The DAX is a blue-chip stock market index that comprises of thirty major German companies trading on the Frankfurt Stock Exchange (FSE). In this sense, it is similar to the Dow Jones Industrial Average which also shows how 30 large publicly-owned companies in the US have traded. Some of the leading companies in the DAX index are Siemens, Allianz, Adidas, Deutsche Bank, ThyssenKrupp, and Lufthansa. Germany is the largest economy in the European Union and in the top 7 largest economies in the world. The DAX is a capitalisation-weighted index which means that companies with a greater market capitalisation will have the greatest influence on the price.
The DAX’s history
The DAX actually started its life known as the Börsen-Zeitung and it was started by a German financial newspaper. If you had bought and held the DAX from the 1960s you would be in a very healthy profit now. The DAX has made strong growth since its inception and it went through 2000 points in 1993, 5000 points in 1998, and even made it above 7500 points during the financial crisis of 2008. The Dax reached its record high last year peaking just above 16,300 in November. Its current price is 14,613 and the chart below shows how its value has increased since 1988 when it was priced at only around 1308. The exchange for DAX futures is the Eurex which has a market operating time of 0700-2100 BST time. Trading the DAX can be done day-to-day as there are many moves to be had. Trading the DAX with HYCM is very easy. Here are some top tips for trading the DAX:
1. Be aware of key fundamental drivers
At the moment there is a crisis going on with Russia and Ukraine. The general impact of geopolitical risk events is very limited as outlined in this article.
2. Use key technical tools to define and limit risks
Support and Resistance
Arguably the most widely followed aspect of technical analysis is support and resistance levels. Support and resistance levels are key market levels where price has shown a reaction in the past. As price moves towards the levels at which price previously reacted, they become significant points, dividing the market into buyers and sellers.
Moving averages
Some of the most popular moving averages are the 50, 100, and 200 moving averages. These moving averages show what the average price has been over the last 50, 100, or 200 periods. These can be very useful in providing suitable entry points into the market especially as they are widely respected technical tools viewed by many traders.
Fibonacci retracement
The Fibonacci tool was named after a 13th Century Italian mathematician, Leonardo of Pisa, known as Fibonacci. He was the son of a Pisan merchant and he travelled widely and traded frequently. Fibonacci numbers are found extensively throughout the natural world and they are also used in trading as one of the most common trading tools. The way it is best used is in the instance that some news is released which is very bearish for the DAX. Traders who missed the original move will wait for the price to retrace to a key Fibonacci level in order to rejoin the move.
By using these common technical analysis tools, traders are well equipped to identify places to enter, exit, and place their stops. Technical analysis should not be used in isolation from sentimental and fundamental analysis when trading the DAX, but when used in combination with them, it becomes a powerful component in successful trading.
