Trading basicsUpdated 3 min readBy the FXNOD team
Forex vs synthetic indices: what is the difference?
Forex is the real-world market where currencies are exchanged, moved by economies, interest rates and news, and open five days a week. Synthetic indices are simulated markets whose prices are produced by a random number generator, unaffected by news and open at all hours. Forex can be analysed but never fully predicted. Synthetic indices are random by design.
Side by side
| Forex | Synthetic indices | |
|---|---|---|
| What it is | The exchange rate between two real currencies | A simulated price series created by the broker |
| What moves the price | Interest rates, economic data, politics, trade flows | A random number generator with set statistical properties |
| Trading hours | Around the clock from Monday to Friday | Every day, at all hours |
| News and events | Can move the price sharply | No effect |
| Weekend gaps | Yes: the price can reopen away from Friday's close | None |
| Volatility | Changes with the session and the news | Fixed by design for each index |
| Where you can trade it | At many brokers worldwide | Only at the broker that created it |
| Can analysis give an edge? | Possibly, with skill and good risk control | Not on direction: each move is independent of the last |
How synthetic indices work
Deriv's synthetic indices are its own products. Deriv describes them as generated by a cryptographically secure random number generator, and says external news events do not affect them. Volatility indices are built to have a constant level of volatility, from 10% to 250%, and tick either every two seconds or every second. Other families behave differently by design: Crash and Boom, Step, Jump and Range Break among them. Check Deriv's own pages for the current list and specifications, because Deriv adds and changes them.
What that means in practice
- No economic calendar to watch, no weekend gap, and the same behaviour at any hour.
- Because each tick is random, a pattern in recent ticks or digits says nothing about the next one. Strategies there manage stake and payout. They do not predict.
- You are trading a product priced and operated by one company, so the terms are whatever that company sets.
What forex demands instead
- Awareness of scheduled news, when prices can jump and spreads can widen.
- Understanding of sessions: the market is quieter in Asia and busiest when London and New York overlap.
- Attention to leverage, which multiplies losses as readily as gains.
Which should you choose?
Choose forex if you want to study real economies and accept that news can overturn a good analysis. Choose synthetic indices if you want a market that is always open and consistent, and you accept that it is random and that your results depend on payout, stake sizing and discipline. Many people use synthetic indices to practise execution and to run bots at any hour. Whichever you choose, learn it on a demo account first.
Questions people ask
- Are synthetic indices real markets?
- No. They are simulations created and run by the broker. The prices are generated by an algorithm and do not track any real asset.
- Are synthetic indices rigged?
- Deriv states that its synthetic indices come from a cryptographically secure random number generator. FXNOD has no way to verify that independently. Random does not mean favourable: the payout on each contract, not manipulation, is what works against a strategy with no edge.
- Can you trade synthetic indices at the weekend?
- Yes. They run every day at all hours, which is one of the main reasons people automate on them.
- Which is easier for beginners, forex or synthetic indices?
- Synthetic indices are simpler to start on: no news and no closing hours. Simpler is not safer. The risk on each trade is the same, and fast contracts lose money quickly.
- Does technical analysis work on synthetic indices?
- Charts and indicators describe what a synthetic index has done. Because each move is generated independently, they do not make the next move more predictable.
Practise it with virtual funds
Trade Pilot gives you a live chart and Deriv's contracts on your demo account. There is nothing to install; check the required package in Discover.
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