Investors’ Guide to the DAX 40 Index

This article looks at investors’ guide to the DAX 40 index, one of the world’s most watched and traded indices. With its high liquidity and extended trading hours, the DAX 40 offers investors tight trading spreads and an ideal opportunity to gain or reduce exposure to equities. We explore what the DAX 40 is, how it differs from the DAX 30, the best time to trade on it, the advantages of trading on it, and what affects its behavior. Finally, we look at the brief history of the DAX 40.

1. What is DAX40?

The DAX 40 or DAX Index is a German stock market index of the 40 largest companies listed on the Frankfurt Stock Exchange (FSE). The key factors are the size of market capitalization and liquidity. Notably, the so-called Performance index, which means that it takes into account not only the increase in share prices but also the increase in capital through the payment of dividends.

Dax 40 is one of the world’s most watched and traded indices. Investors widely believe that the DAX 40 reflects the health of the German and European economies.

Like the DAX, other blue chip stock indices include the CAC 40 in France, the FTSE 100 in the UK, and the S&P 500 in the US. You can trade DAX 40 on a trading platform like SimpleFX.

Frankfurt Stock Exchange (Börse Frankfurt) building (Wikimedia commons).

2. What does the abbreviation “DAX” stand for?

Deutscher Aktien Index.

3. The DAX 40 and DAX 30 indexes. What is the difference?

It’s the same index. Until September 2021, the index operated as the DAX 30, but the name was changed by adding ten new companies to the list. At that time, the group included Airbus, Zalando, Siemens Healthineers, HelloFresh, Symrise, Sartorius, Porsche Automobile Holding, Brenntag, Puma, and Qiagen.

4. What is the best time to trade on the DAX40?

The best time to trade the DAX 40 is when the market is highly liquid. When trading in a low-liquid environment, traders risk low-volume spikes that may break out of standard trading patterns.

Read also: IBEX 35 Index. Basic Information

5. Advantages Of Trading The DAX 40

The DAX 40 is a famous market for traders due to its high liquidity, extended trading hours (9 AM to 5:45 PM on the Frankfurt Stock Exchange), and tight trading spreads. It is easy to identify trends, and the DAX offers clear technical patterns across multiple timeframes. It gives traders an ideal opportunity to gain or reduce exposure to equities.

DAX40 performance in the last year, Jan 2022 – Jan 2023.

6. Investors’ Guide to the DAX 40 index. How to Trade on DAX40?

The trading rules here are similar to those for buying and selling similar items. You need to understand the psychology of stock market trading and be disciplined to choose the best time to enter and exit trades.

So how to trade on the DAX40?

The trader should ensure they fully understand the product and the trading medium they wish to use. For example, futures or spreads. Also, traders should use stop loss and little or no leverage when trading on Dax.

Also, remember that it is worth reading market news and technical analysis when preparing a trading plan, as with any other stock trading strategy.

Do not enter transactions before publishing essential data (financial reports of companies, data on employment in a given sector, data from the European Central Bank on interest rates). Wait for the “dust to settle.”

Set yourself an entry-level exit point and stop loss. If you are using technical analysis to decide your trading levels on the DAX 40, test your analysis thoroughly before trading. For this purpose, you can use the demo account in SimpleFX WebTrader.

Comprehensively record the details of all your transactions. Note why you entered the trade, how it went, and its final outcome. The more transaction details your private trading “archive” covers, you will be better prepared before entering your next DAX40 trade.

The bear and the bull in front of the Frankfurt Stock Exchange (Wikimedia commons).

7. What Affects the Behavior of the DAX 40 Index?

The DAX40 is affected by various variables covering top-level macro topics, global fundamentals and markets, and micro topics, including company and industry movements and valuations. The German index reacts, among others, to:

Tariffs in various sectors are affected by global and regional trade wars, including some companies listed on the DAX40 index.

Currency wars affect the financial performance of exporters, affecting their share price and market valuation. A weak or strong euro exchange rate affects the financial performance of exporters and importers differently.

