What is GER30? How to trade the German DAX index

What is the GER30? How to trade the German DAX index

The GER40 is the new name for the Deutscher Aktien Index (DAX), or the GER30 as it was commonly known. It is Germany's leading stock market index. It tracks the largest blue-chip businesses on the Frankfurt Stock Exchange based on their market value and liquidity. Some familiar names that feature on the index include BMW, Adidas and Deutsche Bank.

If you want to trade CFDs (contracts for difference) in the fourth-largest economy in the world, the GER40 is an option that has the potential to be lucrative.

To help you decide your next move, read on. This guide provides information about the difference between the GER30 and GER40, how to trade on the DAX30, and the current GER30 trading hours, plus strategies on how to trade in a way that could help you get the results you're after.

What is the DAX30?

Germany has the largest economy in the European Union. This fact alone makes it an attractive prospect for traders and the DAX40 – formerly known as the DAX30 – is therefore one of the most watched indices in Europe. It provides a gauge of the performance of some of Germany's largest companies, indicating their current market value and enabling predictions.

The GER40 is the stock index that comprises 40 of the major companies that are most actively trading on the Frankfurt Stock Exchange. It has a base value of 1,000 and represents around 80% of the market capitalisation of Germany's listed stock companies.

A brief history of DAX index trading

The DAX, or the GER40 index as we know it today, was first published on July 1, 1988, and its base date was listed as December 30, 1987. Its starting index level was at 1,163 points.

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The DAX was the invention of Fran Mella, who was an editor at Börsen-Zeitung, a business newspaper. The paper's publisher asked Mella to produce a brand-new stock index for Germany. Mella created a 30-page document outlining his ideas. They were so realistic that they were put before a team of experts. From there, the DAX went from an idealistic project to a real, functioning index.

There were 30 constituent companies that comprised the DAX index. This led to the name GER30. The DAX saw impressive growth in the 1990s, with one highlight including the market closing at above 5,000 points for the first time in March 1998. By the end of the decade, the DAX was calculated solely on Xetra prices, successfully forecasting the move towards electronic trading.

There have been mixed fortunes since then, with the DAX experiencing its largest annual loss of 44% in 2002. The bursting of the dot-com bubble then caused the DAX to plummet in 2003, but it bounced back from 2,202.96 points to reach a high of 8,151.57 points in 2007.

But the GER30 didn't escape the 2008 global financial crisis. By March 2009, the index had lost over half (56%) of its value since its maximum recorded value in July 2007.

The value of the DAX has increased tenfold since its launch 34 years ago, breaking through the 12,000-point barrier in 2015. Today, it's home to a mixture of industries, from major sports brands to leading names in the auto industry, financial services and real estate.

What's the difference between the GER30 and GER40?

Until September 2021, the DAX had tracked the 30 largest companies on the German stock market since its launch, which is why it was known as the GER30.

However, in August 2021 it was announced by Deutsche Börse AG, the owner of the Frankfurt Stock Exchange, that the DAX 30 index would add 10 more constituents. It would therefore become known as the DAX40 – or GER40 on the high-frequency trading platforms.

As well as adding 10 businesses, a new eligibility requirement was introduced. For businesses to join the GER40, they'd have to now post two years of positive earnings before taxes and interest, as well as factoring in depreciation and amortisation. While the change took place in September 2021, CFD traders had until mid-December to recalibrate and update their approach to the new setup.

What are the GER30 companies?

When it was launched in the late eighties, the first 30 constituents on the DAX index included leading names in the automobile industry such as BMW and Volkswagen, along with electrical specialists like Siemens.

In the three decades that have passed, some of the original businesses remained. However, mergers, acquisitions and other factors have seen others come and go. One recurring reason for businesses to be removed from GER30 is that some of the companies had inadequate market capitalisation.

