Stock Trading Test

Stock Trading Test

Is a stop loss order a buy or sell order?

a. A buy order

b. A sell order

c. Can be either

d. Is neither

What is the difference between a stock trader and a stock investor?

a. There is no difference. Both terms refer to people who invest in stocks.

b. Stock traders are the same as stock brokers but stock investors are not.

c. Stock traders profit on short term price changes, stock investors profit on long term growth.

d. A stock investor invests only in blue chip stocks, a stock trader only in risky stocks.

What market stage would a company focus on for increasing sales?

a. Growth

b. Idea stage

c. Decline

d. Peak

What is the type of analysis conducted using past earnings, past stock prices, and other qualitative and quantitative facts about a company called?

a. Technical Analysis

b. Valuation

c. Break Even Analysis

d. Fundamental Analysis

What is the "date of declaration" with reference to stocks?

a. The date a stock is initially sold

b. The date of the financial report release

c. The date the fiscal year ends

d. The date a dividend is declared

What is meant by "technical analysis"?

a. An analysis which uses fundamental information about a company

b. An analysis which is done on a stock after it is purchased

c. An analysis technique which utilizes both qualitative and quantitative factors

d. A stock price analysis technique using technical aspects of a stock

What is portfolio management?

a. Having a suite of investments to reach a goal while minimizing risk

b. Buying shares all in one industry

c. Actively trading stocks in your portfolio

d. Selling securities which are not performing

What is meant by a "day order"?

a. Buying and selling stock on the same day

b. Contract for the stock symbol "DAY"

c. An order which is only good for the current day, and expires if not executed at the end of the day

d. An order that is open indefinitely

What would be the risk tolerance level of a retired government worker in general?

a. High

b. Moderate

c. Varies indefinitely

d. Low

Which of the following would not be a stock trading goal?

a. Achieving 10% return on the invested capital within one month

b. Always making money

c. Earning $1,000 per month from trading

d. Limiting oneself to a maximum of 10 transactions a month

What is the primary goal of technical analysis?

a. Identifying trends to predict short term price movements

b. Helping build a retirement plan

c. Identifying stocks with potential for large increases in the next two years

d. Finding indications of interest rate direction

What is another name for a market cycle?

a. Market Nomination

b. Economic Cycle

c. Gap Cycle

d. Straddle

What is a "speculative stock"?

a. A stock which has a proven track record for slow growth

b. A stock which is high risk and has the potential for large returns or large losses

c. A stock with a guaranteed return

d. A stock which trades on the NASD

What stage of the market cycle is characterized by product exploration?

a. Growth stage

b. Decline

c. Peak

d. Idea stage

Which of the following would be a good example of risk mitigation?

a. Purchasing only small cap stocks

b. Purchasing stocks in three industries

c. Purchasing stocks all in one industry

d. Purchasing only blue chip stocks

What type of transaction is a limit order?

a. A buy order

b. A sell order

c. Can be either

d. Is neither

Why should goals be changeable?

a. They should not be; they should be set only once.

b. Because it allows people never to have to achieve them

c. Lest you should forget your goals.

d. So that you may be able to refine your goals on the basis of the progress you are making

Which of the following is an assumption made by a technical analyst?

a. The stock price does not reflect market information currently.

b. No one else has recognized the stock as a good investment.

c. All stocks will increase in the long run.

d. The stock price already reflects all news and news events and they do not impact a stock's price.

What is a secular trend?

a. A near term trend

b. A predicted trend in the future

c. A past trend

d. A long term trend

Which of the following would be a stock trading goal?

a. Making lots of money

b. Earning 20% return on the invested capital within 1 year

c. Trading only in bear markets

d. Selling call options

Why do goals have to be specific?

a. In order to tell others

b. In order to be achievable and measurable

c. In order to get something done

d. In order to be able to change them

Which of the following would be an indication of market decline?

a. Increase in crime

b. Increase in jobs available

c. Decrease in crime

d. Increase in auto sales

Which type of analysis relies on charting?

a. Fundamental

b. Technical

c. Both Fundamental and Technical

d. Neither Fundamental nor Technical

When is the straddle trading strategy appropriate?

a. When the price may move by a small amount

b. When an investor believes there will be a large decrease in stock prices

c. When an investor believes there will be a large increase in stock prices

d. When an investor believes there will be a large stock price movement, but does not know in which direction

What is the relationship between fundamental and technical analyses?

a. They are mutually exclusive, and an analyst would use one or the other, never both.

b. They must both be used together.

c. They can both be used to complement each other, but cannot be used together.

d. They are very exclusive techniques that should both be avoided.

What is the purpose of setting trading goals?

a. To meet the requirements set by the SEC

b. To minimize taxes

c. To have a measurable and achievable target

d. To guarantee success

Why is it important to write down trading goals?

a. So that they may become more real and not be forgotten

b. So that you may be able to throw them out if you are unable to meet them

c. So that you may be able to tell people you are a successful trader because you set goals

d. So that you may be able to ensure success

What is the duration of a market cycle?

a. One year

b. Depends on the product, market, economic situation, and cannot be stated

c. Limited to 10 years at the most

d. Typically two years

What would credit risk be used to assess?

a. The management's personal credit score

b. The company's ability to pay its long term debts

c. The correctness of a technical analysis

d. A business's ability to acquire debt capital

What should a trader do if one portfolio is outperforming another?

a. Sell off all stock in the worst portfolio.

b. Switch the portfolios around so they all have the same return.

c. Depends on the goals of each portfolio; they could still all be meeting expectations.

d. Do extensive analysis on the stocks.

What is the primary method to mitigate risk?

a. Diversifying investment holdings

b. Day trading

c. Purchasing only tech stocks

d. Purchasing stock in the company you work for

What is a "trailing stop" order?

a. An order in which an investor actively changes the stop loss price of the order based on current market prices

b. A multi tiered stop loss order

c. A stop order placed after the purchase of the underlying stock

d. A stop order placed before buying the underlying stock

Why would an investor not utilize a stock trading strategy?

a. Because they cost money

b. Because of the belief that they do not work, and are a wasted effort

c. Because not enough data available

d. Because they are only for the wealthy

What is meant by a "lagging indicator"?

a. A market statistic which indicates what changes will typically take place after changes in the stock market

b. A report put out by the stock exchange

c. One stock price dictating the price of another stock

d. Insider information

What is the primary theory behind fundamental analysis?

a. All stocks rise in price eventually.

b. Profits can be made in the near term by purchasing mispriced securities.

c. Interest rates are the primary indicator of stock prices.

d. The management needs direction.

What form of analysis would a "Value Investor" utilize to identify stock opportunities?

a. Fundamental Analysis

b. Technical Analysis

c. Capital Asset Pricing Model

d. All of the above

How can a trader implement a goal always to earn 10% on stocks, and never to lose more than 2%?

a. By setting limit and stop loss orders on all transactions using those criteria

b. By actively watching the stocks and try to judge when to sell

c. BY using it as a loose guideline

d. By asking their friends to keep them on track

What is the main advantage of a stop loss order?

a. It limits all risk.

b. It protects the investor's profit without his having to monitor the stock price constantly.

c. It limits an investor's profit.

d. It creates opportunities for a straddle.

What is meant by "day trading"?

a. Trading during market hours

b. Trading stocks on foreign markets

c. Purchasing stocks and selling them on the same day

d. Holding stocks for a short period of time, not more than a week

What is the purpose of using screening factors?

a. They help focus on a specific industry.

b. They guarantee against any losses.

c. They help investors decide when to exit an investment.

d. They are preset criteria that any investment must meet before an investor will consider it a viable investment.