In this video we're going to look at: what exactly is the German DAX index, why is
it so popular with traders, and also how do you trade it with Capital.com. Let's
get into the basics, first of all, if you're not familiar with the DAX let's
look at what it actually is and why it's such a popular market for traders over
all sorts of timeframes. So what is the DAX and why is it popular. It's the
German stock market index. Clearly the German stock market is a major European stock market.
Lots of interest for investors and traders around the world.
So the DAX tracks the value of 30 of the biggest and most liquid, so that's in
terms of volume, companies that trade on the Frankfurt Stock Exchange - so it's a
barometer for the health of the overall stock market. As with all of these
indices whether it's: the FTSE, the Dow, with the S&P, the NASDAQ or the DAX -
trading an index, the DAX in this case, is a way of gaining broad exposure to those
German listed shares. And the reason it's popular with traders is quite a simple
one - we'll take a look at it in a second - but the DAX is a fairly volatile stock
market index, so it moves around a lot during the day, during the week, and of
course what traders are looking for is a market that moves. Let's take a look at
some of that volatility. Just to get a feel for this volatility I've got an
hourly chart here of the DAX, of the market. If we look at these highs here
this was October 4th 2018 traded as high as 12340 and then if we jump
forward in time October 9th, so 5 days later, it's as low as in 11800.
So the markets moved more than 500 points in 5 days, so that gives you a
sample of the volatility, maybe medium-term volatility, for the DAX. Let's
take a look at an even shorter term chart. This is a 5-minute chart now
looking at the last couple of days of the DAX and again you can see plenty of
volatility on this timeframe. So it traded as low, yesterday, as 11,800 at the
time of recording and then it's traded as high as 12,000. So a
200 point move there even during today and we're only really a few hours into
the trading day. The market's gone from 11,990 down to 11,880 - so a move in excess
of 110 points and it's bounced back about 50 points so far. So a very
volatile market and that's what appeals to traders. So like all stock market
indices, it's a basket made up of a group of different shares. The reason it is so
popular with traders is the volatility as we saw there, so let's just take a
brief look at how you trade this market with Capital.com. So how to trade the
DAX with Capital.com. You trade using contracts for difference (CFDs) and you
trade our market called the Germany 30. So that's the index you trade. When
trading CFDs, you trade using leverage so you don't have to put up the whole value
of your position. This is very popular with traders who are looking for maybe
shorter-term moves in the market than investors. It makes their trading capital
go further, of course, it's important to understand whilst profits can be
magnified using leverage, the same applies to losses. So it's very important
to use a risk management technique such as stop losses. Another benefit of
trading using CFDs [is that] you can trade markets in both directions. So if you thought the
DAX was going to rise you'd buy using CFDs, but if you thought the market was going to
fall off a cliff, as we've seen in this video looking at the last week,
we've seen the market under pressure, you can short sell. So you can position
yourself to profit whether you think a market is gonna rise or fall. So just to
summarise CFDs give you a way of trying to capitalise from the DAX
volatility. You get leverage giving you more bang for your buck. You can trade
markets in both directions but it's important of course to
always have risk management processes in place. We'll wrap things up there. There's
more information about the DAX on our website of course, where you can open a
demo account and play around and see how you would trade the DAX and then when you're
ready open an account with real money to start trading it for real.