Day Trading Quiz
Questions: 16 · 10 minutes
1. What is the primary effect of using leverage in day trading?
It prevents losses beyond the amount assigned to one trade
It guarantees that small price moves become profitable
It magnifies both gains and losses relative to the trader's capital
It removes the need to manage position size
2. What is an important limitation of successful paper-trading results?
Paper trading cannot be used to test entry and exit rules
Paper trading prevents a trader from tracking hypothetical losses
Simulated fills and emotions may differ from real-money trading
Paper trading uses only long-term historical prices
3. A trader has a $10,000 account and plans to risk 1% on a trade. The entry is $50 and the stop is $49. Ignoring fees and slippage, what position size matches that risk limit?
50 shares
100 shares
200 shares
500 shares
4. A stock is trading around $40.20, and you submit a buy limit order at $40.00. What does that order mean?
It can execute at $40.00 or lower, but it may not execute at all
It becomes a market order if the stock stays above $40.00
It guarantees a purchase at exactly $40.00
It should execute immediately at $40.20 and refund the difference
5. You are long a stock at $30.00 with a sell stop-market order at $29.50. The next available trading price drops to $29.10. What is the most accurate expectation?
The order must fill at $29.50 because that is the stop price
The order is canceled because the market skipped $29.50
The order becomes a limit order at $29.50
The stop can trigger and fill near $29.10 or another available price
6. A stock moves above a well-observed resistance area while trading volume rises substantially. What is the most defensible inference?
The breakout is certain to continue until the close
The higher volume proves the stock is undervalued
The stock is now protected from falling below resistance
The move has broader participation, although it can still fail
7. A strategy wins 40% of its trades, averaging $200 per win, and loses 60%, averaging $100 per loss. Before costs, what is its average expectancy per trade?
A loss of $20
A gain of $40
A gain of $20
A loss of $60
8. A planned trade risks $0.50 per share and targets a $1.50 gain per share. What is its reward-to-risk ratio?
1:3
3:1
2:1
1.5:1
9. What does volume-weighted average price, or VWAP, represent during a trading session?
The highest price reached during the previous session
The midpoint between the current bid and ask
The session's average traded price weighted by trading volume
A forecast of the session's closing price
10. A heavily shorted stock begins rising quickly, and many short sellers buy shares to close their positions. How can this affect the move?
Their buying can add demand and accelerate a short squeeze
Their purchases reduce demand and slow the advance
Closing short positions has no effect on buying pressure
Their buying automatically caps the price at the prior high
11. What transaction initiates a short stock position?
Selling borrowed shares with the aim of buying them back later
Selling shares already owned and repurchasing them later
Buying shares and holding them until their price declines
Buying shares with funds borrowed through margin
12. All else being equal, which market condition generally supports easier entry and exit with less price impact?
Very low trading volume and widely separated quotes
Frequent trading halts and irregular quotes
A large difference between the best bid and best ask
High liquidity with active orders and a relatively narrow spread
13. A stock shows a best bid of $25.10 and a best ask of $25.14. Ignoring sudden price movement, where would a market buy order generally be expected to fill?
Near $25.10, because buyers transact at the bid
Near $25.14, because an immediate buyer generally takes the ask
Exactly halfway between the bid and ask
At the previous trade price regardless of the current quotes
14. Which activity best fits the standard meaning of day trading?
Keeping every position open for at least one night
Holding a diversified portfolio for several years
Buying only after a company pays a dividend
Opening and closing a position in the same trading session
15. After two losses, a trader doubles the next position solely to recover the money quickly, despite having planned a fixed size. What does this most clearly illustrate?
Loss-chasing or revenge trading that increases risk outside the plan
Reducing exposure after unfavorable results
Diversification across independent strategies
Using a limit order to control execution price
16. Which statement best describes a market order?
It guarantees a chosen price but not immediate execution
It prioritizes immediate execution but does not guarantee the execution price
It remains inactive until a specified stop price is reached
It can execute only at the midpoint of the quoted spread