Synthetic indices may be of interest to some traders who want to trade on pure price action via CFDs without unpredictable real world events. They are driven by algorithmic programmes to mimic the volatility of live markets, but are not affected by macroeconomic events and other external factors. 

In this article we will explain how you can trade different synthetic indices via CFDs offered by Vantage.  

Key Points 

• Synthetic indices mimic market volatility using algorithms and are unaffected by real-world events. 
• Vantage offers various synthetic indices with fixed volatility or programmed price patterns. 
• Trading success depends on technical analysis, risk management, and disciplined execution. 

Understanding the Basics of Synthetic Indices 

What they are, and why trade them? 

Synthetic indices are digital trading instruments that mimic the price movements of real-world financial markets, but without being tied to any physical asset like stocks, commodities, or currencies. Instead, they are designed to follow specific patterns of volatility and price behavior.  

Traders are drawn to them for several reasons: they run 24/7 (unlike most traditional markets), offer consistent volatility levels, and aren’t directly affected by real-world news or economic events.  

This makes them attractive to those who want a pure, technical trading environment without the unpredictability of geopolitical headlines. 

Understanding the Underlying “Mechanism” 

Unlike traditional markets, synthetic indices don’t get their prices from supply and demand in the real economy. Instead, their movements are generated using proprietary mathematical and probabilistic models that are designed to follow consistent, rules-based volatility behaviour.  

The outputs are mapped to price changes in a way that creates realistic market-like patterns, complete with trends, pullbacks, and volatility spikes. In other words, while the numbers are random at their core, the “rules” that govern how they’re displayed make them behave like actual markets with measurable volatility.  

This mechanism allows CFD brokerages like Vantage to offer a variety of synthetic indices, each having a fixed level of price fluctuation, so traders can choose their preferred risk/reward profile.  

Types of synthetic indices  

Vantage offers the following types of synthetic indices via CFDs catered to different trading preferences. 

1. Fixed Vol Index Series 

This series of synthetic indices offers fixed volatility and stable pricing. Quotes are updated once per second, with the system producing one random tick per second, simulating unpredictable market movement.  

Nevertheless, volatility levels can remain steady regardless of market conditions, which some traders may use when developing quantitative strategies or testing trading models. With a 95% confidence level, the annualised volatility is expected to fall within a specific percentage range.  

2. SpikeUp Index Series 

Designed to simulate directional markets where sudden price spikes randomly occur within regular volatility conditions. Each index is programmed with a fixed jump frequency, triggering a large price movement approximately once every 150, 300, 600, or 1000 ticks (seconds) on average. Prices are updated once every second. 

This product’s long-term price volatility can be modeled to fall within a specific annualised volatility range with 95% confidence level. However, due to the random nature of the algorithm, short-term price movement may deviate from expected norms. 

3. SpikeDown Index Series 

The SpikeDown series is designed to mimic directional markets, but producing downwards price movements instead. This facilitates short-selling strategies. Apart from direction, this series shares similar characteristics and algorithmic logic as Spike Up. 

4. FixedStep Index Series 

This series of synthetic indices are designed to move up or down by a fixed number of points every second with equal probability. There are no sudden spikes or crashes, and the movement is non-directional, simulating a pure random walk. 

Using a secure number generator, the direction (up or down) of each tick is decided randomly with equal probability. This simple algorithmic logic ensures fairness, predictability, and suitability for Expert Advisors (EA) testing. 

What You Need to Start Synthetic Indices Trading via CFDs 

In this section, we will discuss what’s needed in order to start trading synthetic indices via CFDs, including opening an account, funding your account and a brief overview of the trading platform.  

Opening a trading account 

Follow these steps to open a trading account with Vantage. 

1. Go to www.vantagemarkets.com and click “Register” in the top right. 
2. Follow the on-screen prompts to register your account. 
3. You’ll be able to choose the type of trading account you want. 
4. Once your account is registered, you will be able to log in to your account. 

If you’re not quite ready to start trading with a live account, you can register for a demo account instead. This way, you can familiarise yourself with synthetic indices via CFDs and test out some strategies before going ahead with a live trade using real funds.   

Funding your trading account  

To start trading synthetic indices via CFDs with Vantage, you’ll need to deposit funds into your account. Vantage supports multiple payment options, including bank transfers, credit and debit cards, and selected e-wallets, giving you flexibility in how you fund your account. Processing times vary, with most electronic payments credited almost instantly, while bank transfers may take longer. 

