Try to answer these 80+ Day Trading MCQs and check your understanding of the Day Trading subject.
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A. Place a stop loss order
B. Short sell the stock
C. Sell an options contract on the stock
D. Just watch the price and see what happensÂ
A. If they do not, they are no longer day traders.
B. Taxes are lower if positions are closed out.
C. Overnight changes in the demand for the security can drastically affect the price.
D. They are required to if trading on margin.Â
A. A trader who profits from short selling
B. A trader who buys and sells on the same trading day, and does this four or more times within a 5 day period
C. A trader who sells and buys stock options instead of stocks
D. A trader who makes profits; the ones who lose money are not day tradersÂ
A. It guarantees they will always have $25,000 money available if they decide to quit day trading.
B. Little — the requirement is more to protect the brokerage.
C. It is a reserve they can use for trading at some later date.
D. It buys insurance from the NASDÂ
A. Nothing, wait and see what else happens.
B. Tell their friends to buy the stock.
C. Call the company to find out what is happening.
D. Purchase or sell the stock depending on the direction as the price is likely to continue in the same direction for some timeÂ
A. An exchange for futures contracts on commodities
B. An exchange for stocks based on anticipated prices one year from now
C. An exchange for options contracts
D. An exchange for foreign currencyÂ
A. Short selling stocks
B. A chart indicating price movements and a prediction for future price movements
C. Calling companies for more information about their stock price
D. Nothing; it usually results in useless informationÂ
A. Within one year
B. Within one week
C. None; transactions are done simultaneously both for entry and exit
D. Some time during the day when the other side of the transaction can be completedÂ
A. Trading on foreign exchanges
B. Setting limit orders which will be executed after market hours
C. Trading in currency transactions
D. Trading in stocks after the market has closed, creating orders which will be executed the following day
A. Because if the price of the security rises endlessly, there is no limit on the losses that can be incurred
B. Because the brokers can mandate the seller cover their position at any point
C. Because there are no laws protecting short sellers
D. Because inexperienced short sellers can create havoc in the marketÂ
A. From misinformation in news reports
B. From company financial statements
C. From misinforming other traders
D. From mistakes made during the previous trading day by other day traders
A. No requirements are there.
B. Minimum deposits must be at least $1,000.
C. They must come into the office and sign an agreement.
D. Brokerages must ask traders if they understand the risky style of trading and that there is a possibility of losing their investment capital.Â
