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Synthetic trading: what it is and how to trade it
Thesynthetic indices are markets thatdo not exist in nature: their price is generated by the broker's algorithm, not by a real asset or an exchange. They are quoted24/7, and do not depend on news and have volatility defined by contract. That makes them very convenient for anyone trading outside forex hours… and also very dangerous if you do not understand who your counterparty is.
If you are coming tolearn synthetic trading from scratch, order matters: the step-by-step route is inlearn trading, the fact sheets for each market insynthetic instruments and calculating position size intrading and risk management.
How a synthetic index works internally
A synthetic index behaves like a continuous-price instrument, but behind it there are no currencies, commodities or companies. The broker publishes aprice-generating algorithm with specific rules, and your trade is executed against it. Three practical consequences:
- There is no opening or closing: the chart does not stop at the weekend and there are nogaps at the open, because it never “closes”.
- Volatility is written in the name: aVolatility 75 is defined with an annual volatility close to 75%, aVolatility 25 with 25%. There are no macro surprises.
- Liquidity-dependent patterns do not exist: there is no order manipulation or news-driven stop sweeps, but nor is there real flow that 'pushes' the price: what you see is the broker's model.
The detail of how the price is built, which parameters are defined and what changes in each family is inhow synthetic indices work internally; and what the absence of a close implies, insynthetic indices 24/7.
The families that exist (and their trade names)
Each broker uses its own names, but the families are the same. The most common ones:
| Family | How it behaves | Examples |
|---|---|---|
| Constant volatility | Random movement with fixed, known volatility. It is the 'base' family. | Volatility 10 · 25 · 50 · 75 · 100 · 150 · 200 · 250 (Deriv), and faster '1s' versions.See Volatility 75 guide · See Volatility 100 guide |
| Crash / Boom | Smooth walk withsudden jumps: in Crash the jump is bearish (~1 every 500 ticks), in Boom bullish. | Crash 300 · 500 · 1000 · Boom 300 · 500 · 1000. See the Crash and Boom guide · Crash 1000 guide · Boom 1000 guide |
| Step Index | It movesin steps of fixed size (e.g. 0.3 / 0.4 / 0.5). Intraday noise is reduced. | Step 300 · 400 · 500. See Step Index guide |
| Jump / Drift / DEX | Periodic jumps with fixed strength, or drifts that change direction every X minutes. | Jump 10-100 · Drift Switching · DEX 600/900 |
| Broker's own indices | Same principles, brand and specific rules. | PainX 400/800/1200 · GainX 400 · FX Vol 20 · FlipX 3 (Weltrade/SyntX) |
Before preparing a strategy for any instrument, the first thing is to readits fact sheet: volatility, tick size, point value per lot, leverage and trading hours. They change from one index to another even if their names look similar.
How they differ from forex and gold
The table summarises the differences; the practical breakdown — what changes when you move from one market to another and the most costly mistakes — is insynthetic indices vs forex.
| Synthetic indices | Forex | Gold (XAUUSD) | |
|---|---|---|---|
| Underlying asset | None (broker's algorithm) | Real currencies | Physical gold (OTC/spot market) |
| Trading hours | 24/7, including weekends | Monday to Friday, 24 h | Monday to Friday, with a daily break |
| Gaps | None | Yes (Sunday open) | Yes (Friday night) |
| News | Not affected | High sensitivity (rates, inflation, employment) | Very high (dollar, rates, geopolitics, US open) |
| Volatility | Defined by contract | Medium, with clearly defined sessions (London / New York) | High and highly technical |
| Main risk | Counterparty (your broker is the other side) | Liquidity and trading hours | Volatility and lot size |
Neither is ‘better’: they are different tools. If you work at night, synthetics give you a market that is moving at 3 a.m.; if you trade in the European or American session, forex and gold give you liquidity and news. And they can be combined with thesame method of structure and risk.
Are they random? Are they manipulated? The two usual questions
Random
Their noise component is indeed random, but that does not mean ‘impossible to analyse’: volatility, tick size and — in Crash, Boom, Step or Jump — the frequency of events aredefined in the rules of the contract. It is a market with different rules, not a casino without structure.
Manipulated
There is nofeed from third parties to manipulate: the price is the broker's, who is also your counterparty. That is why the useful question is not «is it manipulated?», but rather«who is my counterparty and at what cost do I trade?»: spread, commission, execution, whether the broker is regulated and how it handles withdrawals. With an opaque broker, no analysis will save you.
