Synthetic indicesUpdated 3 min readBy the FXNOD team
Boom and Crash indices: how they work
Boom and Crash are Deriv synthetic indices built around sudden moves. A Boom index produces rapid surges and a Crash index sudden downturns. The number in the name is the average number of ticks between those events: Boom 1000 surges on average once every 1,000 ticks. Average is the key word. The next one can come at any tick.
Reading the name
| Index | Event | On average once every |
|---|---|---|
| Boom 300 | Sudden surge | 300 ticks |
| Boom 500 | Sudden surge | 500 ticks |
| Boom 1000 | Sudden surge | 1,000 ticks |
| Crash 300 | Sudden drop | 300 ticks |
| Crash 500 | Sudden drop | 500 ticks |
| Crash 1000 | Sudden drop | 1,000 ticks |
Deriv lists further frequencies, including 50, 150, 600 and 900. Its page does not state the size of a spike or drop, so check the specification of the exact index in your account.
Why you cannot time a spike
An event that happens on average once per 1,000 ticks does not happen every 1,000 ticks. If each tick has the same small chance of a spike, the gaps between spikes vary enormously: about 10% of gaps are shorter than 105 ticks, half are shorter than 693, and about 5% are longer than 3,000. Having waited 900 ticks tells you nothing about the next 100. The index does not remember.
| Gap between spikes on a 1,000 index | Share of gaps |
|---|---|
| Under 105 ticks | About 10% |
| Under 693 ticks | About 50% |
| Over 1,000 ticks | About 37% |
| Over 3,000 ticks | About 5% |
These shares follow from assuming an equal, independent chance on every tick. That is our illustration of what an average interval implies, not a statement from Deriv about its generator.
The two popular approaches and their flaw
- Catching spikes: buying a Boom index or selling a Crash index and waiting. Each tick without a spike costs a little, and the wait can be several times the average.
- Riding the drift: trading the direction between spikes. Many small gains are given back, with more, when the spike arrives against the position.
- Both are the same trade seen from opposite sides, and neither has an edge on a random index.
Spike indicators and killer robots
Searches for Boom and Crash spike detectors and killer EAs are common. If the timing of a spike is random, no indicator built from past prices can see it coming. Tools sold with that claim show past spikes after the fact.
Risk
- A spike moves the price far in one tick, so a stop on a CFD can fill beyond its level.
- Leverage on these indices can be very high, which shortens the distance to losing the position.
- Practise on the demo account, and size every position for a spike against you.
Questions people ask
- What does the number in Boom 1000 mean?
- The average number of ticks between surges. Deriv says the tick frequency sets how often, on average, the market will crash or boom.
- Can you predict Boom and Crash spikes?
- No. An average interval is not a schedule, and Deriv describes these indices as randomly generated.
- What is the difference between Boom and Crash?
- Direction. Boom indices have sudden surges upward and Crash indices sudden drops.
- Is there a spike detector that works?
- Nothing built from past prices can predict a random event. Be wary of anyone selling one.
Trade a synthetic index on demo
Pick any index your Deriv account offers in Trade Pilot, or let a bot trade it at a flat stake with a required stop loss. Virtual funds first.
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