To be listed on the DAX/GER30 – and now GER40 – companies must meet certain criteria. This includes:

  • Being listed on the Frankfurt Stock Exchange
  • Having a legal or operating headquarters in Germany
  • Publishing their quarterly/annual reports promptly. As of 2021, this must also showcase two years of positive earnings before tax, interest and other deductions
  • Having a minimum free float of 10%. The constituents are based on free-float market capitalisation. This is reviewed each quarter and some businesses have been removed from the DAX due to having inadequate free-float capitalisation.
  • A single company cannot have an index weighting above 10%

When the DAX moved to become the GER40, 10 additional companies joined the existing 30. These companies were Airbus SE, Zalando SE, Siemens Healthineers AG, Symrise AG, HelloFresh SE, Sartorius AG Vz, Porsche Automobil Holding, Brenntag SE, Puma SE, and Qiagen NV.

How is the DAX index calculated?

The DAX40 is a cap-weighted average index. This means that companies with greater market capitalisation have a greater impact on the value of the index. However, the maximum weight of any listed company is capped at 10%.

To understand DAX index trading, it's important to know how the index is calculated using the free-float method. This is because the prices used to calculate the index are accessed via Xetra, an electronic trading platform.

This trading system uses a free-float methodology to work out the weightings and the average trading volume. This means only shares that are readily available for sale are included. Those that are unavailable, like shares held by governments, are left out.

This methodology is calculated by multiplying the share price by the number of shares issued, but with locked-in shares removed. The calculation looks like this:

**Free-float methodology = share price x (number of shares issued – locked-in shares) **

The main considerations include:

  • The company's current price
  • What the company's closing price was the trading day before the company featured on the index
  • What is the freely available number of shares, given that some shares won't count
  • The overall number of trading stocks that are available on the stock exchange
  • Another point to factor in is the performance index and price index that affect the German market. The Frankfurt Stock Exchange created these.

The former is an index that moves with changes to capital stock and interest payments, for example. The latter is similar to other indices like the UK100, which just showcases the change in price of a particular set of stocks or portfolio of bonds. Unlike the performance index, this doesn't adjust in line with dividend payments or changes in capital stock.

What affects the value of the DAX index?

The DAX 40 has much in common with other stock indexes in that it reacts to any global events or shifts in the economy. These include:

  • Economic breaking news – for example, a looming recession or changing inflation rates
  • Political unrest and war
  • Natural disasters

Additionally, how companies on the index are performing affects the value. In 2018, the changing fortunes of Wirecard, which was made insolvent, led to the DAX becoming the GER40 and introducing new criteria.

Although it can be seen as a volatile market, the GER40 is generally successful. It has adapted and evolved over the decades. Where there were dips, the market has bounced back even stronger. Plus, past performance doesn't indicate what's to come.

Where the DAX does differ from some of the other major indexes is in its links to Europe. The economies of the European nations have an impact on the German trading markets and the European Central Bank (ECB) is one of the biggest drivers of the DAX. Here, the ECB's decisions about interest rates and monetary policies can affect the volatility of the index's market.

This is a significant factor to consider and it's worth maintaining an awareness of the economies across the EU.

How to trade the DAX index (GER30/GER40)

Trading on the DAX index can be done in a couple of ways. You can either trade on the DAX40 using futures or use contracts for difference (CFDs).

With futures, you're tied into a purchase or must sell by a set date. This means that whatever you buy or sell your GER40 shares for will be at a predetermined price, no matter what the market looks like on the date of the transaction.

Unlike futures trading, with CFDs and spread betting, traders don't own the assets. Instead, you speculate on the future value of the asset and this is cash-settled. Similarly, spread betting sees traders place a speculative bet on which direction they think the prices will move in.

CFD and spread betting in the DAX 40 are available at FXCM. You can access the market and begin trading the GER40 by using the tools available on the platform.

What time does the GER30 open?

The DAX40 opens at 8am and closes at 4.30pm UK time from Monday to Friday. Out-of-hours prices are available from 7am to 8am and 4.30pm to 9pm, and these timings shift in line with daylight savings time.

However, at FXCM, we can offer longer trading hours from 12.30am and 8pm daily.

How much do you need to trade GER30?

