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Yes, prop firms that offer funded accounts for synthetic indices do exist, but they are significantly rarer than those for forex or futures. These specialized proprietary trading firms partner almost exclusively with the broker Deriv to provide traders with capital to trade assets like the Volatility 75 (VIX 75), Boom, and Crash indices, which are not available on standard trading platforms.
Table of Contents
- What Exactly Are Synthetic Indices?
- Why Don’t Most Prop Firms Offer Synthetic Indices?
- Which Prop Firms Provide Funding for Synthetic Indices?
- How to Choose the Right Prop Firm for Synthetic Indices
- What Are the Steps to Getting a Funded Synthetic Indices Account?
- Key Synthetic Indices You Can Trade with a Prop Firm
- What Are the Advantages of Trading Synthetics with a Prop Firm?
- What Are the Risks and Disadvantages to Consider?
- Is Trading Synthetic Indices with a Prop Firm Profitable?
- The Future of Synthetic Indices in Proprietary Trading
What Exactly Are Synthetic Indices?
Synthetic indices are proprietary financial instruments that simulate real-world market volatility but are not based on any underlying asset like stocks, forex, or commodities. They are generated by a computer algorithm that uses cryptographically secure random numbers. The primary, and virtually only, broker offering these unique instruments is Deriv (formerly Binary.com). This means any prop firm for synthetic indices must operate through this specific broker.
Unlike traditional markets, these indices are available for trading 24/7, including weekends and holidays, because their price action is algorithmically generated rather than tied to real-world market hours. This continuous availability is a major draw for many traders who want to trade outside of standard market sessions.
Key Characteristics of Synthetic Indices
Understanding the unique nature of these instruments is crucial before seeking a funded account. Their behavior is distinct from any other asset class. They are engineered to mimic different types of market conditions, from low to high volatility, and even sudden price jumps or drops.
Key traits include:
- Algorithmic Generation: Prices are determined by a secure random number generator, ensuring they are not susceptible to manipulation or real-world news events.
- 24/7/365 Availability: They can be traded anytime, offering unparalleled flexibility.
- Variable Volatility: Different indices are designed with specific, fixed levels of volatility. For example, the Volatility 10 Index has a lower inherent volatility than the Volatility 100 Index.
- No Real-World Correlation: Major economic news, political instability, or central bank announcements have zero impact on their price movements.
Why Are They Popular Among Traders?
The popularity of synthetic indices stems from several factors that appeal to a specific subset of retail traders. The most significant is the ability to trade in a “pure” technical environment. Since fundamental analysis is irrelevant, traders can focus entirely on price action, chart patterns, and technical indicators without worrying about sudden, news-driven price spikes that can invalidate a setup.
Furthermore, the high leverage often available and the consistent volatility make them attractive for strategies that thrive on price movement, such as scalping and day trading. The clear, predictable nature of their volatility (e.g., Volatility 75 being more volatile than Volatility 25) allows traders to select an instrument that perfectly matches their risk tolerance and trading style.
Why Don’t Most Prop Firms Offer Synthetic Indices?
The search for a funded trader program for synthetic indices can be frustrating because the vast majority of well-known prop firms do not offer them. This scarcity is not an oversight but a result of fundamental business and operational constraints that make supporting these instruments difficult for mainstream firms.
The Broker Dependency on Deriv
The single most significant barrier is that synthetic indices are the exclusive, proprietary product of one broker: Deriv. Most large prop firms have established relationships with a portfolio of top-tier liquidity providers and brokers (like MetaQuotes, cTrader, or various ECN brokers) to offer deep liquidity on major asset classes like Forex and CFDs. Integrating with a single, specialized broker for a niche product is often not commercially viable.
This dependency means a prop firm cannot diversify its broker risk. If Deriv were to change its partnership terms or experience platform issues, the prop firm’s entire synthetic indices program would be jeopardized. This level of concentration risk is something most established firms are unwilling to accept.
Regulatory and Hedging Challenges
Proprietary trading firms, especially those with live funded accounts, need to manage their risk. They often do this by hedging their traders’ positions in the real market. For example, if many funded traders are buying EUR/USD, the firm might take an offsetting position with its liquidity provider. This is impossible with synthetic indices. Since they don’t correspond to any real-world asset, they cannot be hedged. The prop firm must absorb 100% of the risk internally, effectively trading against its own clients.
