DAX Index - definition and Characteristics

As you can see from the chart above, four companies have like 40% weighting in the index, meaning that SAP, Siemens, Bayer, and BASF will move the index the most. Thus, you might want to keep an eye on the fundamentals and technical analyses of these companies. 
 

Index quotes and trading

If you open our MetaTrader 4, look for the DAX Index symbol and press new order, the following box will popup. 
 

The minimal volume to trade the DAX index is 0.1, which represents a 2.5 EUR profit or loss when the underlying DAX index moves by one point (EUR). For example, if you buy 0.1 lot of DAX at 13,000 EUR and the price goes to 13,100 EUR, you will earn 250 EUR (calculated as 2.5 EUR per one EUR of DAX = 2.5 * 100 = 250 EUR). The same logic applies for a short position, or for calculating the loss from the position. 

You can choose whether to trade at the current market price (market execution), or you can set up a pending order. Feel free to practice trading on our demo account. 
 

What drives the DAX index?

The main drive of the German stock index seems to be the European Central Bank and its monetary policy. 

First of all, Germany is one of the most significant exporters in the euro bloc, and German companies are happy when the euro declines against other currencies (most notably against the British Pound). As the ECB continues to print money and all the rates are kept at or below zero, the euro has very few reasons to strengthen. Moreover, the economic growth in the Eurozone has slowed recently, which could be another reason for the single currency to depreciate.  

Secondly, German economic numbers, such as GDP, retail sales, labor market figures, PMIs, etc. tend to have only a minimal immediate effect on the German DAX index. 

For intraday traders, its usually the actual daily sentiment which drives the price of this stock index, or technical analysis could come helpful as well. For long-term investors and traders, you need to monitor closely what the ECB is doing, and in times of monetary policy easing (such as nowadays), you might want to try buying any dips. It doesn’t look like we will see any other type of monetary policy soon, so that this strategy could be well used by investors now. 

As previously said, technical analysis is helpful as well, especially for short-term traders. You can find more about the technical analysis in our trading academy articles. 

That's it for now! We hope you enjoyed the article, and we wish you successful trading, whether short-term or swing trading.

 

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