Deriv Synthetic Indices are the most popularly traded assets in Africa. This is despite them being relatively new instruments and being offered by only one broker in the financial market.Deriv Synthetic indices have been traded for over 10 years with a proven track record for reliability and continue to grow in popularity. Here we will let you know all about the synthetic indices so you can see why they are popular.
We will also show you how you can get started with trading these various synthetic indices.
What Are Synthetic Indices?
Synthetic Indices are a family of trading instruments that emulate or copy the behaviour of the real-world financial markets but they are not affected by world events or news. Synthetic indices are available 24/7, have constant volatility, fixed generation intervals, and are free of market and liquidity risks.
In other words, Deriv synthetic indices move like real-world markets but their movement is not caused by an underlying asset.
Stock markets, for example, move in response to the price movement of the stock. The same happens in forex markets where the forex chart moves up and down in response to the price of the forex pair.
There is only one broker that offers synthetic indices trading in the world. That broker is Deriv. The broker, which recently rebranded from Binary.com, has been in existence since 2000. Deriv also offers crypto, forex & stock trading and is the preferred choice of over 2 million traders worldwide.
In Africa, Deriv is the most popular broker and there are some traders that only trade these volatility indices exclusively. In countries like Nigeria, South Africa, Zimbabwe, Kenya,Tanzania, Botswana and Mozambique.Deriv has seen incredible growth due to traders wanting to try out these synthetic indices.
Why Is There Only One Synthetic Indices Broker (Deriv)?
Deriv is the only regulated synthetic indices broker in the world because it is the broker that ‘created and owns' these synthetic indices.
No other broker can offer these trading instruments because they do not have access to the random number generator and if they did, it would be illegal.
On the contrary, over 1000 brokers offer forex and stock trading instruments because no one ‘owns' these markets.
Any broker that can get real-time quotes of the forex and stock markets can easily provide them for trading to their clients.
What Moves Synthetic Indices?
Synthetic indices move due to randomly generated numbers that come from a cryptographically secure computer programme (algorithm) that has a high level of transparency.
The random number generator has been programmed in such a way that the numbers it gives out will reflect the same up, down and sideways movement that you will see on a forex or stock chart.
Deriv does not manipulate the movement of synthetic and volatility indices. In fact, this would be illegal and unfair as they could turn the market against traders.
The random number generator that moves the volatility indices charts is continually audited for fairness by an independent third party to ensure fairness and the broker cannot predict the numbers that will be generated.
How To Trade Synthetic Indices On MT5
To trade Deriv synthetic indices on MT5 you need to follow these easy seven steps:
1. Register a demo account on Deriv by clicking here and entering your email and verifying in your inbox
2. Create a real account by clicking on the ‘Real‘ tab and choosing your default account currency
3. Next, you should do Deriv real account registration mt5 by clicking on the ‘Real” tab again and choosing the synthetic indices option. Set your password and get the login ID that you will need to login to Deriv MT5.You will need to verify your account as time goes on.
4. Download the Deriv MT5 platform by clicking on the indices account you have just created under the ‘Real' tab
5. Login to your Deriv MT5 account and move funds from your main account to the Deriv MT5 synthetic indices account.
6. Choose the synthetic indices you want to trade on MT5 and start trading without verifying your account.
What Are The Types Of Synthetic Indices Offered By Deriv?
· Volatility Indices
· Crash & Boom Indices
· The Step Index
· Range Break Indices
· Jump Index
Volatility 10 Index (V10 Index)
Volatility 25 Index (V25 Index)
Volatility 50 Index (V50 Index)
Volatility 75 Index (V75 Index) The most popular volatility index
Volatility 100 Index (V100 Index) the most volatile synthetic index
Volatility 10 index is the least volatile while volatility 100 index represents the most volatile market conditions. There is also another type of volatility indices that are called (1s). These also range from 10% to 100% volatility. The key difference is that they update at the rate of one tick per second as compared to the normal volatility indices which update at the rate of one tick every two seconds. A tick is the minimum price movement of an index.
