What is the DAX 30 Index?
The DAX 30 index is the most well-known stock index for the German stock market. It’s popular amongst index traders because it represents the German economy and includes some of the most important industrial and technology companies in Europe. It also has some unique features which make it suitable for active traders.
The DAX explained
The DAX is the headline index for listed stocks in Germany. The index includes the 30 most valuable companies listed on German stock exchanges.
The index represents approximately 75% of the total value of publicly listed companies in Germany. Its value is published by the Deutsche Börse Group, and calculated using prices from the Xetra electronic exchange. Xetra is a subsidiary of the Deutche Börse.
DAX stands for Deutscher Aktienindex which means German stock index. The DAX 30 is sometimes referred to as the GER30 or the DE30.
DAX 30 History
The DAX 30 index was originally launched in 1988 with a base value of 1,163. Approximately half of the original index constituents are still in the index.
The index initially used prices from the Frankfurt Stock Exchange. However, since 1999 prices have been sourced from the Xetra electronic trading system.
Over time many of Germany’s largest firms have become multinational companies which earn revenue around the world. The DAX 30 therefore represents far more than just the economy of Germany.
Over the years, numerous derivatives and index tracking products based on the DAX 30 have been launched. These can be traded on exchanges around the globe.
Understanding the DAX 30
The DAX is a market capitalization weighted index that includes the largest 30 companies in Germany. To qualify for index membership, companies must be included on the Prime Standard market in Germany. The list of stocks included is reviewed on a quarterly basis.
How is the DAX30 index calculated?
The index is weighted by market capitalization; however, each company’s weight is capped at 10%. In addition, restricted shares are excluded when the market value of each company is calculated.
Each company’s weight in the index is represents the company’s market value as a percentage of the total market value of all 30 companies.
Companies are removed from the index if their market value falls outside of the largest 45 companies. Companies are considered for inclusion when their value falls within the largest 25 companies.
DAX 30 Weighting and DAX Composition
The following table includes the members of the DAX 30 index as of 20 April 2020. Also included are the stock price, market capitalization and index weight of each company.
|Company||Ticker||Price (€)||Market Cap $Mn||Market Cap €Mn||Weight|
|Deutsche Telekom AG||DTE||12.978||66,604||61,276||4.5%|
|Deutsche Post AG||DPW||27.47||35,753||32,893||3.2%|
|Deutsche Bourse AG||DB1||141.05||27,994||25,754||2.5%|
|Infineon Technologies AG||IFX||16.391||21,353||19,645||2.4%|
|Fresenius SE & Co||FRE||39.755||23,561||21,676||2.0%|
|Henkel AG & Co.||HEN3||79.77||34,085||31,358||1.5%|
|Deutsche Bank AG||DBK||6.236||13,685||12,590||1.4%|
|Fresenius Medical Care SE||FME||71.86||22,831||21,005||1.3%|
|MTU Aero Engines AG||MTX||116.175||6,345||5,837||1.3%|
|Deutsche Lufthansa Group||LHA||8.161||4,109||3,780||0.8%|
The largest 5 companies account for 44% of the index, the largest 10 stocks account for 66% of the index and the largest 15 stocks account for just under 80% of the index.
The index is well diversified across the following sectors: Financials, Consumer Discretionary, Basic Materials, Industrials, Technology and Healthcare. These sectors each account for between 11 and 17% of the index. The Telecoms, Utilities, Real Estate and Consumer Staples sectors are less prominent and each accounts for between 2 and 5% of the index.
Major industries represented in the index include chemicals, software and automobile manufacturers.
Largest 5 Stocks in the DAX index
The following stocks each account for between 6 and 10% of the index. Accordingly, they are the most important stocks for DAX 30 traders to keep an eye on.
SAP AG is a leading enterprise software company. Large corporations can use SAP’s software to run almost every department including HR, finance, payroll, logistics, warehousing and planning. SAP is now a major cloud software provider and competes with Oracle, Microsoft and Salesforce.
SAP is the largest component of the index.
Linde Plc is the world’s largest industrial gas company. It operates around the world through several subsidiaries, supplying gas to various industries. The company is based in Ireland but retains a listing in Germany as it was formed when Linde AG and Praxair merged.
Allianz SE is one of the largest financial services companies in Europe and the largest in Germany. It has several subsidiaries, with the largest being involved in insurance and asset management.
Bayer AG is the world’s fourth largest pharmaceutical company. The firm operates across several segments including pharmaceuticals, crop science and animal health. Bayer is the manufacturer of Aspirin, Cipro and Roundup.
Siemens AG manufactures a wide range of products related to electrical engineering and communications. It serves the telecoms, manufacturing, auto, energy and medical industries around the world.
Unique features of the DAX 30 index
Unlike most stock indices, the DAX indices are updated after the stock exchange closes each day. This is done by using prices from the future exchange which has longer trading hours.
Two different versions of the index are published – a price index and a total return index. The price index does not include dividends, while the more popular total return index assumes dividends are reinvested in the index
DAX 30 price performance
Since its launch, the DAX30 index has increased in value from 1,000 to approximately 11,000. This represents an increase of 1000%, or
The index performance is slightly lower than that of the S&P500 which has returned 1,200% during the same period. Nevertheless, the DAX30 has been one of the world’s top performing indexes over this period.
While the overall performance of the index has been strong, it has also been volatile. The DAX has recorded several declines of over 30% over the past 30 years. It tends to experience persistent bullish and bearish trends which last anywhere from several months to several years.
