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How to Trade DAX® Futures

by | Futures 101

The DAX® futures complex provides a unique opportunity to profit from one of the world’s most dynamic stock indexes.

The Deutscher Aktienindex (DAX®) stock index is Deutsche Börse’s index of blue-chip German stocks. Launched in 1988 as an index of the top 30 stocks traded on the Frankfurt Stock Exchange, based on turnover and market capitalization, it now includes the 40 largest and most actively traded German companies.

Eurex launched futures on the DAX® (FDAX) in the 1990s and more recently has added Mini-DAX® futures (FDXM) and Micro-DAX® futures (FDXS).

DAX® includes such well-known stocks as Airbus SE (AIR), Adidas AG (ADS), Bayer AG (BAYN), BMW, Deutsche Bank AG (DBK), Merck (MRK), Porsche (PAH), Puma SE (PUM), Siemens AG (SIE), and Volkswagen AG (VOW). This makes it a compelling index representing the largest economy in Europe and a proxy for the Eurozone as well.

With the explosion of retail trading based on the growth of electronic trading and the move towards near-24-hour trading with the introduction of E-mini futures on the S&P 500, Eurex entered the fray with futures on the DAX® and the EURO STOXX 50® indices.

Strategies for Trading DAX Futures

“The research that a trader should use before trading the DAX® futures market is the exact same that they would use to evaluate any market that they are going to trade,” says Dan Gramza, President of Gramza Capital Management, who is a trader and consultant to domestic and international clients. Gramza adds that this greatly depends on a trader’s timeframe and risk tolerance. “My suggestion would be that after you have identified your trading timeframe, begin using strategies or indicators that you are currently using in other markets. This way you have the current market performance of your trading as a basis to compare the performance of utilizing those techniques with [DAX® futures].”

DAX® futures are not only a benchmark for Europe’s largest economy representing many well-known stocks but have also proven to be a reliable indicator for movements in U.S. stock indexes. Trading ahead of the U.S. open, DAX® futures are often used to predict the U.S. stock index open. This led many U.S. and global traders to trade this dynamic index instead of just using it as a market indicator.

As volume and open interest continue to grow (see table), the DAX® has become one of the most liquid stock indexes in the world.

Source: Eurex

However, with the success of the underlying stock index along with its volatility, the FDAX futures contract grew too large for a majority of retail traders, especially the burgeoning world of short-term day and swing traders.

With an average daily range of around 200 points (often higher), the DAX® can move the equivalent of €5,000 in a day (each index point is equal to €25, see table below).

Here are the specs for FDAX, FDXM, and FDXS:

FDAX FDXM FDXS
Quotation Euros per index point Euros per index point Euros per index point
Trading Hours Sunday to Friday, 7:00 pm to 4:00 pm ET Sunday to Friday, 7:00 pm to 4:00 pm ET Sunday to Friday, 7:00 pm to 4:00 pm ET
Tick Value €25 €5 €1
Duration Quarterly: March, June, Sept. Dec. Quarterly: March, June, Sept. Dec. Quarterly: March, June, Sept. Dec.
Settlement Cash Cash Cash
Close The third Friday of the relevant month provided that such day is a trading day at Eurex; otherwise, it shall be the trading day immediately preceding. The third Friday of the relevant month provided that such day is a trading day at Eurex; otherwise, it shall be the trading day immediately preceding. The third Friday of the relevant month provided that such day is a trading day at Eurex; otherwise, it shall be the trading day immediately preceding.
Last Trading Day/ Settlement The last trading day of the Index Futures Contracts is the third Friday of the contract month provided that it is a trading day at Eurex; otherwise, it is the trading day immediately preceding. The final settlement day is the last trading day. The last trading day of the Index Futures Contracts is the third Friday of the contract month provided that it is a trading day at Eurex; otherwise, it is the trading day immediately preceding. The final settlement day is the last trading day. The last trading day of the Index Futures Contracts is the third Friday of the contract month provided that it is a trading day at Eurex; otherwise, it is the trading day immediately preceding. The final settlement day is the last trading day.

The margin requirement and risk for holding the big contract are way too high for anyone except institutional and long-term investors.

DAX® Mini and Micro Futures

DAX® futures were born through a constant beat of disruptive events, starting with the reunification of Germany in 1990 and followed by the creation of the Eurozone and single currency. Throughout these events, Germany has been the lynchpin of Europe, which increased the need for the stock index to hedge the German equity market and as a trading vehicle.

All these events not only made the DAX® essential but also huge — too big for many traders. The creation of the Mini-Dax® in 2015 brought this dynamic index to a wider audience because it’s one-fifth the size of the big contract. It enabled retail traders to access this liquid and volatile market and to employ short-term strategies that they could not safely use with the big contract due to its volatility.

More recently, the European debt crisis, Brexit, and Covid-19 has added to the volatility and pushed Eurex to launch the Micro-DAX®, which trades at one-fifth the size of the Mini. This product provides traders additional flexibility in their strategies. The Micro-DAX® allows traders to trade multiple contracts, employ wider stops, and increase the possibility of successful trades.

Issues to Consider When Trading DAX® Futures

Anyone trading U.S. financial markets understands the importance of knowing when major economic reports are released. The U.S. employment situation report, GDP, and Consumer Price Index can cause major disruptions in U.S.-based stock indexes or Treasury futures. This is particularly true for short-term day or swing traders who are less able to withstand a short-term volatility spike. These traders should probably be flat going into these reports. Even longer-term traders need to know market expectations. You can probably add several other indicators — such as unemployment claims, retail sales, and PPI —when applying very short-term strategies.

As a result, it’s appropriate for anyone trading the DAX® to familiarize themselves with the German- and European-based indicators that can have an impact on markets. The StoneX calendar is a good resource for important events that could impact DAX® futures and any market you are trading.

Gramza notes that although the DAX® can often lead and sometimes mirror other major indexes, there are times it acts on its own. “This is especially true when there are economic announcements in Germany,” he adds.

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Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

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