Netherlands 25 Trading Guide: What Is the AEX Index?

The Netherlands’ AEX 25 index, a key benchmark for the Dutch stock market, mirrors other major European indices like France’s CAC 40, Italy’s FTSE MIB, and Norway’s OBX. All these indices share the same listing exchange, Euronext, the leading pan-European exchange group.

The Netherlands 25 index offers a way to gain exposure to the performance of 25 large companies listed on the Euronext Amsterdam. Let’s take a closer look at what the Netherlands 25 is and how to trade the AEX index:

TL;DR

• Traded on Euronext Amsterdam and launched in 1983, the AEX index tracks the performance of the 25 blue chip companies listed on the Dutch exchange.
• It’s a free-float market capitalisation-weighted index.
• It is widely considered the most suitable index for representing the Dutch stock market.
• As of March 2024, the ’Technology’ and the ’Consumer Staples’ sectors represent almost 46% of the AEX composition.
• Shell PLC, ASML Holding (ASML.AS), and Unilever (ULVR-L) are the 3 of the most important shares in the index, with a combined total weight of more than 43% as of March 2024.
• To invest in the Dutch economy, traders can use a wide range of financial products, including CFDs (Contracts For Difference) on the index.

Netherlands 25 Index: What Is the AEX Index?

What Does the Netherlands 25 Index Represent?

The Netherlands 25 (FT), AEX 25 or Amsterdam Exchange 25, provides insights into the performance of the 25 largest and most actively traded shares on the Euronext Amsterdam, with some of these companies being among Europe’s top stocks.

When Was the AEX Index Created?

The Netherlands 25 index was launched on January 3rd, 1983, with a base value of 45.38.

In Which Currency Is the AEX Denominated In?

The currency of the AEX 25 index is the Euro (EUR).

How Is the Netherlands 25 Calculated?

Similar to some of the most traded indices such as the DAX 40 (FDAX), the FTSE 100 (UK 100), the NASDAQ (NQ), and the S&P 500, the AEX index is a free float-adjusted market capitalisation. It also has an initial weighting cap of 15%. Because of the way the AEX 25 is calculated, shares with a bigger market cap have a greater weight in the index, which means they will also have the largest impact on its value.

When Can You Trade the AEX Index?

The AEX index is tradable throughout the weekdays, from 9:00 AM until 5:30 PM Central European Summer Time (GMT+2). This trading period is bookended by a pre-market opening at 7:15 AM and a post-closing session from 5:30 PM to 5:40 PM. The core trading hours are punctuated by an opening auction at 9:00 AM and a closing auction at 5:35 PM.

AEX Index Composition

Top Sectors Breakdown

Knowing the Netherlands 25’s sector composition is important for understanding which stock sectors have the most weight within the index, therefore, influencing most of its overall performance.

The Sectors of the Netherlands 25 Index:

1. Technology - 25.4%
2. Consumer Staples - 21.6%
3. Energy - 15.6%
4. Consumer Discretionary - 14.7%
5. Financials - 10.5%
6. Industrials - 4.9%
7. Basic Materials - 4.1%
8. Health Care - 2.0%
9. Telecommunications - 1.2%

*As of March 2024

Top 10 Constituents

Just as important as knowing which industries have the largest impact on the value of the Netherlands 25 index, traders should also know which companies hold the top spots.

The Top 10 Companies in the AEX Index:

1. Shell PLC (SHEL) - Energy - 15.16%
2. ASML Holding (ASML.AS) - Technology - 14.85%
3. Unilever (ULVR-L) - Consumer Staples - 13.79%
4. RELX (REL-L) - Consumer Discretionary - 8.51%
5. ING Groep N.V. (INGA.AS) - Financials - 5.70%
6. Adyen (ADYEN) - Industrials - 5.20%
7. Prosus (PRX) - Technology - 4.79%
8. Wolters Kluwer (WKL.AS) - Consumer Discretionary - 4.06%
9. DSM Firmenich AG (KDSKF) - Consumer Staples - 2.99%
10. ASM International (ASM) - Technology - 2.99%

*As of March 2024

The Netherlands 25 Index CFDs on the Plus500 Trading Platform

When trading with Plus500, you trade CFDs (Contracts For Difference). CFDs represent financial products, allowing traders to get exposure on the price movements of the underlying asset and exchange with their issuer the difference in price between the opening value of a CFD contract and its closing value.

