April 13, 2024

How To Trade Synthetic Indices In 2024

synthetic indices

Synthetic Indices are unique indices that mimic real-world market movement but with a twist — they are not affected by real-world events. There pairs have been profitable to some forex traders today. But how do we trade these Synthetic Indices pairs?

It can be useful to compare how much time investment is required behind the monitor, the risk-reward ratio and regularity of total trading opportunities. Each trading strategy on boom and crash will appeal to different traders depending on personal attributes. Matching trading personality with the appropriate strategy will ultimately allow traders to take the first step in the right direction.

In this article, we will be discussing how to trade synthetic indices successfully as a professional trader.

What are Synthetic Indices?

As mentioned above, Synthetic indices are unique indices pairs that mimic real-world market movement but with a twist — they are not affected by real-world events. These indices are based on a cryptographically secure random number generator, have constant volatility, and are free of market and liquidity risks.

The Synthetic indices markets are available to trade 24/7, have constant volatility and fixed generation intervals. Volatility here refers to the degree of variation of price over time.

How To Start Trading Synthetic Indices

Some of the synthetic indices traders you’ll see will tell you that the best way to trade is to use some indicators. But how true is that?

Yes, indicators have proven help to some Synthetic Indices traders while it hasn’t been for others. I will be listing some ways to trade these synthetic pairs.

  • Learn how the Synthetic Indices market works

No doubt, one of the first things you need to learn when you want to trade these pairs is to understand how the synthetic indices market operates. Understanding market behaviour is very important.

Instead of buying and selling indices on a centralised exchange, Synthetic Indices pairs are bought and sold via a network which is programmed to mimic real-world market movement.

  • Build a trading plan

Building a trading plan is particularly important if you’re new to the synthetic indices markets. Having a Synthetic Indices trading plan helps take the emotion out of your decision making, as well as providing some structure for you when you open and close your positions. You might also want to consider employing a forex trading strategy, which governs how you find opportunity in the market.

Once you have chosen a particular Synthetic Indices trading strategy, it’s time to apply it. Use your favored technical analysis tools on the synthetic indices markets you want to trade and decide what your first trade should be.

If you are a purely technical trader, then trading the Synthetic Indices market would be at your advantage, you should also pay attention to any developments that look likely to cause volatility in your technical analysis. Upcoming economic announcements, for instance, might well reverberate across the forex markets – something your technical analysis might not consider but it doesn’t work like that in synthetics because it is pure technical.

  • Stick to a Strategy on each synthetic indices pairs

A trading strategy should take into account the style of trading that best suits your goals and available time. For example, day trading is a strategy that involves opening and closing positions within a single trading day, taking advantage of small movements in the price of a synthetic pair.

On the other hand, position trading is the strategy of holding positions open for a longer amount of time to take advantage of major price movements. Both have different time commitments and different techniques needed for success. Along the way, you can discover more trading strategies that suit you and make sure you stick to it.

  • Learn Technical analysis well and analyze the market

After understanding how synthetic indices market works and also building a plan, proper research and analysis should be the foundation of your trading endeavors. Without these, you’re operating on emotion. This doesn’t typically end well.

When you first start researching, you’ll find a whole wealth of forex resources – which may seem overwhelming at first. But as you research on a particular pair, you’ll find valuable resources that stand out from the rest. You should regularly look at current and historical charts, monitor the movement of synthetic indices, check indicators and perform other technical analysis before taking your trade.

Where to trade synthetic indices

Synthetic indices are offered solely by Deriv broker. They are the only broker that offers these pairs.

On Deriv, you can trade CFDs too with high leverage, enabling you to pay just a fraction of the contract’s value. It will amplify your potential gain and also increase your potential loss.

They are all Available to trade on Deriv MT5 (DMT5)Deriv X.

All Synthetic Indices Pairs

  • Volatility indices:

These indices correspond to simulated markets with constant volatilities of 10%, 25%, 50%, 75%, 100%, 200%, and 300%.

One tick is generated every two seconds for volatility indices 10, 25, 50, 75, and 100.

One tick is generated every second for volatility indices 10 (1s), 25 (1s), 50 (1s), 75 (1s), 100 (1s), 200 (1s), and 300 (1s).

  • Volatility 10 (1s) Index
  • Volatility 25 (1s) Index
  • Volatility 50 (1s) Index
  • Volatility 75 (1s) Index
  • Volatility 100 (1s) Index
  • Volatility 200 (1s) Index
  • Volatility 300 (1s) Index
  • Volatility 10 Index
  • Volatility 25 Index
  • Volatility 50 Index
  • Volatility 75 Index
  • Volatility 100 Index

  • Crash/Boom: With these indices, there is an average of one drop (crash) or one spike (boom) in prices that occur in a series of 1000, 500 or 300 ticks.
  • Boom 1000 Index
  • Boom 500 Index
  • Boom 300 Index
  • Crash 1000 Index
  • Crash 500 Index
  • Crash 300 Index

  • Jump indices: These indices correspond to simulated markets with constant volatilities of 10%, 25%, 50%, 75%, and 100%. There is an equal probability of an up or down jump every 20 minutes, on average. The jump size is around 30 times the normal price movement, on average.
  • Jump 10 Index
  • Jump 25 Index
  • Jump 50 Index
  • Jump 75 Index
  • Jump 100 Index

  • Step indices: With these indices, there is an equal probability of up/down movement in a price series with a fixed step size of 0.1.
  • Step Index

Range break indices: These indices fluctuate between two price points (borders), occasionally breaking through the borders to create a new range on average once every 100 or 200 times that they hit the borders.

  • Range Break 100 Index
  • Range Break 200 Index

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