Trading in derivative market is generally riskier than in cash market

In the cash market, a person invests to take the delivery of shares or settle the trade on the same day to benefit from the differential in price. On the other hand, in the derivatives market, the investor or trader enters into a contract to buy or sell a shares of a company or index on a future date.

In the cash market, you can buy a single stock of a company, while in case of derivatives, you can buy only in lot sizes. The derivatives derive their value from the underlying stocks.

Derivatives are complex in nature and are generally considered riskier for retail investors as trading here is done by anticipating the price of the security. For example, if an investor anticipates that the price of the security is likely to go up in future, he may enter a future or option contract to sell it in the future. Since, anticipating the price is difficult, the risk involved is also higher.

Also, generally most of the derivative trading is done using leverage which increases the risk further. Leverage is used in the cash market generally for intraday trades which are also risky.