On Plus500’s trading platform, the Netherlands 25 is the symbol of the CFDs based on the AEX index futures traded on the Euronext Derivatives Amsterdam, a branch of the Euronext stock exchange dedicated to derivatives trading.

With CFDs, traders never own the underlying asset. They can open a long position on the AEX 25 if they anticipate the index to go up. Conversely, they can open a short position if they anticipate the index to go down. CFDs trading also works with leverage, which amplifies both potential profits and losses. It can therefore be a risky type of trading if traders do not fully understand how to trade CFDs and how leverage works.

What Can Influence the Value of the Netherlands 25 Index?

Because the Dutch stock market index can be influenced by various factors, traders should be aware of what can move the price of the AEX 25 before trading it. This, will potentially help them protect their trading capital and seize index trading opportunities:

• Corporate earnings. The performance of every share included in the index can have a direct impact on the Netherlands 25’s value. Therefore, the release of financial earnings can reflect how well (or poorly) a company has performed over a given period of time.
• Regulatory changes. The evolution of the regulation of the financial markets in the Netherlands from The Netherlands Authority for the Financial Markets (AFM) and the Dutch National Bank can potentially affect trading activity and the value of the AEX index.
• Monetary policy. Decisions from the European Central Bank (ECB), especially on interest rates, can impact the overall borrowing costs in the region, which can affect business operations.
• The Value of the Euro. Major fluctuations of the euro (EUR) against its peers on the Forex market, especially the EUR/USD (EURUSD) currency pair, can impact the attractiveness of Dutch products and services for foreign buyers, hence potentially influencing Dutch companies’ sales revenues.
• Economic indicators. The release of much anticipated economic statistics such as GDP, PCE, CPI, NFP, and PMI can influence the overall stock market.
• Global growth outlook. Each stage of economic growth can determine the spending, saving, and investment habits of the local and global population, which is likely to impact the performance of companies within the AEX 25 index and the index itself.
• Trading psychology. Market sentiment, speculation and emotions can be powerful drivers of a financial asset’s value.
• Unexpected events. Pandemics, armed conflicts, strikes, trade wars, and natural disasters are events traders cannot foresee and may have a big impact on the markets.

CFDs on the AEX Index: What Are the Potential Advantages?

Let’s take a look at some of the potential advantages:

• Diversification: As with most indices, the AEX 25 can offer a diversified approach to the Dutch stock market through a single financial product which represents a basket of shares.
• A Good Representation of the Dutch Economy: The AEX 25 index acts like a bellwether stock index to gauge the overall health of the Dutch stock market.
• High Liquidity and Trading Activity: The Netherlands 25 index is the most traded index of the AEX Family from Euronext.
• Accessibility: The European index is easily accessible for retail traders.
• Data Reliability and Transparency: Euronext is a trustworthy and recognized stock exchange, which means that traders can access public and transparent information about the index and its constituents.
• Flexibility: Trading CFDs can fit various trading strategies such as day trading and swing trading.
• Shorting Possibility: Trading CFDs allows traders to seize all market conditions, meaning both bull and bear markets.

Risks and Limitations of Trading The Netherlands 25 Index with CFDs

While CFDs on the Netherlands 25 index can offer potential advantages for your portfolio, you should also take into consideration the inherent risks and limitations involved:

• Leverage: While leverage can magnify your potential gains, it can also magnify your potential losses, which means that you can potentially face significant losses that can hurt your trading capital if you do not manage your leverage well enough.
• Complexity: CFDs can be complex financial products to understand for beginners with little trading experience and knowledge. Concepts like slippage, rollover, and margin requirements among other basic trading terms should be understood before starting with AEX 25 CFD trading.
• No Exposition to Small Caps: Because the AEX 25 gathers the most traded and the largest firms listed on Euronext Amsterdam, it doesn’t include small caps like other specific indices like the Russell 2000 (RTY) and limit exposure to smaller companies that could also potentially present trading opportunities

How Can You Trade the AEX Index?