Domino effect. Global markets are interconnected, and the effects of a sectoral crisis in one country affect sentiment in the same industry in different countries worldwide.

Index weightings. A 5% price change in one company within Dax can have a different effect than a 5% change in another company with a different index weight.

8. DAX 40 Company List:

Company | Sector | Market Cap

Adidas AG | Personal Goods | €26.8bn
Airbus SE | Aerospace & Defence | €95.2bn
Allianz SE | Life Insurance | €89.1bn
Basf SE | Chemicals | €47.4bn
Bayer AG | Pharmaceuticals & Biotechnology | €54.5bn
Bayerische Motoren Werke AG | Automobiles & Parts | €55.3bn
Beiersdorf AG | Personal Goods | €28.0bn
Brenntag SE | Chemicals | €10.5bn
Continental AG | Automobiles & Parts | €12.7bn
Covestro AG | Construction & Materials | €8.2bn
Deutsche Bank AG | Banks | €24.8bn
Deutsche Boerse AG | Financial Services | €30.9bn
Deutsche Post AG | Commercial Transportation | €49.6bn
Deutsche Telekom AG | Telecomms | €100.7bn
Deutsche Wohnen SE | Property | €8.9bn
E. On SE | Electricity | €26.6bn
Fresenius Medical Care AG & Co. KGaA | Health Care Equipment & Services | €9.8bn
Fresenius SE & Co. KGaA | Health Care Equipment & Services | €15.5bn
HeidelbergCement AG | Construction & Materials | €11.2bn
HelloFresh SE | Food and Drug Retailers | €4.0bn
Henkel AG & Co. KGAA | Chemicals | €15.7bn
Infineon Technologies AG | Technology Hardware & Equipment | €41.4bn
Linde Plc | Industrial Engineering | $160.8bn
Mercedes-Benz Group AG | Automobiles & Parts | €72.7bn
Merck KGAA | Pharmaceuticals & Biotechnology | €24.5bn
MTU Aero Engines AG | Aerospace & Defence | €12.1bn
Muenchener Rueckversicherungs-Gesellschaft AG | Nonlife Insurance | €46.5bn
Porsche Automobil Holding SE – PRF PERPETUAL EUR 1 | Automobiles & Parts | €8.4bn
Puma SE | Personal Goods | €9.4bn
Qiagen NV | Pharmaceuticals & Biotechnology | $11.4bn
RWE AG – Class A Shares | Electricity | €28.5bn
Sap SE | Software & Computer Services | €131.0bn
Sartorius AG – Preference Share | Pharmaceuticals & Biotechnology | €15.1bn
Siemens AG | Electronic & Electrical Equipment | €121.9bn
Siemens Energy AG | Energy | €13.8bn
Siemens Healthineers AG | Pharmaceuticals & Biotechnology | €55.4bn
Symrise AG | Personal Goods | €13.8bn
Volkswagen AG | Automobiles & Parts | €47.0bn
Vonovia SE | Real Estate Investment & Services | €21.3bn
Zalando SE | Support Services | €11.0bn

98. Investors’ guide to the DAX 40 index. A Brief History

Since its inception in July 1988, DAX 40 (formerly DAX 30) has been vulnerable to global financial events. It was not spared the technological bubble (2000) or the significant global stock exchange decline (2003). The Index also experienced significant declines due to the global financial crisis (2008) and fell again during the COVID-19 pandemic.

Notably, the correlation between the DAX 40 and the US index has diverged at points, with The 50-day correlation between the two indexes going negative in 2018, implying the underlying currents influencing global assets may have shifted.

Investor‘s Guide to the DAX 40 Index. A Short Summary

The DAX40 is one of the world‘s most watched and traded indices. It is a German stock market index of the 40 largest companies listed on the Frankfurt Stock Exchange and is keyed to the size of market capitalization and liquidity. It has been used to reflect the health of the German and European economies and is affected by various global, regional, and micro topics. I hope that this Investors’ guide to the DAX 40 index provided a comprehensive overview of the index and its trading environment, including the best time to trade, what affects its behavior, and the brief history of the DAX 40.