It is often said, about a great many things that “less is more”, this may very well be true, and if it is, that might very well explain the existence of the DAX index.
As a whole, the DAX represents a mere 30 companies at any given time, with those companies supposed to represent the massive wealth that is the German economy with its many industries, so can such a small sample represent such a large market? And if so, should you truly invest in DAX binary options?
The German market is by far the largest market in Europe and leads the way for the EU in many industries both physical and technological, and its main stock market lists over 700 companies, but the DAX is the index which is most often quoted in relation to the strength of the German economy and the German market movements, much in the same way that the Dow Jones is most often quoted when speaking of the US economy.
Trying to encapsulate the entirety of the German economy with 30 companies can be tricky, mostly due to the fact that it contains so many different avenues of industry, for example – Siemens is a world leader in electronics, both for home and industry, SAP is a world leader in various IT solutions, Bayer is one of the world’s largest pharmaceutical companies, Allianz provides insurance all over the globe, Deutche Bank has branches in nearly every country and who among us would not like to drive a BMW?
Germany has been at the forefront of the EU since its establishment and takes its role as a leader quite seriously, since the German economy is considered to be more stable than some of the other EU members, as proven by events from 2008 onwards, it is often relied upon to provide financial assistance to other less fortunate nations such as Spain and Greece in attempts to stabilize the EU as a whole.
Since exporting much of the goods it creates is a major part of the economy (Germany is currently the 3rd largest exporter in the world, with over $1.5 trillion in 2012 and 2013), it is safe to assume that any change in exporting figures may have a critical effect on the economy as a whole.
The DAX, much like the Dow Jones attempts to capture a snapshot of the most successful companies, in an attempt to reflect the direction of the economy, and trading in DAX binary options will most likely be a reflection of your thinking as to the future of that economy.
While there are a few other stock exchanges and indices in Germany, the MDAX might be the next most important, essentially, the MDAX is an index which contains listings for the 50 companies that rank directly below the members of the DAX in financial stability terms, when a company is forced to leave the DAX for whatever reason, a company that is listed in the MDAX is the most likely component to replace it, but any changes require approval prior to going through.
While they contain different components, one can trade DAX and MDAX binary options in a very similar fashion, with a slight difference being paid attention to due to the different makeup of the index.
As we have mentioned, there are two main aspects that bear considering when trading DAX binary options, exporting figures being first and the status of the EU as a whole being second, but you should also keep in mind that the companies that are members within the DAX itself are all giant corporations, and changes in the DAX often signal the significant weakening of one of them, which, due to their size, is often enough the cause of market changes, so the components of the DAX are as important to the index as the index is important to the economy.
Trade well in DAX binary options and you could find yourself having a portfolio large enough to control your own destiny.