How to trade or invest in the DAX

You’ll trade on the Germany 40 price (derived from the DAX) using either spread bets or CFDs. Both are financial derivatives, meaning that you won’t own any underlying assets, such as shares in a DAX-listed company. Instead, you’ll speculate on the underlying asset’s price movements – in this case, either fluctuations in the Germany 40, or movements in the prices of DAX-listed companies’ shares or ETFs.

Financial derivatives are leveraged. This means that you won’t pay the entire value of your position upfront (as you would when buying shares, for example), but you’ll pay an initial deposit called margin to open your trade. Because both profits and losses of leveraged trades are calculated based on the full position size, rather than your deposit amount, you can earn or lose far more than the price you paid to place the trade.

When investing in shares listed on the DAX, you’ll use our share dealing platform instead. This means that you’ll buy DAX-listed assets outright – for example, shares in a DAX-tracking ETF or DAX-constituent company. This’ll make you a shareholder, entitled to any dividends paid and granted voting rights if applicable. You can invest in DAX-tracking ETFs there, too.

Trade on the Germany 40 price directly

• Speculate on the performance of Germany’s largest companies – some of the most popular in Europe – from a single position
• Take a position on the index’s price using spread bets or CFDs – although these are derivative trading products, this is the most direct way to trade on the price of the underlying index – the DAX
• Gain exposure to the DAX in a market with high liquidity
• Enjoy the freedom to go ‘long’ (if you think the price will rise) or ‘short’ (if you think the price will fall)
• Trade commission-free with spread bets or CFDs (excluding share CFDs) as charges are included in the spread
• Use our Germany 40 ‘cash’ (spot) market to take a position in the short term
• Choose our Germany 40 futures or options markets for the longer term
• Trade around the clock, almost 24/7 (excluding 10pm Friday to 8am on Saturday and 10.40pm to 11pm on Sunday)

Trade or invest in DAX-related ETFs

• Gain broad exposure to the DAX index with our related ETFs
• Take a position on DAX-linked ETF price movements with spread betting or CFD trading without owning the underlying asset
• Use spread bets or CFDs to go long or short – but remember that this offers lower liquidity and higher spreads than trading the Germany 40 directly
• Instead of speculating on the current index level of the Germany 40, you trade on the price of and ETF – calculated using the fund’s net asset value (NAV)
• Buy and hold actual shares in a DAX-related ETF by opening a share dealing account
• Invest in DAX-linked ETFs from just £3 commission using our share dealing platform¹

Trade or invest in DAX-listed shares

• Target specific stocks included in the DAX, like Volkswagen, Allianz and Adidas, without trading the entire Germany 40
• Speculate on DAX-listed stock price movements with spread bets or CFDs without owning the underlying asset
• Go long if you’re feeling bullish, or short for a more bearish market
• Trade shares commission-free with spread bets. CFD share trades incur a minimum of 0.1% commission charge on each side of the trade and a minimum of £10 for online transactions1
• Buy and hold actual shares in a DAX-listed company by opening a share dealing account
• Invest in DAX-listed stocks from just £3 commission with our share dealing platform¹

Open a trading or investing account

There are different types of accounts you can open to take a position on the Germany 40: spread betting or CFD trading accounts, or a share dealing account.

If you’d prefer to become an actual shareholder instead of trading on price movements with derivatives, you can invest in DAX-related ETFs and DAX companies’ stocks through our share dealing platform. This means you’ll be taking direct ownership of shares.

To invest in a DAX-tracking ETF or constituent company, you’re essentially buying, not trading, so you’ll commit the full value of the shares upfront. While you might need more initial capital to get started when compared to trading, your losses are capped at this amount and so can be less risky than trading. That said, you could still get back less than your initial outlay as with any other investment.

Learn what moves the index price

If you want to successfully trade the Germany 40, you’ll need to predict the index’s price movements. This means understanding what influences its price, which will help you decide when to open and close your positions for the maximum chance of profit.

