5 Interesting Facts about Trading the Dax Futures

Germany ranks as the fifth largest economy in the world and the largest economy in the European Union. Dax stands for Deutscher Aktien Index which in plain English means German stock index and comprises 30 most liquid companies. The companies take up almost 75 percent of the aggregate trades on the Frankfurt exchange. Dax trading uses the Xetra system which is all electronic for its significant trades and futures prices are updated even after the day’s market exchange closes. Dax uses futures or CFDs to trades with the transaction being the Eurex. Companies that make up the Dax have shown tremendous resilience because unlike other stock indices, the price of dax is more often than not volatile.

Before investors can venture into this kind of trade, here are a few facts to note about dax trading.

  1. Capitalization Weight Index

    Dax uses the capitalization weighted index meaning that no company can have a dax weighing more than 10 percent.  The free- float methodology only takes the readily available shares into account when calculating and with capitalization weight index it means that a company with a bigger market cap will have a higher influence on the price. This free-float methodology is more convenient because it reduces the concentration of a few companies in the index from being at the top.

  2. Favorable Timing

    Companies on the dax also trade on the US Stock Exchanges, and since with the closing of European markets there is the opening of American markets due to the time difference then individuals can have a better grasp of how markets shift from one exchange to the other and hence have a transparent decision-making process. The trading hours are between 9 a.m – 5:30 p.m CET time with a late dax being 5:30 p.m – 10 pm CET time and early dax being 8 a.m – 9 a.m as calculated by Deulsche Borse.

  3. Euro is the Trading Currency

    The Euro is the currency used in Dax trading, and so the volatility risk involved in engaging in a foreign market is inevitable. It is essential, however, to cover the exchange risk before investing in Dax futures if a trader is dealing in a currency other than the euro.

    Dax trading

    Dax trading

  4. Multiplier of 25

    Standard Dax futures have a multiplier of 25 on the Eurex exchange. Therefore, means that with a dax of 1000 Euros then the contract will be worth 25000 Euros. The dax analysis should, therefore, be accurate and because the markets never stop moving and so it is essential to keep in mind your dax targets moving forward to increase trading and put the odds in your favor. A mini Dax, on the other hand, has a multiplier of 5.

  5. Dominated by Banks and Automobile Companies

    Dax trading has a diversity of companies but the major ones are automobiles such as BMW and Volkswagen and anyone with investment expertise can benefit here. There are other unrelated companies too, but this market is influenced by manufacturing industries thereby making this index an ideal choice.

It is important to note that to feature on the dax a company must be publicly listed for at least three years, be a part of the prime standard segment on the FSE and represent the German economy. Companies are removed or added quarterly depending on the order book size and market cap.