What Are Synthetic Indices and How Can You Trade Them?

One of the most exciting parts of trading synthetic indices is the variety of options available. Let’s break them down:

Volatility Indices (Deriv)

Volatility indices simulate varying levels of market volatility. These include Volatility 10, 25, 50, 75, and 100 Indices, with higher numbers representing higher volatility.

FX Vol / SFX Vol (Weltrade)

Also simulate forex-like volatility, with SFX Vol including scheduled spike behaviour.

Crash and Boom Indices (Deriv)

Crash and Boom Indices mimic markets experiencing sudden downward (Crash) or upward (Boom) price movements. They can also offer opportunities to trade long-term declines or upward trends.

PainX and GainX (Weltrade)

Similar to Crash and Boom, PainX and GainX indices simulate gradual movement in one direction, followed by sharp reversals.

Range Break Indices (Deriv)

These indices move when prices break out of a set range. Traders who prefer predictable movements often choose Range Break Indices, since you can apply breakout strategies to them.

BreakX (Weltrade)

Similar to Range Break indices, these instruments change behaviour after breakouts occur.

Step Indices (Deriv)

Step Indices move in fixed steps, usually between 0.1 and 0.5. This steady and predictable movement makes them an excellent choice for traders who prefer lower-risk and more consistent trades.

Jump Indices (Deriv)

Jump Indices simulate markets with sudden price jumps. The jumps can happen at varying intervals and intensities. These indices offer different levels of volatility, from 10% to 100%.

SwitchX (Weltrade)

Similar to Jump indices, these instruments change behaviour after jumps occur.

TrendX (Weltrade)

These instruments adapt based on recent price behaviour to create trend persistence.

FlipX (Weltrade)

Each price move has a 50/50 chance of moving up or down

With so many different types of synthetic indices, it's important to weigh their benefits and drawbacks:

Volatility and FX Vol / SFX Vol Indices:

• Pro: High liquidity, constant market availability, and fast-paced trading opportunities.

• Con: High risk due to volatility. This may overwhelm beginner traders.

Crash & Boom and PainX & GainX Indices:

• Pro: Excellent for capturing big market moves, allowing trend traders to capitalise on sudden shifts.

• Con: Requires constant monitoring due to sharp market reversals that can lead to losses if you're unprepared.

Range Break and BreakX Indices:

• Pro: Predictable breakout patterns, ideal for traders with breakout strategies.

• Con: Price movements can be slow, making profit potential lower than in highly volatile markets.

Step Indices:

• Pro: Fixed step movements make these indices easier to manage, with reduced risk compared to high-volatility indices.

• Con: The predictability of movement can also limit profit potential for traders seeking fast, large price changes.

Jump and SwitchX Indices:

• Pro: Markets with sudden jumps offer opportunities for quick profits.

• Con: The unpredictable nature of jumps can make it difficult to manage risk, and traders need to be vigilant.

When trading, choosing the right account type can make all the difference when implementing your strategies. Deriv offers these account options for synthetic indices trading:

Deriv MT5 Swap-Free Account

This account is perfect for traders who want to avoid swap charges (interest fees on overnight positions).

It’s a great choice for traders who prefer holding their positions for long periods and don’t want to suffer additional costs.

Deriv MT5 Zero Spread Account

The Zero Spread account is ideal for those who want to minimise trading costs, especially during high-volume trading.

By removing the spread, you get tighter price movements, which can be an advantage for precision trading.

Deriv MT5 Standard Account

The Standard Account is a versatile option for many traders. It offers a balance of trading conditions that caters to various trading styles.

Weltrade offers synthetic indices trading via the SyntX Account. It's available on MT5 only, allows low minimum deposits and supports automated trading and EAs.

Each account type caters to different trading styles. Choose one that aligns with your strategy and financial goals. And please remember that it’s important to practice and get a feel for how synthetic indices behave before jumping into live trading.

NOTE: Weltrade synthetic indices trading is not available to traders living in the USA, Canada, the EU, Belarus, Russia and other non-supported (restricted) countries.