Crash & Boom Indices The crash and boom indices simulate rising and falling real-world monetary markets. In other words, they behave specifically like a booming or crashing financial market. They are different from volatility indices or currencies which have a more ‘normal' behavior. There are four types of boom and crash indices namely:
Boom 300 Index
Crash 1000 Index
Boom 300 Index
· Boom 500 Index
Boom 1000 Index· Crash 300 Index
Crash 500 IndexCrash 1000 Index
The Boom 300 index has on average 1 spike in the price series every 300,ticks, Boom 500 index has on average 1 spike in the price series every 500 ticks while the Boom 1000 index has on average 1 spike in the price series every 1000 ticks. Similarly, the crash 300 index has on average 1 spike in the price series every 300 ticks, Crash 500 Index has on average 1 drop in the price series every 500 ticks, while the Crash 1000 Index has on average one drop in the price series every 1000 ticks.
The Step Index. The Step Index simulates a market step by step. It has an equal probability of going up or down with a fixed step of 0.1.
Range Break Indices The range break indices simulate a ranging market that breaks out of the range after a number of attempts on average. There are two types of Range Break indices: Range 100 index and Range 200 index. The Range 100 index breaks out after an average of 100 attempts while the Range 200 index breaks out after 200 attempts on average.
Jump Indices The Jump indices measure jumps of an index with assigned Volatility. There are 4 jump indices namely;
· Jump 10 Index,
· Jump 25 Index,
· Jump 50 Index
· and Jump 100 index
The jump 10 index has an average of three jumps per hour with uniform volatility of 10%. The Jump 100 index has an average 3 jumps per hour with uniform volatility of 100%.
· Jump 10 Index,
· Jump 25 Index,
· Jump 50 Index
· and Jump 100 index
The jump 10 index has an average of three jumps per hour with uniform volatility of 10%. The Jump 100 index has an average 3 jumps per hour with uniform volatility of 100%.
How do you calculate synthetic indices lot sizes?
Calculating the lot sizes in synthetic indices trading can be a bit tricky. This is because each synthetic index has its own different lot size as opposed to forex where all pairs use the same lot size with the minimum being 0.01.
MT5 works with a system called points which is the smallest value that an instrument can change by. This changes from symbol to symbol depending on the accuracy of the price.
If, for example, the price has 2 digits after the comma (e.g. 1014.76) then 1 point = 0.01. So then, 500 points on this symbol would equal 5.00. Examples of synthetic indices with two digits after the comma include the Jump Indices, V10 (1s) & V25 (1s).
If a symbol has 4 digits after the comma (e.g. 1.1213) then 1 point = 0.0001. So then, 500 points on this symbol would equal 0.0050. This applies to synthetic indices like Boom & Crash 1000.
Calculating the lot sizes in synthetic indices trading can be a bit tricky. This is because each synthetic index has its own different lot size as opposed to forex where all pairs use the same lot size with the minimum being 0.01.
MT5 works with a system called points which is the smallest value that an instrument can change by. This changes from symbol to symbol depending on the accuracy of the price.
If, for example, the price has 2 digits after the comma (e.g. 1014.76) then 1 point = 0.01. So then, 500 points on this symbol would equal 5.00. Examples of synthetic indices with two digits after the comma include the Jump Indices, V10 (1s) & V25 (1s).
If a symbol has 4 digits after the comma (e.g. 1.1213) then 1 point = 0.0001. So then, 500 points on this symbol would equal 0.0050. This applies to synthetic indices like Boom & Crash 1000.
How to calculate minimum synthetic indices stop-loss & take profit levels
With the above in mind, we have a concept called stops levels which is the minimum distance from the current price that you can place any pending orders (including stop loss and take profit).This is also defined in points.
So if for example, the client wants to set a stop-loss on a 2 digit symbol with stops level = 5000 points, where this would be equivalent to $50.00 for this symbol. This means that if the current price is $1000.00, then the closest the client can place a stop-loss order is at $950 (or $50 away from the current price).
The same logic applies for TP, but this would be above the current price, at $1050.
This is how you calculate points in MT5. You don't need a synthetic indices pip calculator.
With the above in mind, we have a concept called stops levels which is the minimum distance from the current price that you can place any pending orders (including stop loss and take profit).This is also defined in points.