Among other factors, the Germany 40’s price is moved by:

• Earnings reports: changes to DAX constituents’ valuations and results, as well as significant positive or negative news released in their latest earnings report, can have a substantial impact on the index price, depending on the weight of the stock
• Economic events: for example, the index experience significant volatility throughout 2020 during the economic fallout of the Covid-19 pandemic
• News releases: just as with significant economic events, high profile news releases can be followed by a period of volatility in the market. If the news pertains to any of the industries or constituents of the DAX, its price may be especially affected
• Exchange rates: fluctuating exchange rates can affect the Germany 40’s price because DAX constituents, like BMW and Volkswagen for instance, earn a lot of their income in other countries

Remember, information from research is power. You should always use a combination of fundamental analysis and technical analysis before trading DAX-listed stocks, and follow a trading plan and a risk management strategy.

Hone your trading strategy

A trading strategy is never perfect, nor is your knowledge of the Germany 40, so both will be an ongoing process of refining your craft. Here are a few tips to consider as you continue to develop your trading strategy:

• Decide on a trading style: there are four main trading styles – scalping and day trading for more short-term traders, swing trading and position trading for longer term. Your chosen trading style determines how often you place a trade and how long you keep them open
• Study charts and price action: daily and weekly charts can help you to gauge market sentiment, while price action can help you recognise patterns and get a feel for what the market might do next
• Use technical analysis and indicators: use technical analysis and trading indicators can help you identify certain signals and trends on the Germany 40
• Look for trading signals: by analysing the Germany 40 chart often and knowing its rhythms, you should be able to tell if it’s in a trend. You can confirm trading signals with momentum indicators such as the stochastic oscillator or relative strength index (RSI)
• Keep up to date with the news: every time news about a DAX-listed company (like earnings) is released, it can affect share prices. Keep a close eye on the economic calendar to help you trade according to the latest events
• Set trading alerts: no one can watch the markets all the time. Trading alerts let you to set specific criteria for the Germany 40 price and be notified immediately once those market conditions have occurred

Take your first Germany 40 trading or investing position

Let’s take a more detailed look at the various ways you can open a position using spread bets, CFDs or share dealing.

Spread betting on the Germany 40

When you spread bet, you’ll be putting up a certain amount of capital per point of movement in the underlying market. Your profit and loss is calculated by multiplying your bet size by the number of points of movement.

Let’s look at an example. You think the Germany 40 is going to rise from its current level of 7150, so you go long and open your position by clicking ‘buy’ on our platform.

If the index’s price increased to 7200 and you bet £10 per point, you’d earn a profit of £500 (50 points x £10 per point) excluding any other costs you might incur like overnight funding. If the index price dropped in value instead, moving against your prediction, you’d make a loss of £500.

Trading CFDs on the Germany 40

A contract for difference (CFD) is an agreement to exchange the difference in price of an underlying asset, as measured from the time the contract is opened until the time it’s closed. So, however much the price of that asset has risen or dropped since you opened your position is what you stand to make as a profit or a loss, depending on whether your prediction is correct or incorrect.

For example, you believe that the Germany 40 is set to rise from its current price of 16296.7. So, you buy a CFD worth £10 per point. Your forecast is correct, and you close your position when the market reaches a sell price of 16396.7. The difference is 100 points, multiplied by the £10 per point, so your profit is £1000 – excluding other costs.

If your prediction is incorrect and the market drops, and you closed your trade at a level of 16196.7, your loss would be £1000 – excluding other costs.

Investing in the DAX with share dealing

When you invest in the DAX (or Germany 40) via a share dealing account, you’ll buy actual shares in a DAX-linked ETF or DAX-listed company.

This entitles you to dividend payments if the fund or company grants them.

As you buy and hold shares when investing, you’ll be restricted to ‘going long’ (you’d aim to buy low and sell high at a later date to earn a profit). This means investing is usually better suited to those willing to take a longer-term view.

You won’t be trading with leverage when using our share dealing platform. Instead, as you’re buying the shares or ETF outright, you’ll commit the full value of the investment upfront.

While this caps your risk (you can only lose as much as you bought for) if your shares depreciate over the period you’ve held them, you’d make a loss on your investment by getting back less than what you initially put in.

However, you’ll also be entitled to any dividends that company pays to its shareholders.

With us, commission costs on shares are from just 0.1% of your position size, plus a foreign exchange fee of just 0.5%.

As passively managed funds, ETFs enjoy the benefit of avoiding the large performance fees typically associated with actively managed funds.

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