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Global-view.com- Dax expands to 40 members
In September 2021, the DAX will be expanded by 10 members. It will go from 30 to 40 members in a move needed for Wirecard falling in love. As additional members are welcome to the club, stricter rules are expected to apply. Rules that will ensure that another Wirecard moment does not occur again.
One of the rules that new members will have to follow to join the DAX 30 is that they must be profitable in the previous two years. This is to ensure that they can maintain their profitability and will not fall as Wirecard shortly after being hosted on the DAX.
What is DAX?
DAX is the German index made up of bluechip shares listed on the Frankfurt Stock Exchange. The DAX was formed in 1988. It consists of 30 companies from the beginning. With changes in investor sentiment, the DAX needs to expand into the stock market.
The DAX is valued at just over a trillion euros. As such, the shares that make up the DAX are highly valued companies that generally indicate the direction or state of the economy. As it stands now, the value of the DAX is about 80% of the value of the Frankfurt Stock Exchange.
The incorporation of ten more companies into the DAX is good for the industry. This shows that there has been growth over the years. Companies that are expected to rise to the blue-chip range have a favorable reputation and are also highly profitable.
The DAX is one of the most traded indices in the world. It is as well ranked as the New York Dow Jones and is considered a good indicator of the state of the German economy.
What do companies need to join the DAX?
For a company to be eligible to join DAX, there must be certain conditions. Following the Wirecard scandal, there has been a change in the conditions to be met by companies admitted to the DAX.
First, the company must have positive earnings before interest, taxes, depreciation and amortization (EBITDA) for two years prior to its admission.
Companies will also not have to be listed on the first stock exchange standard. A company listed on the regulated market is eligible to join DAX.
All DAX companies must have an audit committee on their supervisory boards.
In addition, companies that must be selected to be part of the DAX must meet certain billing and profitability conditions. At the same time, they are required to publish both annual and quarterly reports.
How to trade indices
The stock market and the foreign exchange market are governed by the forces of supply and demand. The higher the demand for an asset, the higher its prices. The lower the demand, the lower the prices.
This means that if you want to make a profit in either market, you will need to time it correctly. Buy when the price is low and sell when it is high for profit.
Trading an index like the DAX is different. It is not similar to single value trading and therefore is not governed by demand and supply. Rather, the price of an index is determined by the movement of the prices of the underlying assets.
This means that if the price of the assets that make up the index increases, the price of the index increases. If the price of most index stocks goes down, the price of the index also goes down.
Therefore, the index reflects the market as a function of its price movement. Mostly, the price of the index is quite stable. This is because it is made up of several stocks. When there is a volatile price movement in some stocks, others in different sectors are stable. This averages the index and ensures that the price of the index remains stable.
Therefore, to change an index, you must enter into a contract for differences. This will allow you to position yourself in the index. You can take a long position if you expect the index price to rise. Or, you can take a short position if you expect the price to go down.
A difference contract allows you to trade in the short or long term while you wait for the index price to change direction in order to make a profit. When the price moves in your favor, you can charge your CFD and reap your profits.
The expansion of the DAX is good news for many investors and traders. The more robust the DAX, the better it can be as an indicator of the state of the economy.
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