Synthetic Indices are rising in popularity amongst traders the world over. However, there are still some misconceptions around them and in this post, we will explain what these synthetic indices are and why you may be interested in trading them.
The aim is to help you in understanding synthetic indices.
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Synthetic indices are simulated trading instruments that mimic or reflect the behaviour of real financial markets.
Since they are simulated markets, you may be wondering:
What moves synthetic indices?
Synthetic indices move through the use of randomly generated numbers.
The random numbers are generated by a cryptographically secure computer programme & for transparency issues, the broker is unable to influence or predict which numbers will be generated. This is just like in the real-world financial markets where the broker has no influence on the price movements.
The random number generator that moves the volatility indices charts is audited for fairness by an independent third party to ensure fairness.