Introduction
The DAX (Deutscher Aktien Index), also known as GER40, is a stock index that represents companies that trade on the Frankfurt Stock Exchange (FSE).
The GER40 is a popular asset on the eToro platform. It can seem like a lot of work to trade it as a beginner, but we've put together an article that explains "everything" you need to know. Hopefully, this will make trading easier for you.
77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
History of DAX
Established in 1988, the DAX began with an initial index level of 1,163 points. The index previously consisted of 30 companies, but it has expanded to 40 as of September 3, 2021. The victory of these companies has bolstered what is known as the "German economic miracle" or Wirtschaftswunder, a term describing Germany's reawakening after World War II.
The DAX 40 index is used frequently as a measure of the German stock market. An electronic trading system that gives the rates used to assess the DAX index is called Xetra. The DAX (GER40) index accounts for roughly 75% of the total market capitalization, or the total dollar market value of the shares traded on the FSE.
Factors to Consider When Trading DAX
Formulating a strategy is essential to be successful in trading in the largest blue-chip companies comprising DAX40. To develop strategies, you should consider several factors that will increase the chances of succeeding in trading. The first factor to consider is security.
DAX is known for its competitiveness, so you need to choose the most suitable, tailor-fit security to your risk tolerance and trading objectives. In line with this, selecting the appropriate volume or the total number of shares to trade is essential as DAX can be volatile. It is also critical to select an investment broker who will assist you to reach your goals when trading in DAX.
A reputable and cost-effective broker, such as eToro, is regarded as one of the greatest options for investing in the DAX (GER40).
How to Trade DAX?
The DAX (GER40) measures the 40 largest German companies' performance and ranks as European investors' leading stock index. Anyone wanting exposure to the DAX (GER40) can do so by investing in financial instruments such as contracts for difference (CFDs), futures, and exchange-traded funds (ETFs).
DAX (GER40) traders can buy and hold, leaving the trade open until the price increases. When the price increases, you can close the trade for a profit. Short-term trading can range from intraday trading, where trades can run for several days and open and close within minutes. The goal for short-term trading is to earn on short-term volatility. This technique involves making more short-term trades than one long-term.
Trading DAX via ETFs
Investing entails selecting assets to add to your portfolio to retain them for the medium- to long-term and then profitably selling them. Additionally, you can earn from dividends - if the firm you invest in distributes a portion of its profits to shareholders. While it is possible to take a short position using inverse ETFs, most investors choose long positions.
Most investors will select a few equities for their portfolios and instead invest in ETFs if they wish to participate in DAX. When you purchase a DAX ETF, you invest in a fund that tracks the index's price. Numerous DAX ETFs do this by owning the index's constituent equities, which means that when you buy, you're effectively investing in all 30 firms through a single investment.
Trading DAX via Futures
There are exchanges wherein trading is available for European futures, particularly DAX Futures. Through it, you have the freedom to check the statistics, prices/quotes, specifications, trading hours, trading calendar, and transaction fees to help make sound financial decisions by choosing a suitable contract through in-depth analysis.
You can also obtain DAX futures in a variety of forms that have good advantages. For instance, standard futures contracts range in size from standard futures to mini-sized DAX futures with a multiplier of 5 EUR. DAX futures are priced typically in euros, which are then converted to US dollars. As individuals continue to make impressive profits from futures trading, the market have been becoming more competitive.
Trading DAX via CFDs
Investing in CFDs, a form of derivative in which the asset in line will be sold at a certain period in the future at a predetermined price, allows you to gain access to Germany's major blue-chip companies. Doing so will enable you to hedge risk through speculating price movements since this kind of financial contract does not transfer the ownership of the underlying stock.
Brokers like eToro are known for offering CFDs to trade DAX (GER40) that will allow you and other traders to access those companies.
Trading DAX CFDs with eToro
eToro became one of the best brokers because it is extremely user-friendly, accepts a variety of payment options, and provides commission-free investment. eToro allows you to pick from over 2,000 stocks and around 250 different exchange-traded funds (EFTs). There are over 40 forex pairings and dozens of indices to trade, including the German DAX.
At eToro, the minimum investment is $50. If you are a new investor, you do not need to invest a fortune to get started. Another outstanding feature of this broker is its social trading network, enabling you to exchange trading ideas and gain knowledge from investors worldwide. Additionally, eToro's preset portfolio selection may benefit investors, putting together the best-performing assets across several investment topics.
How to Trade DAX in eToro?
- Create an account on eToro or log-in your account for existing users.
eToro web-based platform - Click "Discover".
Clicking "Discover" on eToro - Select "Indices".
Selecting Indices on eToro's platform - Look for "GER40".
Looking for GER40 on eToro's list of indices - Select BUY or SELL.
Buying or selling GER40 CFDs in eToro - Key in your desired amount to invest or the number of GER40 units you want to trade.
Entering amount to invest on GER40 via eToro - Review and set the stop loss, leverage, and take profit parameters.
Reviewing stop-loss, leverage and take profit on GER40 CFD trade - Select "Open Trade".
Executing GER40 buy order on eToro
Is It Wise to Invest in DAX?
The DAX is comprised of blue-chip stocks from a variety of industries, including pharmaceutical companies, insurance companies, and automobile manufacturers. Investing in GER40 gives diversification benefits that individual stock investments do not. When markets are bullish, stock indices perform well, but when markets turn bearish, they plummet rapidly. It's generally a good idea to look at the underlying market circumstances before investing in an index like the DAX.
Germany, being one of the fastest growing economies in Europe and the wealthiest countries in the world, will undoubtedly help you accumulate higher profits in your portfolio even in times of volatility by purchasing long-term securities from GER40 listed companies. GER40 is also a good opportunity for those active traders into scalping, day trading, and swing trading.
eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Past performance is not an indication of future results. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision.
Copy Trading does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk.
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eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro.