How to Trade DAX Index UK – Beginner’s Guide

Bullish on the German economy but not sure which individual companies to invest in? Trading the DAX index instead could be your best move. In this guide, we’ll explain how to trade the DAX index UK.

How to Trade Index DAX UK – Quick Tutorial

Wondering how to trade DAX index UK? It’s easier today than ever before. Just follow the four quick steps below to invest in as little as 10 minutes!

  1. Choose the right broker to invest in the DAX index: We recommend using eToro to trade the DAX. eToro is an FCA-regulated broker that doesn’t charge any commissions.
  2. Open an account: Once you’ve chosen a broker, open an account. The process with eToro is quick and easy and can be completed online.
  3. Make a deposit: Before investing, you will need to deposit funds to your trading account. With eToro, you can make a deposit using a credit/debit card, bank transfer, or e-wallet.
  4. Invest in the DAX index in the UK: Now it’s time to make your investment. Search for the DAX index and enter the amount you’d like to invest (minimum position size $50).

Step 1: Choose a DAX Index Investment Platform

Choosing the best UK stock broker is not always an easy task. To make it easier to get started, we’ll highlight two of the top brokers you can use to invest in the DAX today.

1. eToro – Best Overall Platform to Invest in the DAX Index with Zero Commission

eToro is one of the top brokers for UK investors.etoro logo This is because the broker is really easy to use, supports a wide range of payment types, and allows you to invest commission-free. eToro offers over 2,000 stocks to invest in and around 250 different ETFs to choose from. You can trade more than 40 forex pairs and dozens of indices, including the German DAX. This broker also allows for cryptocurrency trading within its platform.

eToro DAX

The minimum investment at eToro is just $50, so beginner investors don’t need to shell out a fortune to get started. Another great feature of this broker is its social trading network, which allows you to share trade ideas and learn from investors around the world. Investors can also make good use of eToro’s premade portfolio selection that groups together top performing assets within different investing themes.

 

eToro MarketCopy Portfolios

eToro is regulated by the FCA, ASIC and CySEC. In addition, all UK accounts are protected by the FSCS, meaning that you are insured for up to £85,000 if anything happens to eToro.

Pros

  • Wide variety of stocks and ETFs to choose from
  • 100% commission-free trading
  • Ability to copy the trades of other users
  • Built-in social trading network
  • FCA and FSCS protection

Cons

  • Foreign exchange charges

67% of retail investors lose money when trading CFDs with this provider.

2. Libertex – Best CFD Trading Platform to Trade DAX Index

Libertex logoLibertex is a global CFD broker that enables you to invest in the underlying price movements of an asset without owning the asset itself. The benefit to this investing approach is that you can profit regardless of whether the DAX is going up or going down in value. In addition, you can trade CFDs with leverage, meaning that you don’t need much money to make big bets on this index.

 

how to trade DAX index Libertex

Libertex stands out among CFD trading platforms in that it doesn’t charge a spread when you trade. Instead, the broker charges a small commission when you open and close each position. Depending on your trading style, this can end up saving you money in the long run. 

Libertex allows you to deposit funds with a debit/credit card, bank wire, or e-wallet, with a minimum deposit of just £10. The trading platform is regulated by the Cyprus Securities and Exchange Commission (CySEC) which ensures the safety and security of your investments.

Pros:

  • Zero-spread CFD trading
  • Good educational resources
  • Long established broker
  • Compatible with MT4
  • Competitive spreads

Cons:

  • Small list of available ETFs and funds

83% of retail investor accounts lose money when trading CFDs with this provider.

Step 2: Choose How You Want to Trade the DAX Index

After getting set with the best DAX broker, it’s time to think about how you want to invest in the DAX index. There are 2 different ways to invest in the DAX. We’ll analyse their pros and cons so you can decide which method is best for you.

DAX Fund Trading

Index funds represent one of the most cost-efficient and easiest way for investors to get exposure to the German DAX index. Index funds are ETFs or mutual funds that contain all or most of the same stocks as the DAX index itself. So, they come very close to matching the price movements of the DAX. The advantage of DAX fund trading is that these funds are actively managed by professionals. If the contents of the DAX change or the fund needs to be rebalanced over time, it’s all taken care of for you.

The downside is that DAX funds also carry a management fee, known as an expense ratio. This is typically less than 1% of your investment, but the fee can still add up over time.

