DAX , short for Deutscher Aktien Index), is an index that currently includes the 40 largest leading companies trading on the Frankfurt Stock Exchange (FWB) and is sponsored by the Deutsche Börse Group. The FWB is the largest of Germany’s seven stock exchanges, and the twelfth largest stock exchange in the world. On active trading days, the market is open from 09:00 to 17:30 CET. As of the third quarter of 2021, the DAX has been expanded to include 40 companies.
The DAX was founded in 1988, and the base value of the index at that time was 1,163. The performance of the DAX is a representative reflection of the overall situation of the Frankfurt Stock Exchange in real time. Until the introduction of the DAX, there was no benchmark index for German stocks. Instead, there were many independent lists run by banks or media outlets.
The index has since gained popularity and is now one of the most traded indices in the world, along with the FTSE (UK 100), the Dow Jones Industrial Average – DJIA (USA30-Wall Street), and other similar indices.
How is the DAX calculated? The DAX index is calculated by free-floating market capitalization. This means that only shares available for trading are counted within the market value of each company. Deutsche Börse Group has operated Xetra’s low-latency electronic trading platform for determining DAX prices since 2006. Xetra has used the T7 trading architecture since 2017 to provide the stability and availability required to operate Germany’s largest cash market. Xetra is operated by the Frankfurt Stock Exchange and has 200 trading participants from 16 European countries, as well as Hong Kong and the United Arab Emirates.
DAX index and free stocks
Xetra system calculates the DAX price every second, making the indicator extremely accurate. calculation is weighted using only free or liquid shares of companies included in the index. This methodology means that any shares that are not available for purchase or sale in the market, such as those owned by the company itself, are not counted.
Many of the member companies are large and multinational and their performance is influenced by Germany and the global economy. Index components now account for 80% of the market capitalization of all publicly traded German companies.
The Frankfurt Stock Exchange has created two versions of the DAX index, performance index and the price index. The performance indicator is commonly quoted. However, price index is an index that is similar to indices traded in other countries, such as the S&P 500 (USA 500) and the FTSE 100 (UK 100). In DAX Performance Index, company distributions such as dividends, capital gains and cash payouts are calculated as part of share price. In the DAX Price Index, these payments are not taken into account.
Can I trade the DAX as an instrument? While you cannot trade DAX directly on Plus500 platform, you can trade CFD futures contracts based on the DAX index. You can open a buy position if you think the DAX is heading up, or open a sell position if you feel index is going to decline. Another way to trade DAX is to trade options. Traders can also place buy/sell orders on CFDs for options (buy and sell).* Opening a position on the DAX also exposes you to potential losses if the trade goes against you.
Who is responsible for DAX? The DAX is operated by Deutsche Börse Group, which regulates markets for trading stocks and securities, and also runs Frankfurt Stock Exchange.
DAX indicator and what is the symbol in Forex
The DAX index is considered one of the excellent stock indexes in the stock market as it consists of 40 major German companies traded on the Frankfurt Stock Exchange: such as BASF, SAP, Bayer, Allianz and others. Please note that before September 20, 2021, the DAX index had 30 stocks, due to technical limitations the index name/symbol will currently remain as “GER30”.
Features of the DAX Index: The DAX Index is distinguished by the fact that it reflects the activity of the largest various German companies, and this difference is considered an advantage added to the activity of this index. Unlike other indicators that are limited to a specific sector, it is a general index that reflects activity in more than 4 sectors. There is the industrial sector, there is the commercial financial sector, and others. . The value of the DAX index is calculated like any other index, as the average of the indices for the thirty companies is taken and is calculated relatively depending on the size of the company and the value of its capital.
Companies listed in the DAX Index: The listed companies represent the largest companies in terms of their capital and activity through trading in the stock markets. These companies are not specific to a specific sector. Rather, the ranking includes the 30 largest companies in all different sectors, including industrial companies such as automobile manufacturers such as the famous BMW company and… Mercedes and these companies are classified among the international companies, and Germany is one of the leading countries in the automobile industry, and the index includes in addition to other major companies such as the international company Siemens, which often takes the highest percentage of this index, in addition to the famous Adidas company and others.
DAX index and market assessments quarterly
Once the market closes each day, the prices of listed companies are calculated and put into a specific formula that shows the total daily movement of the 40 largest companies. While the share prices of some companies included in the index may have risen during that day’s trading sessions, others may have fallen. Traders can see whether the index as a whole has risen or fallen based on the collective number calculated at the end of the day. This helps traders better evaluate the index’s movements and fluctuations over days, weeks, months or even years.
How do companies enter the DAX index? The Board of Directors of the Frankfurt Stock Exchange, which calculates the DAX, meets to review the company’s rankings and market valuations every three months. A company can be removed if it falls out of the top 45, or it can be added once it enters the top 25.
The DAX’s movements are a comprehensive snapshot of daily trading activity among all 40 companies. Its weighted valuation could rise even if the share price of some companies included in the DAX index declines. Likewise, when some listed companies see their share prices rise, the index as a whole can still fall.
