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How to Scalp The DAX30 Index With A Scalping Strategy

Reading time: 8 minutes

Find out how to trade with the DAX30 index in this detailed guide covering: What is DAX? How to trade CFDs on the DAX30 index, and learn a new scalping strategy that you can use whenever you trade with DAX30.

DAX30 - How To Trade It With A Scalping Strategy

What is DAX? & What is DAX30?

The DAX (Deutscher Aktienindex, or the German stock index) is a blue chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. Blue-chip stocks represent companies that are financially stable, well-established, and which provide good returns for investors, making them desirable investments. The abbreviation for the DAX index on the MetaTrader 4 (MT4) and MetaTrader 5 (MT5) trading platforms is DAX30.

Tracking DAX Earnings

For tracking DAX earnings and gaining a deeper insight into the market capitalisation of each DAX company, there are two important website pages to refer to:

What is the Price/Earnings Ratio?

The price/earnings ratio tells us how many years of earnings it takes to pay back the price. A company with a price/earnings (P/E) ratio of 14 means that it will take fourteen years of earnings to re-pay the price. Remember, earnings is the amount a company earns in a year. The higher the P/E ratio, the more overvalued the stock. During recessions, the P/E ratio can drop below 10.

The FED and the DAX30 Index

For trading the DAX30, or, even better, scalping it, there is an interesting correlation between the FED (Federal Reserve) and the DAX. The DAX is usually bearish if the FED is hawkish, because when the U.S increases interest rates, it means that investors can invest their money into the bonds or fixed income for higher returns than before, causing investors to leave risky assets, such as stock markets.

Trade With MetaTrader 5

How to Trade CFDs on DAX30

Have you ever wondered why traders prefer the term equities to indices? It's because the underlying asset in the index is the price of a basket of publicly listed company shares. In short, equities are merely a stock or any other security representing an ownership interest in the company (regardless of whether the company is public or private). You need to remember that the Forex market is strongly related to equities, and that equities and Forex can correlate in a number of different ways.

Economies with a strong manufacturing and exporting sector (e.g. Japan and Germany) can experience a currency's strength and/or weakness. Firstly, investment preferences largely relate to the longer-term positional trading, usually held for at least one year, which in most countries results in lower capital gains taxes, under a 'sit-and-hold strategy'. As for short-term trading, whether its intra-day or intra-week, the most tradable indices would be the Hang Seng, the Nikkei, the FTSE, the DAX, the Dow Jones, the Nasdaq, and the SP500.

This is largely due to good volatility, strong volumes, low spreads, and wide media coverage on these markets that allow traders to make informed trading decisions. The DAX30 is surely one of the most popular ones, and traders prefer to use DAX scalping strategies. Bear in mind that not all DAX brokers are the same, so be sure to always check their conditions first.

Scalping the DAX30 could be performed in various different ways. Bear in mind that there are a lot of DAX scalping strategies and DAX scalping systems. We will now discuss a particularly effective strategy that you should consider trying out on your demo trading account first, before trying it out on a live account. Make sure to also check out the Supreme Edition plugin for MT4 and MT5 when you are ready to make the move to live trading, as it can be downloaded for free!

The DAX Scalping Strategy

Timeframe: 5 or 15m

Indicators:

  • MACD (12,26,1)
  • Stochastic (14,3,3) with 50 level
  • 6 SMMA (smoothed) set on HLCC/4 (red)
  • 4 EMA set on close (blue)
  • Admiral Pivots: Set on Daily (for higher targets) or H1 (strictly for DAX Scalping)

Admiral Pivot Indicator

Source: MetaTrader 4 - Customer Indicator - Admiral Pivot - Checking inputs

Moving Average Indicator

Source: MetaTrader 4 - Editing the parameters for the Moving Average

Moving Average Period 4

Source: MetaTrader 4 - Editing the parameters for the Moving Average

Stochastic Oscillator K period 14

Source: MetaTrader 4 - Editing the parameters for the Stochastic Oscillator

The graph below demonstrates how your chart should look like after you apply the indicators on the MT4 and MT5 trading platforms:

Indicators applied on MT4 MT5 platforms

Source: MetaTrader 4 - DAX30 Chart - M5 chart - Data Range: 14 Nov, 2017 AM - 13:55PM - Please Note: Past performance does not indicate future results, nor is it a reliable indicator of future performance.

Indicators applied on MT4 MT5 platform

Source: MetaTrader 4 - DAX30 Chart - M15 chart - Data Range: 14 Nov, 2017 AM - 13:55PM - Please Note: Past performance does not indicate future results, nor is it a reliable indicator of future performance.

Rules for Entries

Long Entry:

  • Stochastic > 50
  • Blue MA > Red MA (4 EMA > 6 SMMA)
  • MACD >0
  • Targets are Admiral Pivot Points
  • Stop-loss goes 5-10 pips below the last swing low

Stop-loss goes 5-10 pips

Source: MetaTrader 4 - DAX30 Chart - Admiral Pivot set to D1 - (M15 chart) - Data Range: 14 Nov, 2017 AM - 13:55PM - Please Note: Past performance does not indicate future results, nor is it a reliable indicator of future performance.

Short Entry:

  • Stochastic < 50
  • Blue MA < Red MA (4 EMA > 6 SMMA)
  • MACD < 0
  • Targets are Admiral Pivot Points
  • Stop-loss goes 5-10 pips below the last swing low

Admiral Pivot Points Stop-loss goes 5-10 pips

Source: MetaTrader 4 - DAX30 Chart - Admiral Pivot set to H1 (M5 chart) - Data Range: 14 Nov, 2017 AM - 13:55PM - Please Note: Past performance does not indicate future results, nor is it a reliable indicator of future performance.

Because we are using a DAX scalping strategy, if you see that the price is not making any progress, you might want to take the profit before it gets to the pivot point. Bear in mind that DAX scalping tends to be very volatile at times, so you need to ensure that you protect your profits. Don't forget to test-trade first and get familiar with the scalping system! For successful trading, MT4SE should be used, as it offers unpreceded accuracy when it comes to market correlation. See the example below which reflects intraday correlation between the DAX30, Yen pairs, and other equities:

correlation matrix example

Source: MetaTrader 4 & MetaTrader 5 - Correlation Matrix

The good news is that you can access the correlation table on both MT4 and MT5 trading platforms. Long gone are the days when you needed to search across various websites. Correlation tables will always provide you with intermarket connection for any time frame within MetaTrader 4 & MetaTrader 5 Supreme Edition. The tools that Admiral Markets provides you with are essential in your Forex trading journey – so make sure to use them to your advantage.

Trade DAX30

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Risk Warning

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 85% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.