Minimum deposit requirements depend on the account type you choose, so it’s important to check these before making your transfer. Ensure the name on your payment method matches your Vantage account to prevent delays. Once your deposit is cleared, the funds will be available for trading synthetic indices via CFDs. 

Understanding the trading platform: MetaTrader 5 

Vantage offers MetaTrader 5 (MT5), a leading trading platform lauded for its in-depth capabilities, user-friendly interface, and versatility in facilitating trading of multiple asset classes.  

MT5 provides a selection of order types catering to various trading strategies. It also comes with advanced charting tools and technical indicators for robust technical analysis capabilities – especially relevant to synthetic indices.  

Additionally, MT5 also offers algorithmic trading via robots, known as Expert Advisors (EAs). These can perform a variety of functions, including automated trading, backtesting and more. Traders can pick from the EAs already provided in MT5, or purchase and install their own custom EAs, available online at the MetaTrader Marketplace and other trading portals.  

With MT5, synthetic traders gain a powerful trading platform that supports a wide variety of strategies and trading objectives, together with an intuitive interface that both beginners and experienced traders will find easy to understand. 

The core of trading synthetic indices 

Synthetic indices offer purer price action than real-world markets. In this section we will highlight some important factors in trading synthetic indices that every trader should know.  

Analysing synthetic indices 

The price action of synthetic indices are driven purely by their algorithmic logic, based on a system of random number generation. They are not linked to any real-world assets such as stocks, currencies, bonds or commodities, and thus are not affected by macroeconomic events such as trade tariffs, company earnings announcement, wars and geopolitical tension, interest rate changes, inflation and the like.  

Thus, when analysing synthetic indices, traders are unable to rely on fundamental analysis. Instead, they should focus on technical analysis, which is particularly suited to synthetic indices due to their pattern-generating nature.  

Free from unexpected price movements generated by external events, traders may find technical indicators easier to interpret (although this does not guarantee trading success). Chart patterns, candlestick formations, moving averages, and momentum indicators can reveal useful probabilities in synthetic indices because the underlying algorithm is designed to mimic the ebb and flow of real markets.  

Traders can apply technical analysis to spot recurring setups, understand volatility cycles, and manage risk more effectively, but this does not guarantee trading profits. In short, without fundamentals to guide decisions, mastering technical analysis becomes essential to navigate synthetic indices profitably. 

Technical analysis for synthetic indices 

Technical indicators work on synthetic indices in much the same way they do on traditional markets because the price movements are designed to follow realistic market patterns. This means that traders can deploy popular tools to help analyse the price action of synthetic indices, such as:  

• Moving Averages (MA) – Smooth out price data to identify the underlying trend. Shorter periods (e.g., 10- or 20-period) respond faster to price changes, while longer periods (e.g., 50- or 200-period) highlight broader trends. 
• Relative Strength Index (RSI) – Measures the speed and magnitude of price changes to identify overbought or oversold conditions. In synthetic indices, RSI can help spot potential reversal points or confirm momentum strength. 
• Bollinger Bands – Plot volatility-based upper and lower bands around a moving average. Price touching or breaking outside the bands can signal overextension or upcoming volatility shifts. 

Identifying trends, support & resistance levels 

Trends in synthetic indices can be highly persistent due to their programmed volatility. Traders often use a combination of moving averages and trendlines to determine whether the market is in an uptrend, downtrend, or ranging sideways. A series of higher highs and higher lows suggests a bullish trend, while lower highs and lower lows indicate a bearish trend. 

Even though synthetic indices are driven by random number generation, their chart patterns often create visible zones where price repeatedly stalls (resistance) or bounces (support). These levels occur because traders worldwide react to the same technical signals, creating self-fulfilling price zones. Mapping these levels helps plan precise entries, set stop-loss orders, and define profit targets. 

In short, Indicators, trend structures, and price zones can help inform a trader’s decisions, but they do not guarantee profitable outcomes. 

Understanding volatility patterns 

Note that different synthetic indices are programmed to have certain characteristics, and traders should adjust their strategies and expectations accordingly. Let’s take a closer look at understanding volatility patterns in the context of Vantage’s range of synthetic indices.  

Fixed Vol Index Series 

This series of synthetic indices are designed to resemble the volatility of major indices such as S&P 500 or Nikkei 225, traded via CFDs; they do not represent ownership of the actual indices. This makes them well-suited for trend trading and mid-term strategies.  

