Quiz 2. Trading knowledge test for beginners

Question 1 of 15

What is the purpose of a stop-loss order?

To close a trade at a profit.
To execute a trade at a predetermined price.
To limit potential losses on a trade.

Question 2 of 15

What is the difference between a market order and a limit order?

A market order is executed immediately, while a limit order is not.
A limit order is executed immediately, while a market order is not.
A market order specifies a price, while a limit order does not.

Question 3 of 15

What are the two primary types of analysis used in trading, and how do they differ?

Technical analysis and fundamental analysis; technical analysis uses past market data to identify patterns, while fundamental analysis considers economic and financial factors.
Technical analysis and macroeconomic analysis; technical analysis uses past market data to identify patterns, while macroeconomic analysis considers economic and financial factors.
Microeconomic analysis and fundamental analysis; microeconomic analysis considers company-specific factors, while fundamental analysis considers economic and financial factors.

Question 4 of 15

What is leverage, and how does it affect trading?

Leverage is a way to increase profits on a trade, and it decreases risk.
Leverage is a way to increase risk and potential profits on a trade.
Leverage is a way to decrease risk on a trade, but it also decreases potential profits.

Question 5 of 15

What is a margin call, and how can traders avoid it?

A margin call is a demand for additional funds to maintain a trading account balance above a certain level, and traders can avoid it by not using leverage.
A margin call is a demand for additional funds to maintain a trading account balance above a certain level, and traders can avoid it by using stop-loss orders.
A margin call is a demand for additional funds to maintain a trading account balance above a certain level, and traders can avoid it by avoiding risky trades.

Question 6 of 15

What is the significance of the bid-ask spread in trading?

It indicates the potential profit on a trade.
It represents the difference between the highest buy and lowest sell prices for a security.
It represents the difference between the lowest buy and highest sell prices for a security.

Question 7 of 15

What is a trading plan, and why is it important?

A trading plan records a trader's past trades, which is important for tax purposes.
A trading plan outlines a trader's strategy and rules for executing trades, which is important for maintaining discipline and consistency.
A trading plan is a document that outlines a trader's financial goals, and it is important for staying motivated.

Question 8 of 15

What is a candlestick chart, and how is it used in technical analysis?

A candlestick chart is a visual representation of market data that shows a security's opening, closing, high, and low prices for some time. It is used to identify patterns and make trading decisions.
A candlestick chart is a visual representation of a company's financial data and is used to evaluate its performance.
A candlestick chart is a visual representation of a trader's account balance, and it is used to track profits and losses.

Question 9 of 15

What is diversification, and why is it important in trading?

Diversification is a strategy of spreading investments across different assets to reduce risk, and it is important in trading because it helps traders manage risk.
Diversification is a strategy of focusing investments on a single asset to maximise potential returns, and it is important in trading because it minimises the need for research and analysis.
Diversification is a strategy of placing all investments in a single asset to increase potential returns, and it is important in trading because it simplifies the trading process.

Question 10 of 15

What is a trend in trading, and what are the three types of trends?

A trend is a direction in which a security's price moves and the three types of trends are up, down, and sideways.
A trend is a direction in which a security's price moves and the three types of trends are bullish, bearish, and neutral.
A trend is a direction in which the overall market moves, and the three types of trends are bullish, bearish, and sideways.

Question 11 of 15

What is a margin, and how is it used in trading?

A margin is the percentage of a security's price that a trader must pay upfront to open a trade, and it is used to increase potential profits.
A margin is the amount of money that a trader borrows from a broker to open a trade, and it is used to increase potential profits.
A margin is the amount of money that a trader must have in their trading account to open a trade, and it is used to manage risk.

Question 12 of 15

What is a trading journal, and why is it important?

A trading journal is a document that outlines a trader's financial goals, and it is important for staying motivated.
A trading journal records a trader's profits and losses, which is important for tax purposes.
A trading journal is a record of a trader's past trades and the reasoning behind them, and it is important for identifying strengths and weaknesses in a trading strategy.

Question 13 of 15

What is a trading platform, and what features should traders look for when choosing one?

A trading platform is a software application that allows traders to execute trades and features to look for includes reliability, security, ease of use, and access to market data.
A trading platform is a physical device used to execute trades and features to look for include portability, battery life, and processing power.
A trading platform is a financial instrument used to execute trades and features to look for include diversification, risk management tools, and potential returns.

Question 14 of 15

What is volatility, and how does it affect trading?

Volatility is the amount of risk associated with a particular security, and it affects trading by influencing the potential profit and loss of a trade.
Volatility is the frequency and magnitude of price movements in a security, affecting trading by creating opportunities for profit and increasing risk.
Volatility is the liquidity of a security, and it affects trading by influencing the ease with which a trade can be executed.

Question 15 of 15

What is the significance of the economic calendar in trading?

The economic calendar lists important events and economic indicators affecting market volatility and providing trading opportunities.
The economic calendar lists trading holidays and hours for different markets.
The economic calendar lists interest rates for different currencies and countries.

Quiz 2. Trading knowledge test for beginners

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