Synthetic Indices vs Forex: Which Fits Your Strategy?

It’s 10:00 PM on a Saturday night. The traditional Forex markets have been tucked into bed since Friday evening, and your favorite MT4 charts are as flat as a pancake. For most traders, this is downtime. But for a growing tribe of retail traders, the candles are still flickering, and the profits—or losses—are still rolling in.

Welcome to the world of Synthetic Indices.

If you’ve spent any time in trading communities lately, you’ve likely heard the buzz. Some claim Synthetic Indices are the "future of retail trading" because of their 24/7 availability and technical purity. Others dismiss them as nothing more than glorified casino games because they aren't tied to a central bank or a physical economy.

As an intermediate trader, you’re likely past the stage of wondering "what is a pip?" and more concerned with "where is my edge?" Today, we’re going to strip away the marketing fluff and look at the cold, hard numbers. We’ll compare the mechanics, the risks, and the specific strategies that work in both markets so you can decide which one truly deserves a place in your portfolio.

Defining the Contenders: Real-World Value vs. Algorithmic Precision

To choose between these two, you first need to understand what is actually moving the price on your screen.

The Forex Market: The Global Pulse

Forex is the backbone of global commerce. When you trade EUR/USD, you are participating in the interbank market, where trillions of dollars change hands daily. The price moves because of interest rate shifts, geopolitical stability, and trade balances. If the Federal Reserve raises rates, the Dollar usually strengthens. It’s a market driven by human decisions and economic reality.

Synthetic Indices: The Mathematical Mirror

Synthetic Indices, on the other hand, have zero correlation to the real world. They are simulated markets where prices are generated by a cryptographically secure PRNG (Pseudo-Random Number Generator).

Before you run for the hills thinking it's "rigged," understand this: the algorithm is designed to mimic real-market behavior (trends, ranges, and spikes) but without the outside interference of news or bank holidays. Providers like Deriv use audited algorithms to ensure that the house isn't just moving the price to hit your specific stop loss.

Pro Tip: Think of Forex as a wild ocean influenced by the weather (news), while Synthetic Indices are a high-tech wave pool. The waves look and feel real, but they are generated by a machine you can rely on to keep running 365 days a year.

Strategy Playbook: How Technical Analysis Differs Between Markets

While both markets respond to Support and Resistance, the way they "flow" is remarkably different.

Trading the Volatility 75 (V75) Index

Synthetic indices are famous for their "purity" of price action. Because there are no surprise interest rate announcements, technical patterns like Head and Shoulders or Bull Flags tend to play out with surgical precision.

Example: Let’s look at a Scalping setup on the Volatility 75 (V75) Index.

• Scenario: Price is in a clear H1 uptrend. It retraces to a 50% Fibonacci level at 450,500.
• Entry: You see a bullish engulfing candle on the M15 timeframe.
• Numbers: You enter with a 0.001 lot size (the minimum). Your stop loss is at 448,000 (2,500 points away), and your target is the recent high at 455,500 (5,000 points away).
• Outcome: Because V75 moves constantly, this trade might hit its target in 3 hours, regardless of whether it's 2 PM on a Tuesday or 2 AM on a Sunday.

Trading Forex (EUR/USD)

In Forex, technicals are often the "what," but fundamentals are the "why." You can have a perfect double bottom on the GBP/USD, but if the Bank of England unexpectedly holds rates, that pattern will be obliterated in seconds.

Example: You’re eyeing a breakout on EUR/USD at 1.0850.

• Technical Setup: A descending triangle is narrowing.
• The Reality Check: You check the Economic Calendar and see that US Non-Farm Payrolls (NFP) are being released in 30 minutes.
• The Strategy: An intermediate Forex trader knows to wait. If the NFP data is weak, the EUR/USD might spike to 1.0920. If you entered before the news, your 20-pip stop loss at 1.0830 would likely be hit by "slippage" before the market moved in your favor.

The Fundamental Gap: Why Your News Calendar is Useless for Synthetics

This is the biggest fork in the road for most traders.

If you enjoy the "detective work" of trading—reading central bank minutes, tracking inflation data, and understanding how oil prices affect the Canadian Dollar—you will likely find Synthetic Indices boring. There is no "story" to tell. You are purely trading the chart.

