Synthetic Indices Vs Forex Trading: Which is Best For You?

Synthetic indices and forex are two different types of markets, each with its own unique advantages. While the forex market is the most popular and has existed for centuries, the synthetic indices market is relatively new but has been rapidly gaining popularity among traders in recent years.

One key reason for this growth is that synthetic indices are not affected by real-world news events, meaning they are less likely to be disrupted after technical analysis. We’ll explore this and several other reasons in this post.

Both synthetic indices and forex can be traded on the same platforms, which means you’ll need to understand both before deciding which one to focus on. They are valuable in their own right, but they also share certain similarities and differences.

You may have seen traders choosing synthetic indices instead of traditional currency pairs and wondered how synthetic indices compare to forex. This post is designed to help you understand what each market is, how they differ, and which one may be better suited to your trading style.

Let’s dive in!

What Are Synthetic Indices?

Synthetic indices are financial instruments designed to simulate the behavior of real-world markets, such as stock indices, currency exchange rates, or commodity prices. These indices are generated using mathematical algorithms and cryptographically secure random number generators (RNGs), which replicate volatility, trends, and price fluctuations.

One of the biggest advantages of synthetic indices vs forex is that synthetic indices are not influenced by fundamental factors like government policies, news events, or economic data. This makes them more predictable from a purely technical analysis perspective. Traders who prefer chart patterns, indicators, and price action often find synthetic indices appealing for this reason.

With strong technical analysis skills and a solid risk management plan, you can trade synthetic indices profitably without worrying about sudden news-driven spikes.

Just like forex, synthetic indices can be traded either as binary options contracts or as contracts for difference (CFDs). This means you don’t own the underlying assets but instead speculate on price movements. Later in this post, we’ll cover how to trade synthetic indices and the platforms that support them.

Pros & Cons of Synthetic Indices

Pros

1. 24/7 Availability: Synthetic indices are available 24/7. This means they can be traded 24 hours a day, 7 days a week — unlike the forex market, which closes on weekends. This allows traders with a 9–5 job to participate in the market during weekends when they are off work.
2. Simplicity in Trading: Synthetic indices are relatively simpler to trade because they rely mainly on technical analysis, with no need for fundamental analysis. Many traders find the fundamental side of forex overwhelming, but the synthetic indices market removes that complexity and makes trading more straightforward.
3. Low Entry Barriers: You can start trading synthetic indices with a small amount of capital. Most synthetic indices brokers require only a low minimum deposit, unlike many forex brokers that may demand larger initial deposits. This makes synthetic indices more accessible to beginners.

Cons

1. Proprietary Instruments: Synthetic indices are proprietary to the broker that provides them. This means the broker controls the algorithm that drives the movement of each instrument, and it may differ from what another broker offers. For example, the volatility indices on Deriv will not behave the same way as those on another broker. This creates a challenge for traders, as they must study and adapt to the specific instruments offered by whichever broker they use.

2. Limited Broker Options: Only a few brokers currently offer synthetic indices. As of today, the two well-known brokers providing access to these instruments are Deriv and Weltrade.

3. Not Backed by Real-World Assets: Synthetic indices are purely simulations and are not tied to real currencies, commodities, or stocks. Some traders prefer the realism, liquidity, and news-driven movements of the forex market, which synthetic indices cannot replicate.

What Is Forex?

The forex market is the world’s largest financial market, where one country’s currency is exchanged for another. Trading is done through a decentralized network, and forex trades are usually executed as CFDs or binary options contracts. Instead of owning currencies directly, traders speculate on their price changes through brokers.

Unlike synthetic indices, forex price movements are strongly influenced by fundamental factors, such as central bank decisions, interest rates, inflation, geopolitical events, and economic indicators. These factors can create volatility and unexpected market moves that traders must manage carefully.

In the debate of synthetic indices vs forex, forex offers the advantage of being tied to real-world economies and events, making it attractive for traders who like to follow global news and economic trends.

Forex pairs are divided into three main categories:

• Major Pairs: These involve the US Dollar (USD) and are the most traded worldwide. Examples: EUR/USD (Euro/US Dollar) and GBP/USD (British Pound/US Dollar).

