Synthetic indices are the most popularly traded assets in South Africa.
A lot of groups on social media (Facebook, WhatsApp & Telegram) have been set up by traders to discuss and share signals on synthetic indices.
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 in South Africa.
Synthetic Indices are a group of trading instruments that reflect or copy the behaviour of the real-world financial markets. A key feature of these synthetic indices is that they are not affected by fundamentals like world events or news.
in South Africa, synthetic indices are available to trade 24/7, have constant volatility, fixed generation intervals, and are free of market and liquidity risks.
In other words, 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.
Synthetic indices move due to randomly generated numbers that come from a cryptographically secure computer program (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.
No, 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
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 some traders only trade these volatility indices exclusively.
In countries like Africa in general and South Africa in particular, Deriv has seen incredible growth due to traders wanting to participate in synthetic indices trading.
Deriv is the only broker that offers synthetic indices trading 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. This is why there are no other synthetic indices brokers.
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.
You need a dedicated account inside your main Deriv account to be able to trade synthetic indices on MT5.
This is because Deriv offers a variety of different trading instruments including forex currencies, cryptocurrencies, stocks, commodities and, of course, synthetic indices.
You will need different accounts within your main Deriv account to trade these different instruments.
In this section, we are going to look specifically at how you can open a synthetic indices account and then trade synthetic indices on MT5 in six easy steps.
Choose your preferred password & country of residence.
You will need to fund your Deriv MT5 account to be able to do synthetic indices trading. You can use payment agents or dp2p to fund the account using your local payment methods.
Please note that the funds will first reflect in your main account and you will then have to move them to the DMT5 synthetic indices trading account.
Follow these steps and you will be able to see why Deriv is the best broker for South African forex traders. You can start trading right away before verifying your account by using local payment agents to deposit and withdraw from your account.
Below is the list of various synthetic indices offered by Deriv.
1.) Volatility Indices Volatility Indices on Deriv.com are real-time monetary market indicators of expected uniform volatility over a certain period of time. Monetary market volatility is measured on a scale from 1 to 100 with 100 being maximum volatility. The constant volatilities of the indices offered by Deriv are 10%, 25%, 50%, 75% and 100%. There are several volatility indices including:
These indices update at the rate of one tick every two seconds. (A tick is the minimum price movement of an index.) Deriv also offers another type of volatility indices that update at the rate of one tick every second i.e they move faster. These are:
Volatility 100 index represents the most volatile market conditions while the Volatility 10 index is the least volatile. On the (1s) volatility indices V100 (1s) is the most volatile while V10 (1s) is the least volatile.
Volatility 75 (V75) is the most popular volatility index. A lot of traders around the world prefer to trade it. One reason why it is the most popular volatility index could be that it is easier to make a lot of money using even a small lot size.
See an example below where a trader was able to make over $70 profit from a deposit of just $3 trading Volatility 75. The trader was using 0.001 which is the smallest lot size on Volatility 75.
You can trade the following binary options using volatility indices:
2.) 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' behaviour. There are four types of boom and crash indices namely:
The 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 500 Index has on average 1 drop in the price series every 500 ticks, while the Crash 1000 Index has on an average one drop in the price series every 1000 ticks.
3.) 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.
4.) Range Break Indices The range break indices simulate a ranging market that breaks out of a range after several 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.
6.) Jump Indices The Jump indices measure jumps of an index with assigned Volatility. There are 4 jump indices namely;
The Jump 10 index has an average of three jumps per hour with a uniform volatility of 10%. The Jump 100 index has an average of 3 jumps per hour with uniform volatility of 100%.
Lot sizes determine the smallest trade amount you can place. This is a list of the smallest lost sizes for each different synthetic index.
Volatility Index |
Smallest lot size |
| Volatility 10 Index | 0.3 |
| Volatility 25 Index | 0.50 |
| Volatility 50 Index | 3 |
| Volatility 75 Index | 0.001 |
| Volatility 100 Index | 0.2 |
| Volatility 10 (1s) Index | 0.5 |
| Volatility 25 (1s) Index | 0.50 |
| Volatility 50 (1s) Index | 0.005 |
| Volatility 75 (1s) Index | 0.005 |
| Volatility 100 (1s) Index & Step Index | 0.1 |
| Boom 1000 Index | 0.2 |
| Crash1000 Index | 0.2 |
| Boom 500 Index | 0.2 |
| Crash 500 Index | 0.2 |
Calculating pips and 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.
Now we are going to compare synthetic indices vs forex to see their similarities & differences.
Now let's look at the advantages and disadvantages of trading these popular 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 like Monday mornings and Friday evenings.
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 R700 to be able to ride out any short-term reversals that may go against you.
You should also use the smallest lot sizes if your account balance is small.
You can fund your DMT5 account using payment agents or via Dp2p if you want to use your local payment methods. You even using many of the deposit methods accepted by Deriv including Skrill, Neteller, AirTm, PerfectMoney, WebMoney etc.
No, it does not. Otherwise, it would be illegal as it would be grossly unfair to its clients. Binary.com, which has now rebranded to Deriv.com, has been in existence for over 20 years and is a fully regulated broker.
In the EU, Deriv is regulated by the Malta Financial Services Authority (FSA). For traders outside of the EU, the broker is licensed with the Vanuatu Financial Services Commission (FSC) and the British Virgin Islands Financial Services Commission (FSA). In addition, Deriv is regulated by Malaysia’s Labuan Financial Services Authority (FSA).
Now all these regulatory authorities would not let this broker get away with manipulating volatility indices to their advantage. They would promptly suspend the broker from operating in their jurisdictions.
The fact that this has not happened is testimony to the fact that the broker does not manipulate volatility indices.
No, synthetic indices are not a scam. They are a fair trading instrument.
This depends on personal preference. There are a variety of synthetic indices that have different levels of volatility and market character.
If you prefer high volatility you can choose assets like v75 and v100. For slower volatility, you can choose indices like v210 or v25. It is best to demo trade a variety of volatility indices so you can choose which ones you prefer.
If you prefer scalping and want to catch spikes you can trade boom and crash indices.
We advise that you demo trade different synthetic indices when you are starting so that see the ones you prefer.
Deriv is the only broker that offers boom and crash indices. You can open an account to trade boom and crash here.
Yes, you can earn up to 45% lifetime commissions as a Deriv affiliate partner. Learn how you can do that here.
