An introduction to synthetic indices trading
On January 15, 2015, the Swiss National Bank announced its decision to cancel its 1.20 peg against the euro, a move that sent ripples across the globe. Immediately, the currency was transformed from a haven to a highly risky asset, sending the forex market into chaos. Some traders suffered from negative balances, and many brokers got forced to shut down.
Black swan events like this have a steep cost for both traders and brokers since they directly affect financial markets. The worst part is that they are becoming more frequent. Within the past two decades alone, we’ve seen a global financial crisis, a rouble rout in Russia’s economy, plunging oil prices, Brexit, and the persisting COVID-19 pandemic.
Considering that these events significantly affect the financial market, it’s understandable that trading on financial markets might be considered too risky for some. But, what if you could trade without being affected by global events?
This is where synthetic indices trading comes in.
What are 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. These indices are based on a cryptographically secure random number generator, have constant volatility, and are free of market and liquidity risks.
Why trade synthetic indices
Synthetic indices offer tight spreads and leveraged trades. If you’d like to give synthetic indices a try, you can trade them on Deriv. Depending on your risk appetite, you can try trading Deriv’s proprietary synthetic indices using trade types such as CFDs, options, and multipliers.
Trading synthetic indices give you additional advantages, including:
- You’re aware of the potential risks right from the beginning; you won’t be surprised by unexpected margin calls. Margin calls occur when the balance on your account drops below your margin requirements, resulting in your positions become at risk of being closed automatically. You can fix the situation in two ways — deposit enough funds to increase your equity or close your positions.
- You don’t need a lot of capital to start trading.
- You benefit from the fast order execution and deep liquidity at all times, which is attractive for all traders, whether small or large.
- You can trade these indices 24/7, including weekends and holidays.
- There are different levels of volatility — Volatility 10 Index, Volatility 25 Index, Volatility 50 Index, Volatility 75 Index, and Volatility 100 Index.
In the Volatility 10 Index, the volatility is kept at 10%, which is an excellent choice for traders who prefer low price swings or fluctuations. With the Volatility 100 index, the volatility is maintained at 100%, meaning there are much stronger price swings and no significant price gaps. They are continuous indices with deep liquidity.
Here are the Deriv platforms where you can trade synthetic indices.
Trading synthetic indices on DTrader also allows you to manage your trades however you want.
You can choose not only the volatility level but also the contract length. You may open positions at a stake of as low as $0.35 and set the durations for as short as a second to several days.
You have the option of simultaneously opening multiple trades too. For example, you can open a Fall (sell) trade on the Volatility Index in 2 hours and a Rise (buy) trade on the same index in 2 minutes.
Deriv MT5 is an all-in-one CFD trading platform. You gain access to all assets and a wide range of professional trading tools and plugins, including analytical objects, technical indicators, and unlimited charts in numerous timeframes, to manage your capital and trading positions better. The charts and indicators are customisable according to your trading strategy.
Trading synthetic indices on Deriv MT5 is only available with a Synthetics account. You can access DMT5 via a desktop as well as Android and iOS mobile devices.
Deriv X is our newest CFD trading platform that lets you trade various assets in multiple markets simultaneously. It’s fully-customisable and packed with features that let you personalise your trading environment.
You can drag and drop the widgets you’d like to use, apply over 90 indicators and 13 drawing tools, and keep track of your progress and historical trades on one screen.
Trading synthetic indices on Deriv X is only available with a Synthetics account. You can access Deriv X via a desktop as well as Android and iOS mobile devices.
DBot is Deriv’s trading platform that lets you build a trading robot to automate your trades. You don’t need coding experience to build your bots. All you need to do is drag, drop, and configure pre-built blocks and indicators onto a canvas to build your bot. You can also select from a variety of pre-built strategies or set up your own.
DBot doesn’t require constant monitoring, allowing you to step away from your computer without missing opportunities. Just set your trading parameters and let the bot do the trading for you.
You can trade synthetic indices with options on DBot. DBot can be accessed from a desktop device.
SmartTrader is a simple and user-friendly trading platform that’s highly recommended for beginners. You can trade synthetic indices with options, allowing you to earn payouts from correctly predicting the price movement of an asset without buying the underlying asset.
You can access SmartTrader from your desktop device.
Deriv GO is Deriv’s mobile app that’s optimised for on-the-go trading. With this platform, you can trade synthetic indices with multipliers where you can take advantage of risk management features such as stop loss, take profit, and deal cancellation to better manage your trade.
You can download Deriv GO from Google play store, Apple app store, and Huawei app gallery.
Create your free Deriv demo account on both DTrader and Deriv MT5 to practise your trading skills and strategies risk-free. The demo account comes preloaded with 10,000 USD virtual money, which you can top up when you run out. Once you feel more confident with your trades, you can easily switch to a real account.
Disclaimer: Some trading conditions, indices, and platforms are unavailable for clients in the EU.