• Minor Pairs: These exclude the USD but still involve major global currencies. Examples: EUR/GBP (Euro/British Pound) and AUD/JPY (Australian Dollar/Japanese Yen).

• Exotic Pairs: These combine one major currency with one from an emerging or less liquid economy. Examples: USD/TRY (US Dollar/Turkish Lira) and EUR/ZAR (Euro/South African Rand).

Pros & Cons of Forex

Pros

1. Unlimited Broker Access: Forex has a wide range of brokers, many of which are regulated across the globe. This gives traders more options and confidence in choosing where to trade.

2. Non-Proprietary Instruments: The instruments in the forex market are not proprietary to any broker. The behavior of a currency pair is consistent across different brokers, ensuring transparency and reducing the risk of manipulation. When you migrate from one forex broker to another, you only need to adapt to their trading platform—not relearn the behavior of the instruments, since they remain consistent.

3. High Liquidity: With over $7 trillion traded daily, the forex market is the most liquid financial market in the world. This means you can trade virtually any amount without worrying about availability. High liquidity also allows forex to offer tight spreads, fast trade execution, and minimal slippage—especially on major pairs like EUR/USD or GBP/JPY.

Cons

1. Limited Availability (24/5): The forex market is only open on weekdays, meaning it closes on weekends. This can be inconvenient for people who prefer trading on Saturdays or Sundays, as they are unable to participate during that time.

2. News Sensitivity: Forex is highly sensitive to economic and geopolitical news. Major announcements can disrupt market structure and cause sharp price swings, leading to unexpected losses. Traders are often required to monitor the news closely and use it as part of their trading confluence, which adds an extra layer of complexity.

3. Challenging for Beginners: Forex trading comes with a steep learning curve. Terms like fundamental analysis, pips, spreads, and leverage can feel overwhelming for new traders without proper guidance. In addition, many forex brokers have relatively higher entry barriers, which may limit access for beginners with small capital

Synthetic Indices vs. Forex: A Detailed Comparison

Factor	Synthetic Indices	Forex
Market Availability	Trades 24/7, including weekends.	Trades 24/5, closed on weekends.
Instruments	Proprietary indices like Volatility 75, Crash 1000, Boom 500.	Currency pairs: majors (EUR/USD, GBP/USD), minors, and exotics.
Price Influences	Driven by algorithms and RNGs; no effect from real-world news or events.	Influenced by economic news, interest rates, politics, and global events.
Leverage	Often up to 1:1000 (depends on the broker).	Regulated brokers may cap at 1:30 (EU/UK), offshore brokers up to 1:500+.
Volatility	Fixed volatility models (e.g., VIX75 is always highly volatile).	Volatility depends on market events and varies by currency pair.
Liquidity	Liquidity is broker-provided; depends on the platform.	Deep global liquidity ($7 trillion daily volume).
Transparency	Proprietary to broker; behavior may differ across brokers.	Non-proprietary; behavior of currency pairs is consistent across all brokers.
Entry Barriers	Low — can start trading with small capital.	Often requires higher deposits, especially with regulated brokers.
Complexity	Simpler — mainly technical analysis; no need to monitor news.	More complex — requires both technical and fundamental analysis.
Best For	Beginners who want a stable, simple, news-free environment.	Traders who want to experience real-world market dynamics and global economic influences.

 

Synthetic Indices vs. Forex: Which Is Better for Beginner Traders?

When comparing synthetic indices to forex for beginners, synthetic indices often come out ahead. They generally have lower entry barriers, a simpler market structure, and are free from the influence of news events that can disrupt market movements.

If you want something simple, stable, and easier to understand, synthetic indices may be the ideal starting point. These markets don’t rely on global news or unpredictable events. Instead, they’re algorithm-driven, available 24/7, and follow clean, repetitive patterns.

On the other hand, if you’re curious about how real-world events shape financial markets, forex might be more appealing. In forex, you trade actual currencies like USD, EUR, or GBP, and experience how interest rate decisions, political events, or inflation reports move prices. It’s more complex, yes—but that complexity is also what makes forex exciting and rewarding for many traders.