The GER30/GER40 has a minimum pip value of €0.10 per point – although this amount might differ slightly if your account is in a different currency. It has a target spread of 1.3 pip/point and using FXCM means you can make the most of the additional decimal places in the display and move quickly.

DAX index trading: The advantages

The GER40 (or GER30) offers a potentially lucrative addition to your trading portfolio. Some of the key benefits include a high degree of liquidity, long trading hours and tight spreads, plus a strong relationship with the euro.

By making leveraged products such as CFDs available for traders, it's possible to increase market exposure and see returns with a smaller investment and without having to own any assets.

Additionally, it has a track record for breaking past high points, offering record-breaking returns, and bouncing back from low points with a flourish. While the past can't be used to predict the future, it shows that the DAX40 index has had a strong 30 years to date.

There's a diverse range of industries in this market too. It's always been strong for financial services and automotive companies, but the addition of the 10 companies that transformed the GER30 into the GER40 has seen an array of sectors join the index. Health, online food ordering, and ecommerce are just some of the sectors available.

Finally, the DAX is known for its volatility. This can mean you'll see higher returns on your investments.

Is trading the DAX index right for everyone?

When it comes to diversifying your portfolio, you must work out what could be the best match for you. The GER40 has a lot to offer investors, but there are factors to consider.

For instance, the index's ties with the European Union mean that you will need to be aware of fluctuations across Europe that could impact the DAX. Keeping ahead of the curve will stand you in good stead here.

Also, the volatility that makes this such a thrilling index to trade on can also be unsuitable for those who prefer to play it safe with a more predictable market.

CFDs and spread betting aren't for everyone either. There's a high level of risk that's associated with this type of trading. This is because you're trading with leverage and don't own the assets you're betting on.

DAX30 news

The latest DAX 30/40 news can be influenced by events that are taking place across Europe and beyond, such as Brexit and the global economic downturn due to the pandemic.

For instance, the recent war in Ukraine is one major moment that had an impact on the index. On 7 March, the DAX 30 reached its lowest level in a year. This drop was forecasted in February when war first broke out. The reason the DAX was considered most vulnerable to Russia's invasion of Ukraine is that the companies on the DAX 40 rely on Russia for energy supplies.

As well as monitoring major events, it is worth checking European Central Bank reports and Germany's economic indicators to spot any areas where volatility could affect potential returns.

DAX 40 chart

To keep track of the current state of play and get an idea of how the DAX GER30/GER40 has performed in the past, look at our live chart. This tracks the progress made to date, although it doesn't indicate what could happen in the future. It's important to be aware of this because different factors can affect how the dial moves in the coming days and months. However, it can help you get a feel for how the market is moving.

Start trading the GER30/GER40 today

To begin trading on the DAX GER30/GER40, you won't need to invest a lot of capital. In fact, you can do a trial run using a demo account. This lets you practice trading the markets for free, giving you an insight into the real thing without the associated risks.

From there, and you will have access to the markets. You can then begin trading on GER40, using orders to control trading. An account with FXCM also gives you access to trading currencies, indices and commodities. You'll also be able to find support, advice, educational materials and technical analysis of the markets.

Open an FXCM account and trade the world's most popular indices with leverage.

FXCM Research Team

FXCM Research Team consists of a number of FXCM's Market and Product Specialists.

Articles published by FXCM Research Team generally have numerous contributors and aim to provide general Educational and Informative content on Market News and Products.

FXCM Research Team

FXCM Research Team consists of a number of FXCM's Market and Product Specialists.

Articles published by FXCM Research Team generally have numerous contributors and aim to provide general Educational and Informative content on Market News and Products.

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Past Performance: Past Performance is not an indicator of future results.

Spreads Widget: When static spreads are displayed, the figures reflect a time-stamped snapshot as of when the market closes. Spreads are variable and are subject to delay. Single Share prices are subject to a 15 minute delay. The spread figures are for informational purposes only. FXCM is not liable for errors, omissions or delays, or for actions relying on this information.

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