A. That someone inside the company is giving false news reports
B. That insiders are selling all of their stock
C. That short sellers are covering their positions
D. That the stock will most likely continue in this direction
A. Working at the library using their computers
B. Working with a brokerage which charges low commissions from frequent traders
C. Refusing to pay commissions
D. Refusing to pay the margin requirementsÂ
A. Day trading
B. Short selling
C. Scalping
D. Profiting
A. Deposits are restricted for two months.
B. Deposits cannot be withdrawn for two days.
C. They must make at least ten transactions a week or their account is closed.
D. The minimum trade commission is $10.Â
A. By telling their friends to watch the stock for them
B. By placing a limit order to sell after purchase
C. By selling options contracts
D. By trying to arbitrage the stock
A. If the deal doesn't work, there is no obligation on the trader's part.
B. It has potential for substantially large returns using borrowed money.
C. It reduces taxes.
D. It allows them to avoid being classified as a day traderÂ
A. Automatically extend $25,000 in margin
B. Freeze the trader's account until the $25,000 margin requirement is met
C. Nothing; it is the trader's obligation to self regulate
D. Send a noticeÂ
A. They have lower commission rates.
B. They tend to do extensive dilligent research on securities due to the substantially risky nature of the trades.
C. Their errors create opportunities for others.
D. Their actions often indicate market direction.Â
A. Short selling
B. Selling options contracts
C. Letting a stock run
D. Margin tradingÂ
A. Over the Counter Bulletin Board
B. A stock exchange
C. An options exchange
D. A foreign currency exchangeÂ
A. Because the SEC looks for them and fixes them before traders can profit
B. Because the profits are so small they are not worthwhile
C. Because the law of one price — supply and demand will close the gap quickly
D. Because they are illegalÂ
A. It allows for less taxes on additional profits.
B. It allows the trader to short sell the stock.
C. It is only for risky traders.
D. It allows the trader to lock in additional profits on a stock that is increasing in price.
A. Buying 100 shares of a hot new company
B. Buying stock options
C. Short selling stock
D. Passing on a transactionÂ
A. Purchase limit order
B. Option contract purchase
C. Stop loss order
D. Arbitrage tradeÂ
A. It limits other traders' ability to buy the same stock.
B. When the stock price hits a certain trigger point, a market order to sell or buy a stock becomes effective.
C. It limits your taxation.
D. It limits how many transactions you can make in a day.Â
A. The exchange the trader trades on
B. The credit risk of the investor
C. The amount of capital the trader has outside of their account
D. The history the trader has of successÂ
A. Options contracts trading
B. Fundamental analysis
C. Regression analysis
D. News trading — using news releases about companies as indicators of stock pricesÂ
A. Purchase the stock as it will potentially normalize back to the calculated price.
B. Nothing; they would wait and see what happens.
C. Tell their friends to short sell the stock.
D. Call the company and ask why.Â
A. Selling less shares than you own
B. Selling a security before owning it, with the intent of later purchasing it at a lower price
C. Selling a stock for less than it is trading for
D. Creating a limit order for a lower price than the current market priceÂ
A. Traders will often enter transactions overnight in order to avoid the classification, exposing themselves to more risk and potential loss than if they were allowed to trade as they know best.
B. No one can afford a $25,000 margin account.
C. It makes day trading non accessible to inexperienced people.
D. The government should not meddle in the public's well being.Â
A. Because they do not know how to trade properly
B. Because they are trading on margin
C. Because they are short selling a stock
D. Because they are writing options contractsÂ
A. After the trading day to plan for the following day
B. A week in advance
C. Over several months
D. Always on the flyÂ
A. Trade risk
B. Intraday risk
C. Exchange rate risk
D. Interest rate riskÂ
A. Stock analysis based on price movements and charting
B. Stock analysis based on company fundamentals such as financial statements
C. Stock analysis based on new reports during the day
D. Stock analysis based on volume salesÂ
A. The date on which a transaction is executed
B. The date on which an account holder's statement comes out
C. The date on which a company's dividend is declared
D. The day on which a transaction is finalized by the broker transferring ownership of the security
A. They must make at least ten transactions a week.
B. They must pay minimum commissions of $10 per transaction.
C. They must maintain at least $25,000 in a margin account.
D. They can only trade on the US exchanges.Â
A. Investing in companies with drastic price range history
B. Investing in companies with a solid history of consistent dividends
C. Investing in new companies
D. Short selling onlyÂ
A. Selling a stock without owning it
B. Profiting on price differences between the markets
C. Selling stock options
D. Illegally selling stocksÂ
A. Fundamental analysis
B. Technical analysis
C. Multiple techniques
D. ChartingÂ
A. Trading 10 or more times in one day
B. Trading stocks with your friends
C. Holding stocks for more than a day, but typically not more than a few weeks
D. Trading stocks as a hobbyÂ
A. Nothing; they are only interested in bad news.
B. Short sell the stock.
C. Purchase the stock as it may rebound quickly.
D. Tell their friends to short sell the stock.Â
A. A person who locates hot stock tips
B. A person who locates potential short sale deals
C. A person who will provide the securities being sold temporarily, typically a brokerage
D. A person who locates short sales which are out of complianceÂ
A. By referring friends to a brokerage and thus earning referral fees
B. By consistently buying and selling and thus increasing value
C. By not executing some transactions just to save the $10 commission
D. By not reporting their activity to the governmentÂ
A. Because it is required to by law
B. Because it reduces their tax obligations
C. Because the brokerage will ask from time to time what their strategy is
D. In order to consistently pick stocks which fit their portfolio without getting distracted by other opportunitiesÂ
A. Trading in stocks of appliance manufacturers
B. Trading in stocks based on news releases
C. Trading in stocks based on the analysis of company financials
D. Buying and selling stocks based on the history of trading within a certain price rangeÂ
A. Because it is cheaper to trade
B. Because it can be done months in advance
C. Because it does not require as much analysis
D. Because brokerages will provide you with the news and tell you what to do
A. The number of days available for trading in the month
B. The number of days until a locate must be found
C. The number of days until a transaction clears
D. The maximum number of days available to the trader to cover their short positionÂ
A. The difference in price between the bid and ask amounts
B. The difference between opening and closing prices
C. The difference between the price of the same security on two markets
D. The difference between strike price and current priceÂ