As a new synthetic index trader, especially if you have not been trading in other financial markets, it is a good question to ask for the best synthetic indices to trade.
The synthetic index market is gaining traction every day. Financial traders are migrating to the market because of its unique behavior. Some of its distinguishing characteristics from other financial markets include constant volatility, flexibility on trading days, and, most importantly, its independence from fundamental factors.
Today, we will be discussing the top 6 best synthetic indices to trade. My team and I have investigated the synthetic indices market over time, and the experience we got is what we used to draft this list of the best synthetic indices to trade.
Our focus during the research was on the volatility of each index, its availability on different brokerage platforms, and the trading opportunity of each of the assets.
So without further ado, let’s get started.
What is synthetic indices?
Before we proceed to the list, let me give a quick overview of what synthetic is.
Synthetic indices are simulated products of real market assets like forex and stocks with some modifications. This means that synthetic indices are not real market assets; rather, they are created by emulating the market behaviour of forex and stocks and removing some factors like fundamental factors.
Synthetic indices, unlike forex and stocks, are not affected by fundamental factors but only by technical factors like price action.
Recommended: Synthetic indices Vs Forex Trading
There are various types of synthetic index markets, each of which is based on a different real-world market. For example, the volatility index market is simulated using the S&P 500, while the boom and crash market is simulated using real-time forex and stock market data.
6 Best Synthetic Indices to Trade
Based on popularity, trading opportunity, volatility, and availability on different brokerage platforms, the following are the top 6 best synthetic indices to trade in 2022.
#1 – Boom 1000 Index.
The Boom 1000 index is a synthetic index under the class of boom and crash indices. The boom index is known for its sharp price increase in a short period of time. Why traders like Boom 1000 is that you can easily make up to 70 pips within the blink of an eye.
Here, when the price is on the down side, the speed is relatively low, but when it reverses the direction (spike), it happens aggressively; hence the name “boom”. The number ” 1000″ in this index is a measure of the number of ticks (pips) covered at a particular spike. Here, a spike occurs every 1000 ticks.
Basically, Boom 1000 is the apex of it when it comes to Boom and crash indices. Lower boom and crash indexes are Boom 500, and Boom 300 index.
If you are a trader looking for a market that allows you to make a huge profit for a short-term period setup, the Boom 1000 index is a good option for you. However, I must point out that you can easily blow your account with this kind of aggressive market.
As of the time I am writing this article, you can only trade Boom 1000 and other boom and crash indices on Deriv.com
#2 – Crash 500 index
The Crash 500 index is another popular synthetic index. It is identified by a sudden breakdown in price covering up to 70 pips within a blink of an eye.
The number appended to the crash index is a measure of rate of price breakdown. On this crash index(crash 500), a crash(price breakdown) occurs on an average of every 500 ticks.
Just like other synthetic indices, the Crash 500 index is also independent from fundamental factors, so you can safely develop your trading strategy using technical analysis and use it successfully.
Traders benefit from this market by shorting the market when they spot an opportunity.
This asset is also a good option for you if you are looking for financial assets that can make you a huge profit within the blink of an eye. However, I must point out that you can blow account easily with this kind of aggressive market. So trade with caution.
<< Start Trading Crash 500 >>
#3 – VIX 75
From our research, VIX 75 is the 3rd best synthetic index to trade. The VIX, Short form of volatility index, is a synthetic index that is simulated from the volatility of the S&P 500.
As we know, synthetic indices are not real world assets, but rather simulated from real world assets like forex or stocks. In this vein, the VIX 75 index is a simulated index from the volatility of S&P 500.
Aside from VIX 75, we have volatility indices like VIX 10, VIX 25, VIX 50, and VIX100, which reflect 10%, 25%, 50%, and 100% volatility of S&P500 stocks.
VIX are traded in the form of options, so traders can either buy a put option or call option depending on the result of his technical analysis.
One thing cool about volatility indices is their independence from fundamental factors. Traders can easily implement technical analysis, develop a trading strategy, and successfully employ it.
Volatility indices are available from a number of brokers, including IG, AVATRADE, Etoro, and many others.
<< Start Trading VIX 75 >>
#4 – Boom 500 Index
The Boom 500 index operates in the same manner as the Boom 1000 index. It’s just that Boom 500 has less volatility than Boom 1000.
This synthetic index is also identified with a sudden spike that can cover a whole lot of pips within the blink of an eye, covering up to 500 ticks in one spike
So, if you are looking for assets that can provide you with a large profit in a short period of time, this is a great option for you.
<< Start Trading Boom 500 >>
#5 – Crash 1000 index.
Crash 1000 works the same way as Crash 500, just that Crash 1000 is relatively less volatile than Crash 500. The “500” appended to this index is a measure of the number of ticks covered in a crash movement.
On average, 500 ticks are covered on a single crash movement in this index.
<< Start Trading Crash 1000 >>
#6 – VIX 25
If you are new to synthetic index trading, then I recommend that you start with the VIX 25 index. This is because its volatility relative to VIX 75 is low.
From my experience, VIX 25 is easier to trade because it respects the forces of demand and supply. Once you identify a good supply zone for selling or a good demand zone for selling, your profit is guaranteed.
However, if your goal is an asset that can give you a higher profit in a small range of time, then you should opt for the VIX 75 or Boom and Crash indices. They move so aggressively than VIX 25.
<< Start Trading VIX 25 >>
Conclusion
The best synthetic indices to trade are dependent on a lot of factors. If your main goal is a market that gives you profit within a short range of time, then you should consider Boom 1000, Crash 500, or VIX 75. Just know that this set of markets is very risky without a proper risk management system.
On the other hand, if you are looking for synthetic indices that will give you flexibility, you can opt for VIX 25 and lower boom and crash indices.
Related:
Best Time to Trade Boom and Crash
How To Add Volatility 75 Index on Tradingview
Boom and Crash Trading Hours
Disclaimer: All that we covered in this post is from our research and trading experience. We cannot claim perfection. Please do further research before taking any financial decision.