Trade the DAX Index CFD – Germany 30 Index

Trade the DAX Index CFD – Germany 30 Index

Let’s talk about the mistakes You can make while trading the Dax Index

The Dax Index is often extremely volatile and can catch out both private and individual traders if you are unfortunate enough not to avoid making these mistakes.

  1. Make sure you know when European announcements are due each week. Use websites such as the ForexFactory to keep up to date on known news events and the likely Impact of this information. Reduce trade size or use stop loss protection around economic events
  2. Don’t overleverage your trading account with positions that can wipe out your account.
    The Dax index can make sudden and dramatic moves that can quickly turn your account from successful to disastrous in seconds. The Flash crash in May 2010 caused a massive downward move in the Dax and wiped out many an account. Jerome Kerviel a SocGen trader on an income of $66,000 a year lost an astounding 7.2 Billion with a large portion bet on the Dax futures market in 2008.
  3. Keep your trading costs low. Frequent trading of an index such as the Dax with a wide buy-sell spread and/or commission can eat away a large proportion of your profit and affect your overall trading edge. Find a broker with the lowest buy/sell spread and the lowest or 0 commission, so that potential profit is not eroded.
  4. Traders over time will have both winning and losing trades. Don’t get hung up if you have a loss trading. Use money management techniques to restrict large losses and try to open up winning trades so that they more than cover these losses when they occur. Win loss ration + edge ratio need to be positive over a sample size of trades to be consistently profitable over the longer term.

If you like the idea of a fast-moving market with plenty of volatility, then you will love trading the DAX index CFD,  also referred to as the Germany 30 index.

What is the DAX Index?

Germany’s Dax index is very similar to the Dow Jones Index, in that it tracks the movement of 30 of the largest stocks on the relative exchange. In this case, the Dax index consists of the 30 major German companies trading on the Frankfurt Stock Exchange.

You will be familiar with the line-up of companies included in the Dax Index, such as;Computer Screen showing chart of the DAX index

    • Adidas 
    • BMW
    • Deutsche Bank
    • Merck
    • Allianz
    • Volkswagen Group
    • Siemen

Why Trade the DAX Index CFD?

Many traders make the transition from trading direct share CFDs to indices. The reason for this is it is much easier to focus on one or two indices, rather than scan through several hundred stocks on a daily basis.

The Index CFD is the weighted average of the top stocks that comprise the index. So if you have a good handle on the largest 30 companies in Germany, then making the transition to trading the Germany 30 index will be seamless.

For those who aren’t familiar with every stock in the index, technical analysis will allow you to trade based on key technical levels including support/resistance and overbought and oversold levels.

Volatility of the DAX Index

If there is one thing the Germany 30 index is renowned for, it is volatility.

You can see from the chart below (from Sept 2015); the index was moving an incredible amount daily. It has since normalised the wild price volatility, but nonetheless, the Germany 30 index is not for the faint-hearted.

Intraday chart of DAX index showing volatility in price

Trading the DAX is Perfect for Australian Traders Working a 9-5 job

One of the key aspects to the Germany 30 index is active trading times. The index is most active between 5pm-7pm AEST (depending on daylight savings) and is, therefore, perfect for those with a 9-5 job.

Traders based in Australia can finish their day job, run their analysis and then prepare themselves for the open of the market. Similar to the Aussie 200 index CFD, the best time to trade it is within the first hour of trade from the open.

For many day traders, the Dax index is their favourite for this very reason. They can work their standard job, then actively look for trading opportunities on the Dax and be done by 8pm.

History of the DAX

The DAX began with a base value of 1,000 as at 30 Dec 1987 and was officially launched on 1 July 1988. The DAX is actually a continuation of an older German index, the Börsen-Zeitung, which was started by a German newspaper in the late 1950’s.

In its earlier years, the DAX went through a number of mergers, restructures and takeovers which resulted in instability and negative sentiment by investors. Nevertheless, the DAX soon witnessed strong growth, surpassing 2,000 points in 1993 and 5,000 points in 1998. The dotcom boom in the early 2000’s, however, was not kind to the DAX and by early 2003 the index was down below 2,500 points. Then came the resurgence – between 2003 to 2007, the DAX underwent a massive upward trend with a record-breaking 1,587 consecutive days of growth and the value of the index surpassing 8,100.

Like most other global indices, the DAX suffered during the financial market crash of 2008, dropping below 4,000 points for the first time in years. Once again though, it recovered and over the next decade it has continued to reach higher levels, including breaking through the 12,000 barrier in early 2015.

These days, the DAX continues to be one of, if not, the most volatile market index in the world, making it a very attractive market for many risk-taking traders and investors. What’s more, the popularity of the German companies that make up the DAX 30 also continues to grow, mkaing them the backbone of the German economy.


Trading the DAX Index with TradeDirect365

You can trade the DAX via the Germany 30 index on the TradeDirect365 platform. The margin required to trade the Germany 30 index CFD on our platform is just 5% for retail traders (0.5% for professional traders). Because of our low spread, low margin requirement and commission-free trading, the German 30 index CFD is one of our most actively-traded indices.

  • We are ASIC-Regulated: TradeDirect365 is a trading name of Finsa Pty Limited (ACN 158 065 635 and AFSL No. 422661).
  • Low Cost Trading: we are one of Australia’s lowest cost CFD providers
  • Tight, Fixed spreads: trade the Australia 200 index with a fixed spread of 0.9pts, the DAX & UK 100 with a 1pt spread and Wall St with a 2pt spread
  • No Commissions: we do not charge commission on DAX trades
  • Easy-to-use Trading Platform: our trading platform is efficient and user-friendly. Find out more about our trading platforms here.
  • Go long or short: trade your view by buying or selling the DAX 30


Germany 30 Index CFD Specifications on the TD365 Platform

    • Trading hours: opens Sunday 23.02 to Friday 21.00. Closed period during the week 21.15 – 21.30 & 22.00 – 23.00
    • Fixed spread during hours: 0.9 point
    • Out-of-hours spread: 2pts from 16.30 to 21.00, 6pts from 21.00 to 07.00
    • Expiry date: None
    • Contract months: Rolling
    • Margin required: 5% for retail (Leverage of 20:1) or 0.50% for wholesale (Leverage of 200:1)
    • Guaranteed Stop-Losses: Yes

Considerations when Trading the DAX 30 Index CFD

When trading the Germany 30 Index CFD, there is an overnight financing cost. This means your account will be debited every day you hold the position past the New York close. You will also need to consider any dividends which may be paid on the stocks within the index.

If one of the stocks on the Frankfurt Stock Exchange top 30 pays a dividend, then you will receive a credit if you are long the index. If you are short, then you will be debited at a pro rata rate. Any debits and credits are clearly highlighted within your activity history tab within the TradeDirect365 platform.


Key Fundamental Data to Watch when Trading the DAX

It is handy to keep an eye on the following data points;

    • Elections and European referendums
    • European Central Bank (ECB) meetings
    • Employment, inflation andreporting season for the stocks

Charting the German 30 Index CFD

If you are a technical chartist, then you will love the charting options available on the TradeDirect365 trading platformTo view the chart, you will notice a chart icon beside each instrument. Click on that to open the chart.