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Foundation lesson

What are synthetic indices?

Broker-created, algorithm-driven markets whose price behaviour is defined by mathematical systems rather than ordinary real-world supply, demand and news flow.

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Product mechanics vs strategy

A product mechanic is a rule or statistical property defined by the broker — for example, a fixed volatility level, a step size, or an average interval between spike events. A strategy is your decision process for entering, exiting and sizing trades. Confusing the two is one of the biggest mistakes synthetic traders make.

“On average” is not a countdown

If an instrument says a jump happens every 20 minutes on average, that does not mean a jump is due exactly at minute 20. Random sequences can cluster or stretch. The same principle applies to average tick intervals on spike indices.

Why news matters differently

Broker synthetic indices are generally designed to operate independently of scheduled economic news. That makes them different from EUR/USD or gold — but it does not make them low risk.

Four questions before touching a new synthetic

  1. What exactly does the broker say generates or characterises the price?
  2. Is the key parameter a volatility level, step size, directional bias, range mechanic or statistical event interval?
  3. Which platform and contract specification applies?
  4. What is the worst plausible move my position size can survive?
Risk note: Synthetic indices, CFDs and leveraged products can move quickly. Examples and calculators are educational illustrations, not trading signals or promises of profit.