This model, where the firm only profits when the trader loses (and vice versa), can create a conflict of interest and is often viewed less favorably. Furthermore, because these indices are unregulated simulated products, they fall into a regulatory gray area in many jurisdictions, making it difficult for larger, compliance-focused firms to offer them.
Which Prop Firms Provide Funding for Synthetic Indices?
Despite the challenges, a small number of specialized prop firms have emerged to fill this niche. These firms build their entire business model around the Deriv platform and cater specifically to synthetic indices traders. It is important to note that this landscape is dynamic, with firms frequently changing their offerings.
Here are some examples of firms that have been known to offer synthetic indices funding. Traders must conduct their own due diligence, as offerings can change without notice.
| Prop Firm | Broker Platform | Key Features | Evaluation Model |
|---|---|---|---|
| The Funded Trader | Deriv (on specific challenges) | Well-known brand; occasionally offers synthetic indices on special account types like the Knight’s Challenge. Check terms frequently. | Typically 1 or 2-phase evaluation with profit targets and drawdown limits. |
| FundedNext | Deriv (on specific challenges) | Sometimes offers synthetic indices on specific challenges. Known for flexible rules and a 15% profit share from the challenge phase. | 1 or 2-phase evaluation models are available. |
| Infinity Forex Funds | Deriv | Specializes more in this niche. Often has specific account types designed only for synthetic indices trading. | Offers both evaluation-based and direct funding models, which is rare. |
| Next Step Funded | Deriv | A newer player focused heavily on the synthetics market. Aims to provide a straightforward funding path. | Standard 2-phase evaluation process. |
How to Choose the Right Prop Firm for Synthetic Indices
Selecting the right firm is arguably more critical in this niche market due to the smaller pool of options and the unique risks involved. A methodical approach to evaluation is essential to protect your capital and give yourself the best chance of success.
Evaluating Challenge Rules and Profit Targets
Every prop firm challenge is a balancing act between risk and reward. Pay close attention to the profit target, maximum drawdown (static or trailing), and daily drawdown limits. For synthetic indices, which can be extremely volatile, a firm with a more generous drawdown limit might be preferable. A 10% profit target with a 5% daily drawdown is much riskier on the Volatility 75 Index than it is on EUR/USD. Ensure the rules align with the volatility of the instruments you plan to trade.
Understanding Payout Structures and Consistency Rules
How and when do you get paid? Look for firms with a clear, reliable payout schedule (e.g., bi-weekly or monthly) and a high profit split, typically 80% or more. Critically, you must investigate any “consistency” or “gambling” rules. Some firms penalize traders if one trade accounts for a huge portion of their total profit, which can be a trap for synthetic indices traders who might catch a single, explosive move on a Boom or Crash index. A firm without restrictive consistency rules is often a better fit for this trading style.
The Importance of Reputation and Trader Feedback
Because the market is small and less regulated, reputation is paramount. Look for real trader reviews on platforms like Trustpilot, Reddit, and YouTube. Be wary of overly positive, generic reviews. Focus on feedback that discusses the payout process, customer support responsiveness, and any issues with slippage or platform stability. Resource hubs like Cointracts are an excellent starting point, as they aggregate reviews and provide unbiased comparisons, helping you vet a firm’s credibility before you commit to an evaluation fee.
What Are the Steps to Getting a Funded Synthetic Indices Account?
The path to securing a funded account for synthetic indices follows a standardized process, familiar to anyone who has looked into prop trading. The primary difference is the trading platform and the instruments available.
Step 1: Select a Specialized Prop Firm
Your first move is to research the limited options available. Using the criteria outlined above—challenge rules, payout structure, and reputation—select a firm that best fits your trading strategy and risk tolerance. Once chosen, you will purchase an evaluation account, with the fee varying based on the account size you are aiming for (e.g., $10k, $50k, $100k).
