Business

German DAX: Stock Markets Continue Trading Higher

February 29, 2020

A stock exchange is an entity that represents a vital part of every nation’s economy. With stocks and other commodities being traded more frequently every day, it is quite clearly a part of the financial industry that is vital.  According to AskTraders, the stock market allows investors to gain access to many companies through buying and selling shares. There are favorable stock markets, and there are those that are not and these can be characterized as “bullish” or “bearish.”  Of course, the quality of some stock markets does not rely on the current economic situation of the country. Such stock markets are often favorable, and these stocks are popularly referred to as a “blue-chip” assets. A blue-chip stock exchange market is the German DAX.

The name is short for Deutscher Aktienindex, which is the German way of saying the German stock index. The DAX was invented sometime in the ’80s, and it includes 30 big German companies. These companies trade commodities using the Frankfurt Stock Exchange. The DAX measures and monitors the performance of the 30 companies that participate in it. Since the selection of companies is limited, the DAX does not represent the state of the economy. It is, however, a good indicator, as it represents some of the top companies in the country. While the DAX is usually a blue-chip market, it is very volatile. Limited stock markets often have this trait. Currently, volatility in the stock market is relatively low.

How to trade on the DAX

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Anyone who knows anything about the stock market knows that any company can be traded. They just need to meet certain requirements to be qualified for the trade. The opportunity is open to anyone, as long as there is a spot open, and they meet the criteria. In order for a company to be eligible to be traded on the German DAX, they must do the following:

  • Maintain a public listing for a minimum of three years

A public listing of a company indicates that the stocks of the company are available to the public. The stocks will be traded on the stock exchange and can be traded to and fro the general public. This opens the company to a volatile market, where prices drop and rise regularly. The state of the company’s finances will have an effect on the market state of their stocks. When the company is doing well, the prices of their stocks will be high and vice versa. The state of the market will also affect the prices of the stocks, as well as the company value. So the company will seemingly become more vulnerable to losing value. Once a company goes public, they need to stay this way for a minimum of three years. During this period, the value of stocks cannot drop below a certain amount. If they do, then they will not be eligible to be traded on the DAX. The value of the stock must be constant or rise over this period. If it can achieve this, then it can be traded on the DAX.

  • Ensure that they have at least 15% of their market cap is traded publically

The market capacity or market cap refers to the value of the shares that a company owns, in the market. There are shares and other commodities from many companies being traded in the market frequently. So the total amount of shares from a particular company is their market capacity. During the period while their shares are in the market, they need to trade at least 15% publicly. This means that they cannot afford to trade less than 15% of the total number of shares in the market. In order to achieve this feat, they may need to maintain constant profits. This will make their stock prices more valuable and sought after in the market. These shares will have to be purchased by individuals, not private entities. At the end of a three year period, their sales will be reviewed. If the market cap that is traded is 15% or more, they can be traded on the DAX.

  • Have stocks on the prime standard of the FSE

Source:investing.com

The general standard and prime standard are indexes that represent the performance of stocks. The general standard is for stocks that are underperforming in the market or performing normally. The prime standard is used to designate stocks that are performing above average in the market. The company that wishes to be traded on the DAX needs to have shared on the prime standard. This will reflect the stability and reliability of the company. These traits are necessary for the DAX, as it represents top companies in the country. So while the company’s stocks are being traded on the Frankfurt stock exchange, it must do well. Performing well in the FSE will provide a solid platform for the company to build on. It will also mean that the company can survive in the DAX. The DAX is meant for the best companies, so any new companies will need to be exceptional.

  • Represent the economy of Germany

The DAX is a German-based market, so to be traded on it, you need to have a positive effect on the economy. There are many ways you can achieve this, but one common way is taxation. With your company thriving, pay tax regularly to contribute to the GNP of the nation. This will make your business or company seem reputable. This will lead to an increase in the demand for your company shares. It will also cause a rise in the value of your company and its stocks. Another way to achieve this is to situate your headquarters in Germany. This will mean you will need to hire German citizens to work in your factory. This will have a positive impact on the state of the country’s economy. Your business will be considered an asset to the nation, giving you more privileges.

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