Introduction to Synthetic Indices: Synthetic indices are financial instruments offered by Deriv that simulate the price movements of real-world markets. These indices provide traders with opportunities to speculate on the performance of various asset classes without directly owning the underlying assets. Here's a breakdown of the key aspects of synthetic indices:
- Types of Synthetic Indices: a. Volatility Indices: These indices measure the market's expectation of future volatility. They are derived from the prices of options on various assets and can be traded as a standalone product. Under this type, Deriv offers the following categories:
- V-10 Index: Measures the volatility of the forex market by tracking the prices of currency pairs.
- V-25 Index: Represents the volatility of major stock indices, such as the S&P 500, FTSE 100, and DAX 30.
- V-50 Index: Tracks the volatility of a broader range of stock indices, including emerging market indices.
- V-75 Index: Reflects the volatility of major forex currency pairs, providing opportunities for forex traders.
- V-100 Index: Represents the volatility of a diversified portfolio of assets, including stock indices, forex, and commodities.
- b. Crash/Boom Indices: These indices simulate the occurrence of market crashes or booms. They offer traders the chance to profit from extreme market movements within a short time frame. Deriv offers the following categories:
- Crash 500 Index: Simulates a market crash scenario, where the index value rapidly declines.
- Crash 1000 Index: Represents an even more severe market crash, offering higher potential returns.
- Boom 500 Index: Simulates a market boom scenario, where the index value experiences rapid growth.
- Boom 1000 Index: Represents an even more significant market boom, providing higher profit potential.
- c. Step Indices: Step indices replicate the price movements of real-world stock indices. They consist of a series of consecutive synthetic indices, each with a different level of volatility. Deriv currently offers only step index with no categories:
- d. Range Break Indices: These indices simulate the price movements of real-world markets within a predefined range. Traders can speculate on whether the market will stay within or break out of the range. Deriv offers the following categories:
- Range Break 100 Index: Represents the price movements of major stock indices within a predefined range.
- Range Break 200 Index: Covers a wider range of stock indices, providing more diversified market exposure.
- e.Jump Indices: Jump Indices are a type of synthetic index offered by Deriv. These indices simulate market movements characterized by sudden jumps or spikes in prices. They provide traders with opportunities to speculate on the occurrence of significant price movements within a short period. Deriv offers several categories of Jump Indices:
- Jump 10 Index: This index tracks the price movements of 10 major global stock indices, including the S&P 500, FTSE 100, and Nikkei 225. It allows traders to gain exposure to a diversified range of global markets.
- Jump 25 Index: Similar to the Jump 10 Index, this index tracks the price movements of 25 major global stock indices, providing a broader representation of the global market. It offers a wider selection of markets for traders to participate in.
- Jump 50 Index: This index expands the coverage to 50 major global stock indices, offering even more comprehensive exposure to the global market. It provides traders with a more extensive range of market opportunities.
- Jump 75 Index: This index includes 75 major global stock indices, providing an extended range of market coverage. Traders can access a larger number of markets and potentially capitalize on a wider range of price movements.
- Jump 100 Index: This index encompasses 100 major global stock indices, offering a wide selection of market representation. It provides traders with a diverse portfolio of markets to trade and potentially profit from.
- f.DEX Indices: DEX Indices, also known as Digital Exotic Indices, are another type of synthetic index available on Deriv. These indices replicate the price movements of various underlying assets, such as currencies, commodities, or stock indices. Deriv offers several categories of DEX Indices:
- DEX 900 Down Index: This index reflects the price movements of a basket of 900 underlying assets that are expected to decrease in value. Traders can speculate on the downward movement of these assets.
- DEX 900 Up Index: This index tracks the price movements of a basket of 900 underlying assets that are expected to increase in value. Traders can speculate on the upward movement of these assets.
- DEX 600 Up Index: This index replicates the price movements of a basket of 600 underlying assets that are anticipated to rise in value. Traders can participate in the potential appreciation of these assets.
- DEX 600 Down Index: This index mirrors the price movements of a basket of 600 underlying assets that are expected to decline in value. Traders can speculate on the downward movement of these assets.
- DEX 1500 Up Index: This index represents the price movements of a basket of 1500 underlying assets that are predicted to increase in value. Traders can participate in the potential appreciation of these assets.
- DEX 1500 Down Index: This index reflects the price movements of a basket of 1500 underlying assets that are expected to decrease in value. Traders can speculate on the downward movement of these assets.
- Features and Advantages:
- a. 24/7 Trading: Synthetic indices are available for trading 24 hours a day, seven days a week, allowing traders to access the markets at any time.
- b. Quick Trading Cycles: Synthetic indices offer short trading cycles, typically ranging from 5 to 10 ticks, allowing for quick profit opportunities. c. Fixed Payouts: Synthetic indices have fixed payout structures, enabling traders to know their potential profit or loss before entering a trade.
- d. Simplicity: Trading synthetic indices is straightforward, making them suitable for both beginner and experienced traders.
- e. Diverse Market Exposure: Synthetic indices mimic a wide range of asset classes, including forex, stock indices, and commodities, providing traders with diverse market exposure.
- Trading Strategies:
- a. Volatility Trading: Traders can speculate on the expected volatility of the market by taking positions on volatility indices.
- b. Short-Term Trading: Synthetic indices with quick trading cycles allow traders to capitalize on short-term price movements.
- c. Range Trading: Range break indices provide opportunities for traders to profit from price movements within a predefined range.
- Risk Management:
- a. Proper Position Sizing: Traders should carefully consider their position sizes to manage risk effectively.
- b. Stop Loss Orders: Setting stop loss orders can help limit potential losses in case of adverse market movements.
- c. Risk-Reward Ratio: Traders should assess the risk-reward ratio of their trades to ensure it aligns with their risk tolerance.
It's important to note that trading synthetic indices involves risks, and traders should educate themselves, practice risk management, and consider their financial goals before engaging in trading activities
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