If you’re interested in DAX fund trading with eToro, you can invest in the iShares MSCI Germany ETF. This ETF comes from the biggest operators of ETFs in the world (BlackRock), so investors can be sure that they are buying into a reliable product.

iShares Germany

DAX Index Trading

The other main way to trade the DAX is to trade DAX CFDs. With CFDs, you can speculate on the price of the DAX itself without owning any of the shares that make up the index.

One of the benefits to DAX index CFD trading is that you can speculate in either direction. That is, you can bet that the DAX will gain value or that it will lose value. You can also leverage your trade to increase the effective size of your position.

The downside to index CFD trading is that it can be expensive, especially if you plan to hold a leveraged position overnight. Most brokers charge overnight interest fees since you’re effectively borrowing money from your broker. For this reason, DAX index trading is typically restricted to day trading.

You can buy or sell DAX CFDs with eToro – just search for the ‘GER30’ CFD contract.

eToro indices

Step 3: Research DAX Investment

Before you jump into investing in the DAX, it’s important to understand what it is and whether it’s a good investment for you. We’ll cover everything you need to know and highlight some strategies you can use to make money from investing in the DAX.

What is the DAX Index?

The DAX index tracks the value of 30 of the largest companies by market cap that trade on the Frankfurt Stock Exchange in Germany.

The index is dominated by giant German corporations like Volkswagen, Daimler, Allianz, Bayer, Deutsche Bank, Siemens and BMW. Because of this, the DAX is much more oriented toward traditional and so-called “old economy” sectors like car manufacturing, aviation and heavy industry. In that sense, it’s very different from the US stock indices like the S&P 500 and the Nasdaq, which are more technology heavy.

The DAX is very popular to trade, and as a result is highly liquid with tight spreads and long trading hours.

Is DAX a Good Investment?

For any investors looking to have exposure to the fifth largest economy in the world and the largest one in the European Union, the DAX is a great place to start. The index may only cover 30 companies, but it represents a huge swath of the German economy.

Another reason to invest in the DAX is to achieve diversification. If you are heavily invested in tech stocks through the S&P 500 and the Nasdaq indices in the US, the German DAX gives you exposure to automakers, heavy industrial companies, and financial stocks.

It’s also worth pointing out that Germany’s economy is in the midst of a transformation. European stocks are increasingly moving towards the tech sector, particularly after the COVID-19 pandemic. The DAX stands to be one of the major beneficiaries in the EU market in the years to come.

How to Make Money from Investing in DAX

Investing in the DAX is mostly done in the form of long term investments through an index fund or tracker fund. These passive investing types of funds are great for such strategies as they are well diversified within the countries market, and also they are very cheap to purchase.

Since its launch more than 30 years ago, the value of DAX has increased more than tenfold, with an average annual return of close to 8 percent. Already this year, the DAX is up around 10.93% and is outpacing both the S&P 500 and Nasdaq indices.

DAX 2021 eToro

If just investing in the index is not your cup of tea, you can go on and create your a portfolio of companies included in the index. This is a great way to customise your portfolio’s weighting how you see fit; so, if you wanted to invest more in BMW than Bayer, you would simply put more weight in BMW than it has in the index, and reduce the weight of Bayer.

With eToro, this can easily be done as almost all of the DAX components can be found on the platform and purchased without having to pay any commission.

DAX Investment Strategies

As we already said, most investors use long-term time horizons for this type of investment. However, you can also day trade or even swing trade the index.

For beginners, a good strategy would be to invest for the long term and to use dollar-cost averaging . This strategy involves investing a set amount of money into DAX index consistently and over long period of time. As for the intervals, you can decide if you want to add already pre-set amount of money on a monthly, quarterly or yearly basis.

This way, you would be investing both when the price is rising, which increases your average cost, but also when the price is falling, helping to lower your cost basis and get you more upside potential for future price increases. Another important thing is that you won’t have to focus on watching the market closely and timing your entries. This strategy works relatively well since the market almost always goes up in the long run.

Another strategy is to invest an upfront lump sum into a DAX index tracker fund or a portfolio you have created and leave it on the side for a more extended period. As this index is more of a passive investment, this strategy will allow you to avoid the temptation to rebalance or change your portfolio’s weighting due to fluctuations in price. As we have previously mentioned, the DAX has returned around 8 percent on average since its inception.