The index has been particularly affected by the bursting of the Dotcom Bubble, the Global Financial Crisis and European Debt Crisis. However, in the past it has recovered from each crisis and continued to make new highs.
Factors influencing the DAX 30 index price
The prominent companies in the DAX 30 index are strongly linked to the strength of both the German economy and the global economy. Retail brands like Adidas and the major automakers are affected by consumer spending. The large chemical companies like BASF and Linde are closely correlated to global industrial growth. The hardware and software companies track the global tech sector closely.
Other DAX indexes
While the DAX30 is the most well-known stock index in Germany and includes the country’s largest companies, there are three other DAX indexes to follow.
The MDAX index includes midcap companies listed in Germany. The index includes the 60 companies that rank immediately below the DAX 30 members but excludes companies in the technology sector. The index was launched in 1996.
This index includes Airbus, Hugo Boss, Osram, Puma and TAG.
The TecDAX index includes the 30 largest technology stocks listed in Germany that do not qualify for inclusion in the DAX30.
This index was launched in 2003 and replaced the NEMAX50 index.
Notable members of this index include Carl Zeiss, Dialog Semiconductor and Evotec.
The SDAX which was launched in 1999, includes smaller companies that do not qualify for the DAX 30 or MDAX. The index includes 70 companies.
The largest company in the index is Hapag Lloyd AG with a market value of $23.9 billion and the smallest is Metagene AG with a market value of $109 million.
DAX Index Trading
The DAX 30 index is a popular index amongst active traders. Its relatively high volatility and strong trends mean it is suitable for trading across all time frames.
Advantages and disadvantages of DAX 30 trading?
Advantages of trading the DAX 30 Index
- The price of the DAX 30 is affected by a large number of industries and economic factors. This means the price moves around often providing frequent trading opportunities.
- The DAX 30 index trading day overlaps both the European and US trading sessions. This gives traders the opportunity to open positions before the US market opens, while still participating in trends that develop.
Disadvantages of trading the DAX 30 Index
- Analyzing the DAX index can be challenging do due to all the different companies and sectors that have a substantial weighting in the index.
DAX 30 CFD Trading
An index itself is not tradeable because it is merely a calculation based on the prices of the constituent stocks. However, you can trade exchange traded funds (ETFs), futures contracts and contracts for difference (CFDs) on the index.
ETFs are best suited to long term investors as they are typically not leveraged. Futures contracts are suitable for active trading but require a large trading account. CFDs are best suited to active traders with trading accounts of all sizes.
What is CFD Trading
CFDs are a type of derivative instrument, similar to futures contracts. They allow traders to easily open both long and short positions using leverage. CFDs can be traded on any liquid assets, including indexes, stocks, currencies, cryptocurrencies and commodities.
They offer more flexibility than other types of derivatives. You can start trading CFDs with any account size, and you can trade several asset classes using one trading platform like the Libertex platform.
Because CFDs are traded using margin, only a small percentage of the value of a position needs to be deposited before making a trade. CFDs are also easier to short sell than other instruments.
Pros and cons of using CFDs to trade the DAX 30 Index
As with all trading activities and instruments, there are advantages and drawbacks to consider when trading DAX 30 CFDs.
- You can start trading DAX 30 CFDs with as little as EUR 100.
- CFDs allow you to profit whether the index is rising or falling.
- CFD trading accommodates smaller trades than futures trading, which has a very high minimum trade size.
- Like any index the DAX 30 can be unpredictable at times.
- Because the DAX 30 has a long trading day, you may need to keep an eye on the market after the regular trading session.
DAX Trading Strategies
Most traders develop their own trading strategies. The following are some of the more popular approaches for trading the DAX 30 index with CFDs.
The DAX 30 Index is especially well suited to day trading. Day traders can use momentum, breakout or intraday trend following strategies with CFDs.
Breakout trading is a popular approach to day trading the index. When a support or resistance level is breached, a substantial move often follows. Breakouts early in the trading day are important as a new trend can develop throughout the European and US trading session.
Swing trading is a good strategy if you aren’t able to watch the market all the time. The volatility of the DAX 30 index means there are lots of price swings that last anywhere from two days to two weeks. As a swing trader you can use either technical or fundamental analysis – or a combination of the two.
The DAX 30 index experiences persistent long-term trends that last from a few months to a few years. Less active traders can ride the trend in both directions using CFDs.
Frequently Asked Questions
What is DAX 30 index?
The DAX 30 is the leading index which tracks the performance of the largest companies in Germany.
What moves the DAX 30?
The DAX responds to both the local German economy the performance of the global technology and manufacturing industries.
How to invest in DAX 30?
For long term investors, DAX 30 ETFs are a good option.
How to trade the DAX 30 index?
The DAX is a great index for trading. Most traders use CFDs to trade the index.
How important is the DAX 30 index to traders?
The DAX is one of the most popular indexes in Europe. It also correlates well with global developed markets and overlaps both the European and US trading sessions.
The DAX 30 is one of the world’s most important stock indices outside of the US. It is a good benchmark for the German economy too. It’s one of the best indexes to trade for those active during the European trading session. However, it can also be traded during the US session.
You can trade CFDs on the index with Libertex . If you want to get started, you can open a risk-free demo account today. This will allow you to get used to the trading platform and learn more about trading the DAX 30 index, with no risk or cost.
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