The two questions have their own guide:are synthetic indices random?(what is defined, what is not and what can be measured) andare they manipulated?(what OTC is, the broker's role as counterparty and what can be checked with data before entrusting it with money).
Can you make money trading synthetics?
You can, in the same way you can in any market: it is a game ofzero-sum minus costs. Without a measurable edge and without risk management, the long-term result is negative, and most retail accounts lose (this is what the reports of brokers regulated under MiFID show). What sets apart those who survive, which is developed incan you make money with synthetic indices?:
- Risk defined before entering: how much you lose if the scenario is invalidated, in money and as a percentage of the account.
- Size calculated, not «by eye»: lot size derived from risk and stop, never the other way round.
- Trading log: without data there is no improvement; without improvement there is no positive expectancy.
- One idea per trade: and no doubling positions to «fix» a loss.
Why the martingale destroys accounts in synthetics
As there is no news or gaps, the temptation to average against the position seems reasonable: «the price will come back». But position size grows geometrically and so does your risk: an adverse streak —whichalways arrives— consumes the entire account. Here we teach the opposite: fixed risk per trade and a hard daily loss limit.
How they are traded in practice
- Platform: MetaTrader 5 (for exampleDeriv MT5 or Weltrade's MT5), with synthetic indices in the Market Watch.
- Before touching anything: check the instrument specification (tick, value per lot, leverage) and calculate the lot size from your risk.
- Automation: Since it is MT5, you can use indicators and expert advisors (EA) in MQL5, or tools like those from this house, which also share the mentor's chart markings with students.
- Schedule: choose the hours whenyou perform. The advantage of synthetics is that the market is always there; you don't have to be there.
Frequently asked questions
Are synthetic indices random?
Their price is generated by the broker's algorithm, so they do not depend on any real asset or on news. But they are not “a casino”: volatility is defined by contract and Crash, Boom, Step or Jump follow fixed rules. What does not exist is an interbank market behind them.
Can they be traded on MetaTrader 5?
Yes. Deriv and Weltrade, among others, offer them on MT5, which allows you to use indicators, EAs and automation in MQL5 exactly as in forex.
What is the difference compared with forex or gold?
Forex and gold are real assets: sessions, news and weekend gaps. Synthetics are 24/7, with no news and with volatility defined by the broker; their main risk is counterparty risk.
How much capital do I need to start?
It depends on the broker (some allow very low deposits), but what matters is not the minimum, but that the capital allows you to applyyour risk per trade without being left out because of size. If you need to risk 5% per trade to trade well, the problem is the capital, not the strategy.
Are they legal?
It is a product offered by brokers regulated in different jurisdictions, with rules that differ depending on the country. Before opening an account, check the regulation that applies to you and whether the product is allowed for retail clients in your country.
Next step
If you want to learn the complete method —structure, entries with invalidation, lot calculation and risk control—, the academy opens its doors with live classes and mentoring:
Keep reading
- How synthetic indices work from the insideThe price engine, the volatility in the name, the events and the symbol contract.
- Are synthetic indices random?Which part is random, what is defined and what can be measured.
- Are synthetic indices manipulated?What OTC is, the broker as counterparty and how to check it.
- Synthetic indices vs forexSchedules, gaps, costs and the mistakes when switching markets.
- Advantages and disadvantages of syntheticsThe real advantages and what you pay for them: counterparty, spreads, outliers and availability.
- What if the broker goes bankrupt?Counterparty risk, licences, warning signs and capital allocation.
- What is a volatility pair?The term means two different things: volatile synthetic index or a forex pair with a wide range.
- Volatility 75: what it is and how to trade itThe “75” is its annual volatility: it changes your position size. Lot formula and typical mistakes.
- Volatility 100: what it is and how to trade itThe widest range in the round range: how much the lot drops and what the 1s versions change.
- Crash and Boom: how they workThe jump engine, what the number means and the three ways to gain exposure to the event.
- Crash 1000: what it is and how to trade itSlow rises and crashes every ~1000 ticks: how to plan an asymmetry that plays against you.
- Step Index: what it is and how to trade itIt moves in fixed steps: a clean read… and stops that must respect that size.
- Boom 1000: what it is and how to trade itThe mirror image of Crash: a bearish drip and explosive bullish spikes.