Step 2: Pass the Evaluation or Challenge Phase
This is the proving ground. You will be given a demo account and a set of rules to follow. Typically, this involves reaching a specific profit target (e.g., 8-10%) without breaching the maximum and daily drawdown limits (e.g., 10% and 5%, respectively). Most firms use a two-phase process:
- Phase 1: A higher profit target (e.g., 8%) within a 30-day period.
- Phase 2: A lower profit target (e.g., 5%) within a 60-day period, designed to test consistency.
Successfully meeting all objectives in both phases will qualify you for a funded account.
Step 3: Trading the Funded Account
After passing the evaluation, you will be issued credentials for a funded account. While this account holds real capital from the firm, you will still trade under a set of rules, primarily the drawdown limits. Your goal is to generate profits, which will then be split between you and the firm according to the agreed-upon profit share. Consistent profitability and adherence to the rules will allow you to scale your account and increase your earning potential.
Key Synthetic Indices You Can Trade with a Prop Firm
Prop firms offering synthetic indices give you access to Deriv’s unique suite of instruments. The most popular ones include:
Volatility Indices: These are the most widely traded. They have constant, fixed levels of volatility.
- Volatility 75 (VIX 75) Index: Famous for its high volatility and constant motion, making it a favorite for scalpers.
- Volatility 100, 50, 25, and 10 Indices: Offer a range of volatility options to suit different trading styles.
Crash & Boom Indices: These indices are characterized by long periods of steady movement in one direction, punctuated by sudden, violent “crashes” or “booms” in the opposite direction.
- Crash 500/1000: Experience an average of one major drop (crash) in every 500 or 1000 ticks.
- Boom 500/1000: Experience an average of one major spike (boom) in every 500 or 1000 ticks.
Jump Indices: These indices have a constant probability of jumping up or down, moving with a fixed step size, which creates a different kind of price action compared to the smoother Volatility Indices.
What Are the Advantages of Trading Synthetics with a Prop Firm?
Combining the unique nature of synthetic indices with the capital of a prop firm creates several compelling advantages. The most obvious benefit is access to significant trading capital. Instead of risking your own money, you can trade a large account ($100,000 or more) after paying a small evaluation fee. This leverage magnifies your profit potential significantly.
Secondly, it imposes discipline. The drawdown rules of a prop firm force traders to manage risk meticulously. This structured environment can help cultivate the good habits required for long-term success. Finally, trading in a purely technical environment with no fundamental news risk allows you to test and refine your technical strategies with unparalleled consistency.
What Are the Risks and Disadvantages to Consider?
The primary risk lies in the less-regulated nature of the synthetic indices market. Since all activity funnels through a single, offshore broker, you have less regulatory protection than you would with a traditional, regulated broker. This makes choosing a reputable prop firm even more critical.
Another disadvantage is the extreme volatility of certain indices, like the Volatility 75 Index. While this volatility offers profit opportunities, it can also lead to rapid and substantial losses. A momentary lapse in discipline can result in breaching a drawdown limit and losing your funded account. Lastly, because these firms must carry all the risk, some may have unfavorable rules or be slower with payouts than their forex-focused counterparts.
Is Trading Synthetic Indices with a Prop Firm Profitable?
Yes, trading synthetic indices with a prop firm can be highly profitable for disciplined traders with a robust and well-tested strategy. The combination of high leverage from the firm and the inherent volatility of the indices means that skilled traders can generate substantial returns.
However, profitability is not guaranteed. The same volatility that creates opportunity also creates immense risk. Success depends entirely on the trader’s ability to manage risk, remain disciplined under pressure, and consistently execute a trading plan with a positive expectancy. Many traders fail evaluations because they underestimate the volatility and do not apply strict risk management from the very first trade.
The Future of Synthetic Indices in Proprietary Trading
The future of synthetic indices within the prop firm industry will likely remain a specialized niche. It is improbable that major, mainstream prop firms will adopt them due to the broker dependency and hedging limitations. However, as long as there is trader demand, specialized firms will continue to cater to this market.
We may see more firms enter this space, potentially leading to more competitive evaluation rules and higher profit splits. Innovation might also come in the form of new account types or more flexible trading conditions. For traders who master these unique instruments, the opportunity to secure funding will likely persist, offering a viable and potentially lucrative path in the world of proprietary trading.