Lastly, including the DAX investment to your portfolio would be a good thing for portfolio diversification, especially if you are heavily invested in growth stocks from the US and China. This will allow you to spread the risk across multiple assets and across geographical areas, which can reduce the impact of a downturn in one of the areas of your portfolio. Just adding a few of the names that make the DAX to your existing portfolio can make a big difference to the overall portfolio diversification. With eToro, you can invest as little as $50 (around £36) in the DAX.

How to Trade DAX Index UK on eToro

Ready to start investing in the DAX index right now? We’ll show you how to invest with eToro, an FCA-regulated broker that charges zero commission.

Step 1: Open an Account and Upload ID

Head to the eToro homepage and begin the registration process. You will be asked to provide personal information such as your name, email, and mobile number.

eToro sign up

eToro will send a code to your phone via SMS – which you will then need to verify on-screen to complete the registration process.

Step 2: Confirm Identity

Since eToro is regulated by the FCA, the broker requires you to verify your identity. All you need to do is upload a copy of your government-issued ID (passport or driver’s license) and a proof of address (utility bill or bank account statement).

Step 3: Make a Deposit

You will now need to deposit some funds into your newly created eToro investment account.

You can do this via the following payment types:

  • Debit/Credit Card (Visa, MasterCard, Maestro)
  • PayPal
  • Skrill
  • Neteller
  • UK Bank Transfer

You must deposit at least $200 when opening a new account.

Step 4: Search for DAX Index

Now you can invest in the DEX index through CFDs or buy the iShares MSCI German ETF. The easiest way to do this is to use the search box at the top of the page.

iShares 2 etoro

As you can see from the above, simply type the ticker symbol or the full name in the Search box.

Step 5: Place an Order

Once you have found the index that you wish to purchase, click on the ‘Trade’ button. An order form will then appear on-screen.

Simply enter your investment (in USD, minimum $50), and click on the ‘Open Position’ button to complete your commission-free investment!

eToro – Trade DAX Index UK with Zero Commission

If you’re interested in investing in some of the biggest companies in Germany, consider investing in the DAX. The index has a strong historical performance and could be poised to rise as Germany pivots into the post-COVID world.

Ready to invest in the DAX index in the UK? Get started today with eToro – just click the link below to sign up!

67% of retail investor accounts lose money when trading CFDs with this provider.

FAQs

Should I trade DAX?

The answer depends on your preferences, but if you are aiming to build a well-diversified portfolio, DAX can be a great addition, especially since investing in it can be done in a really low-cost way.

How can I day trade the DAX?

You can day trade DAX through the ETFs designed to replicate its performance (or their leveraged versions like already mentioned WisdomTree 3X ETF). However, with day trading, investors rely almost entirely on technical analysis and order flow as the moves occur very fast and last for a short time, so it is not recommended for beginners or for people with a regular job that can't monitor the market constantly during the open hours.

What time does DAX open?

The FSE trading hours for the DAX are 09:00 GMT to 17:45 GMT and most providers will also give pre and post-market indications. This is to help traders gauge where markets are expected to open and where they are quoted after the official market has closed.

What are the best DAX companies to Trade?

Within the DAX Index you will find some of the most well-known, multinational companies like sportswear manufacturer Adidas, software developer SAP, pharmaceutical giant Bayer, famous car manufacturers like BMW, Daimler and Volkswagen, industrial conglomerate Siemens and financial service company Allianz among others. All of these companies are global leaders in their fields, and represent well known, blue-chip names of German economy.

How much money should I invest in the DAX Index

This depends on you and your preference, but you can also, for example, split the overall amount that you planned to allocate to German market in such way that you purchase either DAX index (symbol GER30 on eToto), or iShares MSCI Germany ETF (EWG) to get a broad based exposure, while using the other part of the planned capital to purchase some of the best individual companies of the index in order to get more upside potential.

Ilija Rajakovic

About Ilija Rajakovic PRO INVESTOR

Ilija Rajakovic is a Serbian-based investor and writer. His main focus areas include finance, trading, and macroeconomy. Ilija holds a Master’s Degree in Investment Banking and is pursuing his Ph.D. with a focus on sustainable finance and development. He is actively managing personal investment portfolios and advising private clients. And has run a website which generated actionable stock market ideas and provided insights into global economic landscape in the past. His economic articles have been publshed in highly respected magazines like NIN and Magazin Biznis.

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