What Are Synthetic Indices Like Volatility 75 and Boom and Crash?

1. What a synthetic index is

An ordinary index such as the JSE Top 40 or the S&P 500 is calculated from the prices of real shares, which move because people buy and sell them. A synthetic index has no constituents. Its price is produced tick by tick by a random number generator, an algorithm the broker runs and usually has audited, and it is designed to behave statistically like a market: it trends, ranges and reverses, but only by chance.

The instruments were popularised by Deriv, formerly Binary.com, and similar products are now offered by a handful of other brokers under different names. They are traded as contracts for difference, so you never own anything; you take a position on whether the generated number goes up or down.

The key consequence is that there is nothing to analyse. There is no earnings report, no central bank, no supply and no demand, only the output of an algorithm whose properties the broker has chosen.

2. Volatility, Boom, Crash, Step and Jump

Volatility indices are named after their preset annualised volatility: Volatility 10 moves gently, Volatility 75 and 100 swing hard, and some versions generate a new price every second instead of every two seconds. Volatility 75 is by far the most traded, because its large moves make small accounts feel like they can grow quickly.

Boom and Crash indices drift steadily in one direction and then jump sharply the other way at random. Boom 1000 averages one upward spike every 1,000 ticks, Crash 500 one downward spike every 500 ticks, and so on. Traders try to catch the spike, but its timing is random by design: the number tells you the average interval, not when the next one comes.

Step indices move in fixed increments up or down with equal probability, and Jump indices add occasional large jumps to a normal random walk. All of them are variations on the same idea: a chosen statistical shape with no information content.

3. Why they are popular in South Africa

They trade around the clock, including weekends and public holidays, which suits people with day jobs. They are not affected by load-shedding news, SARB decisions or US data, which many beginners see as simpler. And they are heavily promoted on TikTok, YouTube and in WhatsApp signal groups, often with screenshots of large gains from small deposits.

Minimum position sizes are small, so a deposit of a few hundred rand can open a trade, and the high volatility means a lucky run can multiply an account in hours. The same volatility empties accounts just as fast, which the screenshots do not show. Social media signals on synthetic indices are a particularly common route to losses.

4. Who is on the other side

In a real market your trade is ultimately matched with someone else’s. With a synthetic index there is no one else: the broker generates the price and takes the opposite side of every position. Your loss is the broker’s revenue and your profit is its cost, a pure market-maker arrangement.

The broker also charges a spread on every trade. On a fair random walk the expected result of a trade before costs is zero, so after the spread the expected result is negative. Over many trades that small edge, together with the losses from over-leveraged accounts, is how the product makes money for the provider, much like a casino house edge.

Reputable providers have their generators tested by independent auditors so that the price cannot be manipulated against a particular client. That protects you from cheating; it does not change the arithmetic of a zero-sum bet with a spread.

5. Can you predict them?

Technical analysis rests on the idea that prices repeat patterns because people react to them in similar ways. A random number generator has no people and no memory: each tick is independent of the last. Support and resistance, trend lines, Fibonacci levels and order blocks drawn on a synthetic chart are patterns the eye finds in noise.

Strategies sold for Volatility 75 or Boom and Crash often look convincing in a short backtest because random series produce runs that look like trends. Over enough trades, results converge on the expected value, which is the spread lost on every trade. The luck or skill calculator shows how many trades it takes before a winning streak means anything.

Money management changes how fast you lose, not whether you lose on average. If you trade them at all, treat the deposit as entertainment money that you expect to lose.

6. Regulation and tax

Synthetic indices are mostly offered to South Africans through offshore entities. Check the FSCA register for the specific entity that holds your account, and remember that an offshore entity’s client is outside the FSCA complaints process and the FAIS Ombud.

Profits are taxable in South Africa like any other trading income. Frequent trading of this kind is usually treated as revenue, taxed at your marginal rate, and losses are subject to the same rules. The trading tax calculator applies to synthetic index profits too.