Are Synthetic Index price movements random and independent?

Yes. Each new price movement of a Synthetic Index is generated randomly and independently of previous price movements.

 

This means that previous results do not affect the generation of the next tick. It does not matter how many consecutive upward or downward movements have occurred, how many times large or small price changes have occurred, or what the current or previous price level is. Historical price movements do not change the probabilities applied to the next generation.

 

As a result, Synthetic Indices do not contain intentionally built-in momentum or mean-reversion mechanisms based on previous price movements. A sequence of movements in one direction does not make a movement in the opposite direction more likely simply because of what happened before.

 

Importantly, the same principle applies when the price approaches zero. Zero is not a boundary for the generation algorithm. If the price reaches zero, the probability of the next movement is not adjusted to prevent the price from moving below zero.