Here are some tips you should know now that you have signed up for your synthetic indices account. These tips for trading synthetic indices will help you limit your losses and increase your chances of getting a handsome profit.
Practice Trading Synthetic Indices on Demo First.
Trading synthetic indices is quite different from trading forex and stocks. For example, some volatility indices like v300 (1s) are very volatile. They have a large price movement in a very short space of time. If you are not aware of this you may find your account wiped out very fast.
Practising trading synthetic indices on demo will help you grasp the volatility that is associated with these indices. If you make any mistakes on a Deriv demo account you will not lose real money. You can then go ahead and open a real Deriv account when you are now fully knowledgeable.
It is important to treat your demo account as you would treat your real account as much as possible. For example, do not open trades willy-nilly on the demo account simply because it's paper money. You won't learn much from the demo account that way.
Reduce the Equity In your DMT5 Deriv Demo Account
Match the equity in your Deriv demo account with the equity you are going to deposit in your Deriv real account. This will help you understand the margin requirements and the number of positions you can open using the equity that you want to deposit.
If you are planning to deposit US$1000 then you will be misleading yourself if you practice using a US$10 000 demo account. This is because you will be able to open a lot more positions on the demo account than you will be able to do on the real account later on.
You will also be able to open positions with bigger lot sizes in that demo account. All this will lead to bigger profits or losses than you will be able to get when you start trading your real account. You will then be disappointed when you see this on your real account.
Start by Focusing on One or Two Synthetic Indices
When you log in to your Deriv account you will find out that there are a number of synthetic indices offered by Deriv including:
Within these, there are even more different types of indices eg V10, V25, V75, V75 (1s), V100 (1s) etc. If you start by trying to focus on all of them will leave you distracted. You will not be able to really understand how each index moves.
Focusing on a few indices will help you get better results more quickly. Trying to focus on all the indices will result in blow accounts
Have A Strategy For Trading Synthetic Indices
There are a number of trading strategies that you can use with synthetic indices. For example, some use price action, others use reversals and so on. There is no good or bad strategy. It all depends on the trader and what works for them.
Take your time to find out which one works for you on a demo account before trading it live. Take into account factors like the equity you will have, the time you will have to trade, your risk appetite etc. All these will help you decide on the best strategy for you.
it takes time to figure all this out and you will stumble upon strategies that do not work for you along the way. This is why you need to find the best strategy for you on a demo account where you will not be risking your real money.
Keep A Trading Journal Of Your Trades
A trading journal is a log that you use to record your trades as a tool for performance management. A journal can help you track progress and study mistakes made when entering or exiting a trade.
Keeping a trading journal of all your synthetic indices trades will help you understand some aspects of your trading like:
- the best strategy for you
- the best times to trade for you
- the best synthetic indices to trade for you
- your common trading mistakes
- the most adequate equity for your trading style etc.
Your trading journal should have sections like asset traded, lot size, trade direction (long or short), the reason for taking the trade, reasons for setting up your stop loss and take profit levels etc. It is also a good idea to include screenshots showing the setup when you enter and exit the trade.
Reviewing the trading journal once per week will give you very interesting insights into your trading.
Test A Strategy For At Least 50 trades Before Using it On A Live Account
This is related to the two points above. You need to test a strategy extensively on a demo account before you choose to use it on your real account. Backtest the strategy and then also test it in real-time as you take your trades. Your trading journal will help you keep account of the trades you take and of the winning percentage of the strategy you will have chosen.
At least 50 trades are enough to help you decide if a strategy will work for you or not.
Be Careful With Engaging Account Managers ToTrade Your Synthetic Indices Account
There are a lot of people who claim to be account managers on social media. Most of them are from India. You may be tempted to have them trade your account and then you share profits.
The advantage of this approach is that you will not need to spend time looking for the best strategy and then also looking at the charts looking for the best setups. In other words, it will be like passive income.
In reality, though, most of these account managers are chances who want to trade a real account without risking their own money. They will experiment using your money and if they make a profit you will share it with them. If they make a loss then they will not lose anything and they will leave your account and look for the next victim.
So be very careful with these account managers. If you are going to use them make sure you are giving them log in details to an account with funds you are ready to lose at any time. Do not expect much from the. You should also ask them to give you an investor password of the account(s) they have traded successfully before so you can evaluate their performance.
Do Not Revenge Trade Synthetic Indices
Revenge trading is when you increase your lot size or (stake in binary options) after a loss with the aim of recouping your losses and then making a profit. This is a bad strategy that will quickly lead to blown accounts. Practice your risk management and know when to stop when trading. Your strategy should take all these factors into consideration.
Withdraw Your Profits Time & Again
Make it a habit to withdraw your profits regularly. This will give you an emotional boost that can drive you forward.
If you follow these steps you will increase your chances of trading synthetic indices successfully. Do you have any other tips? If so please share them in the comments below.