Everything you need to know to trade the DAX

Find out all about the Deutscher Aktienindex, or DAX – a measure of 30 German blue-chip stocks listed on the Frankfurt Stock Exchange.

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Why is the DAX important to traders?

The DAX tracks the value of 30 of the biggest, most liquid companies trading on the Frankfurt Stock Exchange (FSE) – the biggest stock exchange in Germany, and tenth biggest overall.

Germany is the largest economy in the European Union, and the fifth largest economy in the world. Its listed companies are a huge factor in that prominence, and the 30 companies that make up the DAX represent some 75% of the total market cap of the FSE.

Key information

Constituents: 30
Exchange: Frankfurt Stock Exchange
Weighting: Capitalisation weighted
Methodology: Free float
Base date: 30 December 1987
Base level: 1000
Trading hours: 10:00am – 6:45pm (UK time)

How to trade the DAX

Like any stock index, the DAX can’t be bought and sold like a stock. Instead, you’ll have to trade it using derivatives such as futures, spread betting or CFDs. The main exchange for DAX futures is the Eurex, which offers trading on DAX futures from 7am – 9pm (UK time). 

CFD trading and spread betting, meanwhile, let you go long or short on the DAX without having to deal with an exchange.

Find out more about indices trading.

How is the DAX calculated?

In order to feature on the DAX, a company has to:

  • Be publicly listed for at least three years
  • Have at least 15% of their market cap traded publically
  • Be a part of the ‘Prime Standard’ segment on the FSE
  • Represent the German economy (by generating sufficient revenues or being headquartered within Germany)

Companies are added or removed quarterly, on the basis of their market cap and the size of their order book.

The DAX is a capitalisation-weighted index, meaning that companies with a higher market cap will have a bigger influence on its price. And it’s calculated using a free-float methodology, so it only takes the number of readily available shares into account – ignoring those that can’t actually be bought and sold (like shares held by governments, or other institutions).

No single company can have a DAX weighting of more than 10%. Prices are taken from the Xetra trading venue, which handles 90% of trading on the FSE, and are calculated every second.

History of the DAX

The DAX was launched by the FSE on 1 July 1988, with a base value of 1000 as of 30 December 1987. However, it’s a continuation of a much older index: the Börsen-Zeitung, started by a major German financial newspaper in 1959.

Since 1988, other indices have gradually been added by the DAX’s operator, Deutsche Börse, including the:

  • MDAX: Added in 1996, it represents the 50 biggest companies after the DAX, excluding those in the technology sector
  • TecDAX: Added in 2003, it represents the 30 biggest companies after the DAX within the technology sector
  • HDAX: Replaced the DAX 100 in 2003, and combines the DAX, MDAX and TecDax

Dax price history

The DAX posted strong growth in its first few years, surpassing 2000 points in 1993, and 5000 in 1998. As the new millennium dawned, the DAX was rallying: at one point in early 2000 it was above 7500.

The unravelling of the dotcom boom in the early 2000s was disastrous for the DAX, though, bringing a sustained bear market for the next three years. By early 2003, the index was down below 2500 once more.

By the time of the 2008 financial crash, the DAX had just got back above the 7500 level, before once again seeing a major move lower – this time dropping below 4000. For the second time, though, it recovered. In the decade after the crash several records were broken, including the 12,000 barrier on 16 March 2015.

The DAX, then, tends to see a fair amount more volatility than its counterparts in the UK and US. That makes it an attractive market for many traders, but can also bring added risk.

Businesses on the DAX

Its price might be volatile compared to other global indices, but the companies that make up the DAX are remarkably resilient. Of the original 30 constituents, 17 were still present on the index as of February 2018 – although Continental left and returned, while Veba and Viag merged to form E.ON. (*)

DAX constituents in 1988

(2018 constituents marked in blue)

Notes

Allianz

 

BASF

 

Bayer

 

Bayer. Hypo.- und Wechsel-Bank

Merged to form HypoVereinsbank, removed in 2005

Bayerische Vereinsbank

Merged to form HypoVereinsbank, removed in 2005

BMW

 

Commerzbank

 

Continental*

Removed in 2008, added back in 2012

Daimler

 

Degussa

Removed in 2002

Deutsche Babcock

Removed in 1995

Deutsche Bank

 

Deutsche Lufthansa

 

Dresdner Bank

Taken over by Allianz in 2001

Feldmühle Nobel

Removed in 1990

Henkel

 

Hoechst

Removed in 1999

Karstadt

Removed in 2001

Kaufhof

Merged with Metro in 1996, which was removed in 2012

Linde

 

MAN

Removed in 2012

Mannesmann

Removed in 2000

Nixdorf

Merged with Siemens in 1990

RWE

 

Schering

Taken over by Bayer in 2006

Siemens

 

Thyssen

 

Veba*

Merged to form E.ON in 2000

Viag*

Merged to form E.ON in 2000

Volkswagen

 

 

The FTSE 100, meanwhile, had just 19 constituents out of its original 100 that were ever-present from its inception in 1984 until February 2018. And while the Dow Jones is far older – its longest constituent, General Electric, first joined in 1896 – just 13 companies present in 1987 were still there 30 years later

DAX composition

Perhaps surprisingly – considering that many associate the German economy first and foremost with the automobile industry – the number one sector on the DAX is chemicals. That’s mostly due to the presence of major chemicals companies like Bayer and BASF.

The three major Germany car companies do feature, though, with Daimler (the parent company of Mercedes-Benz), BMW and Volkswagen Group all taking a significant portion of the index’s weighting. 

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FAQs

What is the Germany 30?

The Germany 30 is the term used by IG – and most other leveraged trading providers – for our market on the DAX. 

What are the DAX TR and DAX PR?

When you see a price for the DAX quoted, it is usually the DAX TR, which stands for total return and includes the dividends paid by DAX constituents. The DAX PR, which stands for price return, is less commonly quoted and does not include dividends.

What is Prime Standard?

The indices of Germany are all taken from the ‘Prime Standard’ segment of stocks on the FSE, which has strict regulations governing transparency that are imposed as part of German law. Any listed company that doesn’t fulfil the requirements to be Prime Standard will be designated General Standard, and will not feature on the DAX, MDAX, TecDAX or HDAX.

What is the CAC?

The CAC is an index that tracks 40 blue-chip stocks listed on the Euronext Paris exchange. Because of the strong economic links between Germany and France – the biggest and second-biggest economies in the European Union respectively – the DAX and CAC will often follow similar price movements. 

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