What Is Synthetic Indices? A Complete Beginner’s Guide

The financial markets are full of exciting instruments, but one that has gained massive attention in recent years is synthetic indices.

Unlike traditional assets like stocks, commodities, or forex pairs, synthetic indices are algorithm-driven markets that mimic real-world price behavior, but they are completely detached from real-world activities like economic news or geopolitical events.

Today, Deriv and Weltrade are two of the best-known brokers offering synthetic indices, giving traders a chance to explore markets that are always open, always volatile, and highly flexible.

 In this guide, we’ll explain what synthetic indices are, how they work, the benefits and risks involved, and how you can start trading them.

Let’s get started

What Are Synthetic Indices?

 Synthetic indices are financial instruments that are created to simulate the behavior of real-world markets, such as stock indices, currency exchange rates, or commodity prices. These indices are derived from a combination of various data sources and mathematical algorithms, allowing traders to speculate on their movement.

In the Synthetic indices market, Cryptographically secure random number generators (RNGs) are used to replicate volatility, trends, and price fluctuations.

For example:

• The Volatility 75 Index is designed to reflect a market with 75% volatility, making it one of the most popular instruments among traders.

• Crash and Boom indices mimic sudden surges or drops, simulating the way real financial assets sometimes spike or plummet unexpectedly.

Unlike traditional indices such as the S&P 500 or Dow Jones, which track real company stocks, synthetic indices are 100% algorithm-based. They are not tied to any real-world assets.

Because they are algorithmically generated, synthetic indices operate continuously, 24/7, and are unaffected by real-world economic events, market hours, or liquidity constraints. This makes them ideal for traders who want to test strategies in a controlled yet realistic environment.

How Do Synthetic Indices Work?

Synthetic indices are algorithmic trading instruments that run on secure random number generators (RNGs). These RNGs are Audited and regulated to ensure fairness. They are also designed to generate price movements that match specific volatility profiles. The underlying algorithms simulate different market conditions, from steady trends to sharp reversals, making synthetic indices a useful tool for stress-testing trading strategies in an artificial market simulation.

For instance:

• The Volatility 10 Index (V10) represents a very calm market with low volatility.

• The Volatility 100 Index (V100) simulates extremely volatile market behavior, perfect for high-risk/high-reward traders.

• Crash 1000 is programmed to experience a sharp drop once every 1000 ticks (on average).

This programmed consistency allows traders to know what kind of environment they are trading in—unlike real markets, where unexpected news can ruin a perfectly good setup.

Popular Types of Synthetic Indices

Synthetic indices come in many forms. The most popular ones include:

1. Volatility Indices (V10, V25, V50, V75, V100, V250): In the volatility indices market, each instrument represents constant volatility levels. For example, Volatility 75 (V75) representsa volatility level of 75, and it is one of the most actively traded synthetic instruments worldwide.

2. Crash and Boom Indices: The crash and boom indices market is a market created to simulate sudden spikes in the market. Crash indices simulate sudden downturns, while boom indices mimic sudden upsurges.

3. Jump Indices: Prices jump dramatically every 20 minutes on average.

4. Range Break Indices: Simulate price bouncing between support and resistance, followed by sudden breakouts.

5. Step Indices: Move up or down in fixed steps of 0.1–0.5, ideal for scalpers.

These variations mean traders can pick an instrument that best suits their strategy and risk appetite.

Platforms for Trading Synthetic Indices

Currently, the two most recognized brokers for synthetic indices are:

1. Deriv

Deriv is the first synthetic indices broker that has been in existence since the year 1999. Since inception, they have been rebranded from BetOnMarkets.com to Binary.com, and then to Deriv.

Deriv offers most of the popular synthetic indices instruments, like volatility indices, boom and crash indices, step indices, jump indices, range break indices, and others.

Aside from synthetic indices instruments, you can trade other markets like currency pairs, commodities and  stocks on Deriv.

On Deriv, you can trade synthetic indices either as a binary option contract on their Deriv Trader, Deriv Go and  Smart Trader or as a Contract for Difference (CFD) on Deriv X, Deriv cTrader, or Deriv MT5.

• Platforms: DTrader, DBot (automated trading), Deriv Go, Deriv C Trader, Deriv X and MT5 (Deriv MT5).

• Offers the widest range of synthetic products including Volatility Indices, Crash & Boom, Step, Range Break, and more.

• Available on both demo and live accounts.

