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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Volatility Indices on Deriv.com are a type of synthetic indices which are simulated markets that mimic the real world market volatility. Deriv.com offers various volatility indices namely;
- Volatility 10 Index (V10 Index)
- Volatility 25 Index (V25 Index)
- Volatility 50 Index (V50 Index)
- Volatility 75 Index (V75 Index) This is the most popular volatility index
- Volatility 100 Index (V100 Index)
What do the numbers on Deriv’s Volatility Indices mean?
These numbers indicate volatility of the index relative to the real-world market volatility. Market volatility is measured on a scale from 1 to 100 with 100 being maximum volatility.
Thus, the Volatility 100 Index represents 100% market volatility and the Volatility 10 Index has only 10% of the real-world market volatility. In other words, the Volatility 10 Index has just 10% of the volatility of the V100 Index.
Volatility 50 has 50% of the volatility of the V100 Index and so on.
These indices update at the rate of one tick every two seconds. A tick is the minimum price movement of an index.
1 Second Volatility Indices (1s)
There is another group of indices that update faster with a tick every second and they are called the 1(s) indices. These indices are just like the above-mentioned indices and you can see them listed below;
- Volatility 10 Index (1s)
- Volatility 25 Index (1s)
- Volatility 50 Index (1s)
- Volatility 75 Index (1s)
- Volatility 100 Index (1s)
These volatility indices can be used in binary options trading as well but we will focus on how to trade them in the same manner we trade forex.