Additionally, they can be used to assess logic accuracy, risk control and strategy performance in EA models for educational purposes only; not a guarantee of profit, without interference from news events or market gaps. Some traders test expert advisors (EAs) such as grid trading models, money management simulations, or mean-reversion strategies with this index series. These examples are for illustration only and do not constitute a recommendation. 

SpikeUp/SpikeDown Index Series 

SpikeUp/SpikeDown synthetic indices are similar to assets affected by event-driven volatility, including CPI announcements, black swan events, the GBP flash crash, or stock earnings reports. 

Useful for evaluating how expert advisors respond to rapid price gaps, slippage, and market stress, without the unpredictability of real-world news timing. 

SpikeUp/SpikeDown indices can be used to test trading bots such as Stop-Loss Trigger EA, Gap Recovery EA, and News-Spike Scalper EA for educational purposes only. These examples are provided for illustration and do not constitute a recommendation. 

FixedStep Index Series 

The Step Move/FixedStep index series offers price action similar to non-directional markets with constant micro-fluctuations, including low-volatility consolidation phases, high-frequency trading environments, or short-term range-bound markets. 

They are useful for evaluating how expert advisors perform under stable volatility conditions, as well as testing money management strategies, grid systems, and non-trend-based models. As with all other synthetic indices, Step Move/FixedStep offers pure price actions without the unpredictability of real-world market news or trend breakouts. 

Popular EAs to test using this index series include Grid Trading EA, Money Management Stress Test EA and Mean-Reversion Scalper EA. 

Placing a trade 

While synthetic indices are not impacted by real-world events, proper risk management must still be practised. Remember that synthetic indices are traded using Contracts-for-Difference (CFDs), which is a leveraged product that may involve margin calls should your trade move rapidly against you.  

It is essential to understand how much leverage can impact your trade, not only in terms of profit but also in terms of losses. Be sure to control your use of leverage for optimal results, instead of risking your account balance by choosing leverage that is too high for your risk appetite.  

Along with choosing an appropriate level of leverage, it is also important to control your position sizing. This means ensuring that you do not risk too much of your trading budget in any single trade.  

Market orders vs pending orders 

When placing your trades, you can choose between market orders and pending orders. Note that these two types of orders work in different ways.  

Market orders are executed immediately at the currently available price. There is no price guarantee, and are best used when speed is paramount.  

Meanwhile, pending orders allow you to specify the conditions under which the order is to be filled. For instance, you can set a minimum price at which you want to sell, or to buy only when the price reaches a specified level or below. Pending orders can offer greater control over your trades. However, they may remain unfilled if market conditions do not meet the stipulated conditions.  

Understanding how to make proper use of market orders and pending orders is critical in trading synthetic indices.  

Understanding lot sizes and leverage 

Lot size determines the volume of your trade, while leverage amplifies both potential gains and losses. In synthetic indices trading via CFDs with Vantage, leverage is fixed, meaning the same ratio applies to all trades regardless of position size. This allows you to control larger market exposure with a smaller initial margin, but it also means losses can accumulate quickly if the market moves against you. 

Choosing an appropriate lot size is key to managing risk effectively. Larger lot sizes increase both profit potential and loss exposure, while smaller lot sizes offer more controlled risk. Since leverage is fixed, traders should carefully consider position sizing to ensure it aligns with their overall trading strategy and risk tolerance. 

Setting stop-loss and take-profit 

Another crucial element when trading synthetic indices via CFDs is knowing how to set stop-losses and take-profits. Both of these are specific types of orders that are useful in helping to manage your trade and reduce trading risk.  

A stop-loss order will close your position when your position moves against you up to your risk tolerance. For instance, expecting the price of a synthetic index to rise, you decide to go long. To hedge your position, you place a stop-loss order for 5% below the price at which you entered the position. If the position drops instead of rising, your stop-loss will trigger if the price falls more than 5%. This closes your position, preventing further losses.  

Meanwhile, a take-profit order allows you to lock in your gains. It closes your position once the desired profit level has been reached, preventing the temptation to keep your position open in the hopes of a larger profit. The longer a position stays open, the greater the potential for price movements in either direction, which may change an unrealised gain into a loss.  

For example, you decide a synthetic index is due for a bull run, and you aim to capture a 10% price increase. By setting a take-profit order at 10% higher, your broker will close your order once the price reaches the trigger point.  

When setting stop-loss and take-profit levels, take into account your risk-to-reward ratio. Some traders use a 2:1 ratio, where for each dollar at risk, they aim to make two dollars in profit, but this is not a guarantee of returns. This means that if you set your stop-loss at $10 below the price at which you entered the trade, your take-profit should be at $20 above your entry point. 