2. Weltrade

Weltrade is another Synthetic indices broker that has been gaining traction over the recent years, weltrade, founded in 2006 originally under the name SystemForex, was rebranded to Weltrade in 2012

Weltrade is among the brokers that now offer synthetic indices instruments, giving traders access to popular products like FX Vol, SFX Vol, PainX / GainX, FlipX, and SwitchX.

In addition to synthetic indices, traders on Weltrade can also access a wide variety of traditional markets including forex currency pairs, commodities, metals, and stocks.

On Weltrade, synthetic indices are traded as Contracts for Difference (CFDs), this provides flexible trading opportunities with high leverage and competitive spreads.

Platforms: MT4, MT5, as well as mobile and web terminals for convenient trading.

Weltrade’s synthetic indices are available on both demo and live accounts. this allows beginners to practice and for professionals to trade real money.

• Available via MT4/MT5 platforms.

• Known for transparent execution and strong customer support.

• A good alternative for traders who want additional flexibility outside Deriv.

Some of the Specific SyntX Instrument Types at Weltrade are;

• FX Vol. — A synthetic volatility instrument that mimics markets with fixed volatility levels (forex-volatility context).

• SFX Vol. — Similar to FX Vol., but with simulated “news-flash” style events (price spikes) every so often.

• PainX / GainX — Instruments where price moves gradually (consistent steps), interspersed with occasional jumps/drop events.

• FlipX — Instrument with a 50/50 chance for each tick to go up or down; choice of step size.

• SwitchX — Alternating behavior between strategies (e.g. between PainX and GainX modes) after certain events.

• BreakX — Focused on breakout behavior — price changes when crossing prior critical levels.

• TrendX — Designed to detect trend emergence (analyzing previous movements) and change behavior accordingly.

Why Trade Synthetic Indices? (Benefits)

Synthetic indices have grown rapidly in popularity because they offer unique benefits:

1. 24/7 Trading: No market hours— Synthetic indices market is open 24hrs a day, 7 days a week.

2. No Real-World Risks: The synthetic indices market is unaffected by central bank policies, elections, or global crises.

3. High Volatility: Instruments like V75 offer huge trading opportunities.

4. Demo-Friendly: Both Deriv and Weltrade provide demo accounts, this allows you to practice with risk-free account.

5. Portfolio Diversification: Both Deriv and Weltrade offer you the chance to trade forex, stocks, or crypto in addittion to synthetic indices.

Risks of Trading Synthetic Indices

Of course, synthetic indices are not risk-free. Traders should be aware of:

• Broker Dependency: You rely entirely on the broker’s algorithms. That’s why it’s best to stick with tested names like Deriv and Weltrade.

• Overleveraging: Some instruments offer leverage up to 1:1000, which can wipe out accounts if misused.

• Lack of Traditional Regulation: While brokers may be licensed, synthetic indices themselves are not tied to regulated exchanges.

• Volatility Dangers: Instruments like V75 or Jump indices can move against you very quickly.

How to Trade Synthetic Indices (Step by Step)

Here is a brief step-by-step guide on how to start trading synthetic indices;

1. Choose a Broker – Sign up with Deriv or Weltrade.

2. Open a Demo Account – Create a demo account with the broker and practice with virtual funds.

3. Select a Platform – Deriv and weltrade offers variety of trading plartforms, you can select from MT5, DTrader, or DBot on Deriv; MT4/MT5 on Weltrade.

4. Pick an Instrument – For example, Volatility 75 or Crash 500.

5. Analyze the Chart – Use technical indicators like RSI, MACD, or moving averages to forecast the market, aside from using these technical indicators, pure price action trading also work on synthetic indices.

6. Place Your Trade – Decide on lot size, stop-loss, take-profit and then place your trade.

7. Manage Your Risk – Don’t overleverage, especially on volatile assets.

Are Synthetic Indices Legit?

Yes. While synthetic indices are not tied to real-world assets, they are legitimate CFD instruments offered by reputable brokers.

• Deriv is the original pioneer and has built its reputation on fairness and transparency since 1999.

• Weltrade has added synthetic indices to its portfolio, proving their growing acceptance.

• RNGs used in synthetic indices are independently audited, ensuring fairness.

Conclusion

Synthetic indices represent a new era of trading instruments. They give traders the chance to participate in always-open, high-volatility markets without worrying about economic news or market hours.

Platforms like Deriv and Weltrade have made them accessible to traders worldwide, whether you’re looking for fast scalping opportunities on Step Index, or high-volatility setups on V75.

But remember: Always practice on demo, master your strategy, and apply strict risk management before going live.