However, for many intermediate traders, news is the enemy. How many times have you been right about a direction, only for a random tweet from a politician or a surprise "flash crash" to wipe out your position?

Synthetic Indices eliminate this variable.

• Forex: You must manage "event risk."
• Synthetics: You only manage "market risk."

Warning: While Synthetics don't have "news," they have specific characteristics. For example, Crash and Boom indices are designed to have sudden, massive spikes or drops that can ignore stop losses if you are on the wrong side of the "spike." Always learn the mechanics of Crash/Boom before trading them with real capital.

Risk Management: Navigating High Volatility and 24/7 Exposure

Risk management is where intermediate traders either graduate to pro or blow their accounts. The math changes significantly between these two assets.

Leverage and Margin

In Forex, leverage is often capped (e.g., 1:30 or 1:500 depending on your jurisdiction). In Synthetic Indices, leverage can be significantly higher, and because the markets never close, you are never protected by the "weekend gap"—which can be both a blessing and a curse.

Example Calculation (Forex):

• Account Balance: $1,000
• Pair: USD/JPY
• Risk: 1% ($10)
• Stop Loss: 20 pips
• Lot Size: 0.05 lots
• Result: If the market hits your stop, you lose exactly $10.

Example Calculation (Synthetics - V100):

• Account Balance: $1,000
• Index: Volatility 100
• Risk: 1% ($10)
• Stop Loss: 10.00 points
• Lot Size: 0.10
• Result: If the market moves 10 points against you, you lose $10. However, because V100 is extremely fast, a 10-point move can happen in the blink of an eye.

The "Always On" Trap

The 24/7 nature of Synthetics is a double-edged sword. Since the market never closes, many traders fall into the trap of overtrading. In Forex, the market's natural rhythm (London open, New York close) provides a built-in schedule. With Synthetics, you need the discipline to walk away even when the "perfect" setup appears on a Sunday afternoon.

The Verdict: Choosing Your Path Based on Lifestyle and Goals

So, which one fits your strategy? Let’s look at three personas:

1. The Part-Time Professional

If you have a 9-to-5 job and can only trade late at night or on weekends, Synthetic Indices are likely your best bet. You don't have to worry about missing the London session volatility, and you can apply advanced price action strategies whenever you have free time.

2. The Macro Strategist

If you love the thrill of the global economy and want to trade the "big moves" based on interest rate cycles, stick to Forex. There is a deep satisfaction in predicting a long-term trend in the AUD/USD based on commodity prices that an algorithm simply can't provide.

3. The Systematic Scalper

If you use EAs (Expert Advisors) or rigid mechanical systems, Synthetic Indices offer a more stable environment. Without the "noise" of news spikes, your backtesting results are often more reliable when moving to a live environment.

Next Steps for You:

1. Audit your schedule: When are you most focused? If it's outside of 8 AM - 5 PM GMT, try a demo account on Synthetics.
2. Review your journal: Are most of your losses caused by news events? If yes, Synthetics might offer the "cleaner" environment you need.
3. Master one index: Don't try to trade all 20+ synthetic indices. Start with the Volatility 75 or Step Index and learn its unique "personality."

Frequently Asked Questions

Are Synthetic Indices a scam since they aren't real markets?

No, they are not a scam, but they are proprietary. They are simulated markets using a transparent, audited algorithm. While they aren't tied to global economies like Forex, they offer a legitimate way to trade price action 24/7 through regulated providers like Deriv.

Can I use the same technical indicators for both?

Yes! RSI, Moving Averages, and Bollinger Bands work on Synthetic Indices just as they do on Forex. In fact, many traders find that indicators are actually more "reliable" on synthetics because the price movement is smoother and lacks fundamental gaps.

Which is more profitable: Forex or Synthetics?

Neither is inherently more profitable; it depends on your risk management. However, Synthetic Indices often offer higher volatility, meaning you can hit your profit targets faster—but you can also blow your account just as quickly if your lot sizing is incorrect.

Do I need a different platform to trade Synthetic Indices?

Most Synthetic Indices are traded on MetaTrader 5 (MT5). While many Forex brokers still use MT4, the shift to MT5 allows for the specialized data feeds required for synthetic assets. You will need a broker that specifically offers synthetic contracts.

Ready to refine your edge? Explore our comprehensive guide to MT5 indicators to start building your next winning strategy.