Tips for Successful Synthetic Indices Trading via CFDs 

Trading synthetic indices via CFDs can be engaging and educational, but it demands skill, discipline, and a solid strategy; profits are not guaranteed. Because these markets run 24/7 and move purely on programmed volatility, traders must rely on preparation and risk management to stay profitable. The following tips can help you build a sustainable trading approach. 

Start with a demo account 

Before risking real funds, begin with a demo account. This allows you to: 

• Practice trading without financial risk 
• Familiarise yourself with the platform’s tools and features 
• Test different strategies and identify what works best for your trading style 

Using a demo account builds confidence and helps you refine your decision-making before transitioning to live trades. This helps you avoid wasting funds on trading mistakes. 

Stay disciplined and manage emotions 

Discipline is the backbone of consistent trading. Stick to your trading plan and avoid the temptation to “chase” losses or overtrade after a winning streak. Emotional decision-making often leads to costly mistakes, especially in fast-moving synthetic indices. Patience – waiting for high-probability setups – is often more profitable than trading impulsively. 

Continuous learning and practice 

As you progress in your trading, you should make it a point to evolve and refine your skills by:  

• Studying new technical strategies 
• Reviewing your past trades to identify strengths and weaknesses 
• Staying updated with platform features and what your fellow investors are doing or saying 

Like any skill, trading improves with consistent practice and honest self-assessment. Treat each session as an opportunity to learn and grow. 

Start Your Synthetic Indices Trading Journey via CFDs with Vantage 

We’ve covered the essentials in how to trade synthetic indices via CFDs, including understanding how different indices offer varying volatility levels and how to adjust your strategies accordingly; the importance of proper risk management and how to set appropriate stop-loss and take-profit orders; understanding the role of technical analysis in synthetic index trading; as well as tips on how to improve your success when trading synthetic indices.  

As you embark on your journey of trading synthetic indices via CFDs, remember to continue practicing discipline and responsible trading. Taking a long-term view will serve you better rather than aiming for maximum profits at every trade you make.  

Begin your trading journey with Vantage, which offers tight spreads, transparent pricing, a range of charting tools, and multiple order types. Ensure you understand the risks of CFD trading before opening a live account. 

FAQs 

1. Why are the prices of synthetic products different from external markets? Where do the prices come from? 

Synthetic products are generated by the platform’s proprietary Derivation Engine and are not connected to real-world financial assets. Prices are produced using cryptographically secure random number generators combined with mathematical models to replicate market-like volatility in a transparent and consistent way. 

2. Why can synthetic products be traded on weekends? Is that unusual? 

Synthetic products operate on a 24/7 basis, including weekends, because their pricing is independent of traditional financial markets. This continuous availability is by design and does not rely on standard market trading hours. 

3. Why did my order not execute? Is it a system issue? 

Synthetic products use a Fill-or-Kill execution method. If an order cannot be matched in full at the requested price instantly, it is cancelled to prevent partial fills and avoid unnecessary slippage. This is part of standard trade execution controls. 

4. Why do SpikeUp/SpikeDown indices have sudden spikes or drops? Is it manipulation? 

These indices are based on predefined probability models. For example, SpikeUp 1000 has an average upward spike every 1,000 ticks. Such spikes are an intentional feature of the product’s volatility model and occur uniformly for all traders, without manual intervention. 

5. Why did I still lose more than expected even with a stop-loss? 

During periods of sharp price movement, the market price may gap past your stop-loss level, resulting in slippage. This is a known risk across all forms of trading and may lead to a larger loss than intended. 

6. Is There Any Internal Manipulation or Betting Involved? 

Trades are processed in real-time via CFDs with identical pricing for all clients. The platform acts as a liquidity provider and manages overall risk exposure but does not interfere with or target individual trades. Execution rules are applied consistently for all participants. 

7. Why do some products have higher or lower spreads?  

Spread levels are determined by each product’s volatility profile. Products with lower volatility, such as the FixedStep Index, typically have tighter spreads, while higher-volatility products, like SpikeUp or SpikeDown indices, may have wider spreads to manage associated risk. 

8. Why is margin calculated on the total lots, even when holding both long and short positions? 

For synthetic products, margin is based on total position size regardless of direction. This approach prevents zero-cost hedging and helps maintain risk controls for highly volatile products by ensuring both long and short exposures require margin.