Depending on your trading goals, your risk tolerance, and your trading strategy and experience, there are a variety of ways to trade the AEX index:

• Trading AEX 25-related Exchange-Traded Funds (ETFs)
• Trading futures on the Netherlands 25 index
• Trading options on AEX 25
• Trading the single shares CFDs included in the Netherlands 25 index
• Trading CFDs on the AEX 25 index and other types of index CFDs, such as CFDs on AEX 25 ETFs like the iShares AEX (IAEX.AS) and CFDs on AEX Options

*Availability based on regulation

Examples of Popular Trading Strategies on the Netherlands 25 Index

There is no single strategy that will work for every trader and in every market condition. The best strategy to trade the Netherlands 25 index for you will depend on personal factors such as your risk tolerance, your investment horizon, and your market expertise.

Technical analysis and fundamental analysis are two of the most well-known ways to analyse the AEX 25 index. Technical analysis focuses on price movements on trading charts and fundamental analysis focuses on underlying company and economic factors. While some traders prefer to use one technique to decide whether to buy or sell the index, some prefer to combine elements of both approaches.

AEX index day trading and swing trading are two popular trading styles that focus on short-term price movements within the day (day trading) or over a few days to weeks (swing trading). Traders can use technical indicators, such as the Relative Strength Index (RSI) or the Slow Stochastic Indicator, and chart patterns to identify potential entry and exit points based on historical values, price action, and trends.

Let’s take a closer look at 3 popular trading strategies that can be used to trade the Netherlands 25.

Support & Resistance Trading. This strategy identifies price levels where the stock has historically encountered buying (support level) or selling (resistance level) pressure. Traders aim to buy near support levels to potentially seize potential trend reversal upwards and sell near resistance levels to potentially capture trend reversal downwards.

News Trading. This trading technique strategy is all about trading economic data to exploit potential higher volatility arising from major news releases that can impact the Dutch economy, specific comvpanies within the AEX 25, or overall economic growth.

Breakout Trading. This type of trading focuses on capitalising on price movements that break above/below a resistance/support level, suggesting a potential continuation of the trend after a consolidation within a range for instance.

Netherlands 25 Trading — Frequently Asked Questions (FAQs):

What is the Netherlands AEX 25?

The Netherlands AEX 25, which stands for Amsterdam Exchange, is a stock market index that includes 25 of the largest blue chip companies from the Netherlands and abroad listed on Euronext Amsterdam.

What companies are included in the AEX Index?

The AEX index includes 25 big companies that are well-known internationally, such as ArcelorMittal (MT.AS), Ahold DEL (AD.AS), Heineken (HEIA.AS), Just Eat Takeaway (TKWY.AS) and Philips (PHIA.AS).

How often Is the Composition of the AEX Index Reviewed?

Every quarter, Euronext’s Independent Scientific Committee reviews the constituents of the indices of the AEX family, which includes the Netherlands 25 index. Every March, a full annual review occurs. The effective date for the review is after the market close of the 3rd Friday of the month of each quarter.

Can I trade the AEX index with CFDs as a beginner?

Yes, it is possible for you to trade the AEX index as a beginner. However, it’s important to be aware of the risks involved in trading CFDs on the AEX index before you start. You should learn how the market works and practise with a demo trading account first.

How can I trade the Netherlands 25 CFDs?

If you’re considering adding the Netherlands 25 index (AEX) to your CFD trading strategy, you should start by making sure it aligns with your risk tolerance and trading style. You might also want to develop a written trading plan that outlines your chosen strategy and incorporates money and risk management rules to foster trading discipline. Once you’re ready, explore popular AEX trading strategies like day trading and swing trading through news trading, support and resistance trading or breakout trading through a Plus500 trading account.