Synthetic indices vs forex trading: The Instruments Available

Synthetic Indices:
When trading synthetic indices, the instruments you’ll find are unique to the broker that provides them. For example, Deriv offers volatility indices (volatility 75, volatility 100, volatility 25 index, etc), crash & boom indices (boom 1000, crash 1000, boom 500, etc), and range break indices and jump indices. These instruments are purely algorithm-driven and can only be found on platforms that support them. You won’t see them on every broker because they are proprietary. That means if you switch from one broker to another, the exact same index may not exist — or may behave differently.

Forex:
In forex, the instruments are standardized across the industry. Every broker offers access to major currency pairs (like EUR/USD, GBP/USD, and USD/JPY), minor pairs (like EUR/GBP or AUD/NZD), and exotic pairs (like USD/ZAR or EUR/TRY). Unlike synthetic indices, these pairs are consistent — meaning EUR/USD will behave the same whether you’re trading it on Broker A or Broker B. This makes the forex market highly transparent and globally accessible.

Synthetic indices Vs Forex: Differences in Leverage, Volatility, & Liquidity

Leverage

• Synthetic Indices: Most brokers offering synthetic indices provide flexible leverage, often going as high as 1:1000. This means traders can control larger positions with a smaller account balance. However, while high leverage can boost profits, it also increases the risk of blowing your account if not managed properly.

• Forex: Forex brokers also provide leverage, but it often depends on the broker’s regulation. For example, regulated brokers in Europe may cap leverage at 1:30, while offshore brokers may offer 1:500 or more. In short, forex leverage is controlled by regulation, while synthetic indices leverage is decided by the broker.

Volatility

• Synthetic Indices: These are designed to have consistent volatility. For instance, the Volatility 75 Index (VIX75) is built to mimic a market that is always highly volatile. This makes them exciting to trade but also riskier, as price swings can be extreme in a very short time.

• Forex: Forex volatility varies depending on the currency pair and market events. Major pairs like EUR/USD or GBP/USD are usually more stable, while exotic pairs like USD/ZAR or GBP/TRY can show sudden and wild moves — especially around news events.

Liquidity

• Synthetic Indices: Liquidity is provided by the broker since these instruments are proprietary. This means your ability to buy or sell instantly depends on the broker’s infrastructure, not a global pool of traders.

• Forex: Forex is the most liquid market in the world, with over $7 trillion traded daily. This ensures fast execution, tight spreads, and very little slippage on major pairs. In other words, you’ll rarely struggle to find a buyer or seller in forex.

What Affects Synthetic Indices & Forex Prices

One key difference between synthetic indices and forex is what actually drives their price movements.

Synthetic Indices:
Synthetic indices are not tied to real-world events. Their movements are powered by algorithms that mimic real market behavior but without external influences like politics or economics. This means the patterns you see are purely mathematical and consistent. You don’t need to worry about a sudden news release, a government policy, or a central bank decision crashing the market.

Forex:
Forex prices, on the other hand, are heavily influenced by global factors. Currency pairs like EUR/USD or GBP/JPY react to interest rate changes, inflation reports, political events, and even unexpected news like natural disasters or conflicts. This makes forex more dynamic — but also more unpredictable. Traders often have to follow the news closely, use economic calendars, and factor in both technical and fundamental analysis to make informed decisions.

In short, synthetic indices move based on fixed algorithms, while forex prices move based on the real world. That’s why trading forex requires more awareness of global events, while synthetic indices offer a more controlled environment for testing strategies or practicing trading skills.

Conclusion

Both synthetic indices and forex open exciting opportunities for traders, but the right choice depends on your goals, experience, and trading style.

If you’re a beginner looking for a simple, low-barrier, and news-free market, synthetic indices give you a straightforward way to sharpen your technical skills and test strategies without worrying about global events disrupting your trades.

On the other hand, if you want to experience the real-world dynamics of global finance, forex offers unmatched liquidity, diverse instruments, and the thrill of trading actual currencies influenced by economics, politics, and world events.

At the end of the day, neither market is “better” than the other. They simply cater to different needs. Many traders even combine both — using synthetic indices to practice strategies and forex to engage with real-world currencies. Brokers like Deriv allow you trade both Synthetic indices and forex.