# Spread Betting the MDax 50

The MDAX 50 is the index based on mid-cap German companies, those that are smaller than in the main DAX 30 index. Your spread betting company may not provide you so many choices of bet with this as with the DAX, for instance IG Index only offer one futures style bet on it, where they call it the Germany Mid-Cap 50. Currently the quote for it is 9089 – 9104.

Suppose that you feel that the index is going up, you might be tempted to place a buy spread bet or long bet for, say, £13 per point. A bet on the index going up would be placed at the higher number of 9104. After some time, perhaps the index will get up to 9232 – 9246, and you will decide to take your profit.

When you close the bet it will be at the selling price of 9232. The total number of points that you have gained is the difference between the buying and selling price, which is 9232 less 9104, or 128 points.

To see how much you have won that you simply have to multiply your stake by the number of points. 128 times £13 equals £1664, your total profit for this bet.

On the other hand, the index might have gone down after you placed your bet, which would result in you losing money. In such a situation, you should consider closing the bet quickly so that you do not lose too much. Say the index drops down to 9045 – 9060 and you end your trade.

Again, the total number of points is the difference between the opening and closing prices, which is 9104 less 9045, or 59 points.

Multiplying again to see how much you have lost, you see you are now £767 out of pocket.

One problem with spread betting on indices that are not frequently traded is the amount of spread, which is basically the profit for your spread trading company. You can see that it is 14 or 15 points in this example. This means that you need to have a bigger swing in the index price than otherwise, in order to make the same profit. Say in the original case you decided the index was going down, and placed a £2 short bet at 9089.

The index dropped 30 points, to 9059 – 9074, and you closed your bet. You won the number of points between 9089 and 9074, which is 15 points. Working out your winnings, you won £30.

If instead the index had gone up 30 points, against your bet, to a quote of 9119 – 9134, and you decide to close your bet to cut your losses, in this case the number of points the index has racked up against you is 9134-9089, which is 45 points. At £2 per point, you would have lost £90.

Paying for the spread is the price of spread betting, but you can see that it takes a toll on your account. When you are betting on a financial product with a large spread, you need to expect to see a big swing in the index in order to cover these costs.

## How to Spread Bet the MDax 50

You may have heard of the DAX Index, more correctly known as the DAX 30, but have you heard of the MDAX index? It’s related to the DAX and the German stock market, as you might expect, but is not traded as much.

Like any other index, the MDAX 50 is volatile and can change rapidly. Over the last year it has gone between 7 1/2 and 10 1/2 thousand, and is currently around 9000. The MDAX is a share index of 50 mid-cap companies, and these are basically the 50 companies that rank below the top 30 which are used for the DAX index.

There are a couple of other provisions. It only tracks companies in traditional sectors of the market, excluding for instance the technology companies. Size of companies for the ranking is decided by the order book volume and by market capitalization. The index was set to 1000 as a base value when it was started in 1988, so has grown tremendously in just over 20 years.

In case you’re wondering, there is a third DAX index which deals solely with technology companies, and an overall index called the HDAX which combines all three. DAX is simply an abbreviation for Deutscher Aktienindex.

Because of Germany’s position as a major economic powerhouse in Europe, all of the DAX indices are attention-grabbing, and give you a different perspective on world economics from the US or UK indices. Germany is a leader in manufacturing and industry in Europe and thus sets the tone for the business climate, which at times reacts very differently from that of the UK or US.

With that said, it is necessary to figure out what effects the MDAX 50 so that you have some background to make sensible spread bets. Germany’s unemployment figures are issued every month, and are watched carefully to gauge where Europe is headed. The unemployment statistics, which are issued by the Federal Statistics Office in Germany, analyze the employment information into three categories, the unemployed, the employed, and the economically active population, and then compares these figures to unemployment rates in other countries in Europe, the US, and Japan. Germany’s unemployment declined steadily from 2006 to 2009, when some other countries were facing what was said to be the worst economic climate since the Great Depression.

Germany also keeps a check on its figures by market sector of employment. For this it breaks the figures down into six different sectors, including energy supply, mining, civil engineering, manufacturing, production engineering, and production excluding building services. The number of people in the public sector is declining because Germany is engaged in a program of privatization of government services, such as waste management.

With all this information, the movement of the DAX indices becomes much more transparent. The MDAX will tend to lead the way in comparison to the DAX 30, because of its predominance of smaller companies which are inclined to be able to react more quickly to market conditions, for example by leading the way out of a recession. When you are spread betting on the MDAX 50, be careful to watch your stop loss positions and to cut your losses on any losing trades.