
- Inside institutions, yes: banks, market makers and funds employ traders under risk limits and supervision, and the CFA and FRM syllabi cover the instruments they use. Retail day trading from home is not a profession with a qualification, and the loss figures providers must publish are the fairest description of it.
- What does leverage actually do?
- It lets a small deposit control a much larger position. At 30:1, a price move of a few per cent against you can wipe out the whole deposit, which is why ESMA caps it for retail clients and forces positions closed before losses exceed the account.
- Does Getting Digital recommend brokers or trading systems?
- No. This page describes instruments and the rules around them. It names no broker, signal service, strategy or trading course as worth buying.
Courses in the directory
770 courses are filed here; the top 6 by our ranking, details and the provider link on each course page.
Last reviewed 26 September 2026 · Getting Digital