So if for example, the client wants to set a stop-loss on a 2 digit symbol with stops level = 5000 points, where this would be equivalent to $50.00 for this symbol. This means that if the current price is $1000.00, then the closest the client can place a stop-loss order is at $950 (or $50 away from the current price).
The same logic applies for TP, but this would be above the current price, at $1050.
This is how you calculate points in MT5. You don't need a synthetic indices pip calculator.
Advantages Of Trading Synthetic Indices
you can trade them anytime, any day throughout the year including holidays. This makes them very convenient
Synthetic indices are not affected by news and other fundamentals. These can really cause wild price movements e.g non-farm payroll's (NFP) effect on USD pairs
there are no negative balances when you trade synthetic indices
you can start trading synthetic indices with low capital
They’re not subject to manipulation or fixing.
They’re ideal for automated trading with continuous quotes and no gaps.
they have uniform volatility
you can trade them using price action
they have tight spreads and high leverage (margin trading)
you can deposit to your synthetic indices account using local payment methods
Deriv is the most popular broker in Zimbabwe and as such there are a lot of local traders that you can share trading tips and strategies with.
you can trade them anytime, any day throughout the year including holidays. This makes them very convenient
Synthetic indices are not affected by news and other fundamentals. These can really cause wild price movements e.g non-farm payroll's (NFP) effect on USD pairs
there are no negative balances when you trade synthetic indices
you can start trading synthetic indices with low capital
They’re not subject to manipulation or fixing.
They’re ideal for automated trading with continuous quotes and no gaps.
they have uniform volatility
you can trade them using price action
they have tight spreads and high leverage (margin trading)
you can deposit to your synthetic indices account using local payment methods
Deriv is the most popular broker in Zimbabwe and as such there are a lot of local traders that you can share trading tips and strategies with.
Disadvantages Of Trading Synthetic Indices
there are fewer synthetic indices to choose from as compared to forex pairs
they are very volatile. While this can give opportunities for getting profit, it can also amplify losses
some synthetic indices have large stop-loss levels. For example, Volatility 50 has a stop-loss level of 40 000 points or about US$12 using the smallest lot size of 3. This can be a challenge if you want to scalp and have tight stop losses. V 100 also has a large stop-loss level.
the fact that you can trade synthetics round the clock means that there is a real danger of overtrading. Overtrading can lead to blown accounts.
there are fewer synthetic indices to choose from as compared to forex pairs
they are very volatile. While this can give opportunities for getting profit, it can also amplify losses
some synthetic indices have large stop-loss levels. For example, Volatility 50 has a stop-loss level of 40 000 points or about US$12 using the smallest lot size of 3. This can be a challenge if you want to scalp and have tight stop losses. V 100 also has a large stop-loss level.
the fact that you can trade synthetics round the clock means that there is a real danger of overtrading. Overtrading can lead to blown accounts.
What is the best time to trade synthetic indices?
Synthetic indices have uniform volatility around the clock. This means that you can trade them at any time of the day. This is different from forex where there are some periods with low volatility
Synthetic indices have uniform volatility around the clock. This means that you can trade them at any time of the day. This is different from forex where there are some periods with low volatility
What is the minimum deposit needed to trade Deriv synthetic indices?
There is no set minimum deposit amount needed to trade synthetic indices. You can transfer as little as $1 from your main account to your DMT5 synthetic indices account.
However, the challenge with such a low deposit is that you will probably blow the account in seconds due to the volatility. We would suggest funding your trading account with at least $50 to be able to ride out any short-term reversals that may go against you.
There is no set minimum deposit amount needed to trade synthetic indices. You can transfer as little as $1 from your main account to your DMT5 synthetic indices account.
However, the challenge with such a low deposit is that you will probably blow the account in seconds due to the volatility. We would suggest funding your trading account with at least $50 to be able to ride out any short-term reversals that may go against you.
How can I fund my DMT5 synthetic indices trading account?
You can fund your DMT5 account using payment agents, or via Dp2p if you want to use your local payment methods. You can even use many of the deposit methods accepted by Deriv including Skrill, Neteller, AirTm, PerfectMoney, WebMoney etc.
