Risk Management And Level Picking - July 2017
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Questions and Answers
- 1.
When is the right time to not use a stop loss?
- A.
Just before data comes out
- B.
When you have hit your first target
- C.
Never
- D.
After 14:30
Correct Answer
C. NeverExplanation
Not worth the risk. Can take one announcement, one piece of news or one spike and ruin your day, week or worse.Rate this question:
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- 2.
What should you do if you accidentally put on a trade with more contracts than you wanted to?
- A.
Exit unitended contracts immediately and notify your risk manager
- B.
If it is in profit, leave it
- C.
Make sure you have a stop loss for the same amount of contracts and leave it
Correct Answer
A. Exit unitended contracts immediately and notify your risk managerExplanation
If you accidentally put on a trade with more contracts than you wanted to, the best course of action is to exit the unintended contracts immediately. This is important to prevent any further potential losses or risks. Additionally, it is crucial to notify your risk manager about the mistake, as they need to be aware of any deviations from the planned trading strategy. By taking these actions promptly, you can minimize the impact of the error and ensure that proper risk management protocols are followed.Rate this question:
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- 3.
Which of these is not true.
- A.
Stop losses are the best way to manage risk on a trade by trade basis
- B.
When looking at a trade, the amount a trader risk should be less than the potential profit gained
- C.
Not using a stop loss is okay if you feel extremely confident about the trade
Correct Answer
C. Not using a stop loss is okay if you feel extremely confident about the tradeExplanation
The statement "Not using a stop loss is okay if you feel extremely confident about the trade" is not true. Using a stop loss is a crucial risk management strategy in trading, regardless of how confident a trader may feel about a trade. It helps limit potential losses and protect against unexpected market movements.Rate this question:
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- 4.
Which statement is correct?
- A.
A is a resistance level and B is a support level
- B.
A is a support level and B is a resistance level
Correct Answer
A. A is a resistance level and B is a support levelExplanation
In technical analysis, resistance level refers to a price level where the stock or asset tends to stop rising and may reverse its direction. On the other hand, a support level is a price level where the stock or asset tends to stop falling and may reverse its direction. Therefore, if A is a resistance level, it means that the price tends to stop rising at that level, and if B is a support level, it means that the price tends to stop falling at that level.Rate this question:
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- 5.
Having entered on the black dotted line at 1.05127. Where would be the correct and appropriate place to put the stop above?
- A.
A
- B.
B
- C.
C
Correct Answer
A. AExplanation
A stop placed above B and C would be would be too largeRate this question:
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- 6.
What is this chart missing?
- A.
Fibonnaci
- B.
Pivots
- C.
Moving Average
Correct Answer
B. PivotsExplanation
It makes sense to always have pivots on your chartRate this question:
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- 7.
A move from Point A to Point B is known as what?
- A.
Consolidation
- B.
Gap Fill
- C.
Breakout
Correct Answer
B. Gap FillExplanation
A move from one point to another, as described in the question, is commonly referred to as "gap fill." This term implies that there is a space or distance between the two points that needs to be filled or bridged. Consolidation refers to the act of combining or merging, which is not relevant to the context of moving from one point to another. Breakout typically refers to a sudden or significant change or escape, which is not applicable to the concept of moving between two specific points.Rate this question:
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- 8.
Point A is the low of the 27th December 2016. Why would it not be considered as a good entry?
- A.
Too long ago
- B.
Not near another support or resistance level
- C.
Has recently been chopped though
Correct Answer
C. Has recently been chopped thoughExplanation
The reason why point A would not be considered as a good entry is because it has recently been chopped through. This means that the price has been moving back and forth around this level, indicating a lack of clear direction or trend. As a result, it would be risky to enter a trade at this point as there is no strong indication of a potential price movement.Rate this question:
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- 9.
Which levels here have been chopped through recently
- A.
A
- B.
B
- C.
C
- D.
D
- E.
E
- F.
F
Correct Answer(s)
C. C
F. FExplanation
The levels that have been chopped through recently are C and F.Rate this question:
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- 10.
You should be looking for trades with a minimum risk reward of?
- A.
4:1
- B.
2:1
- C.
1:1
Correct Answer
B. 2:1Explanation
The answer is 2:1 because it indicates that the potential reward of a trade should be at least twice the amount of the potential risk. This means that for every unit of risk, you should aim to gain at least two units of reward. This ratio helps to ensure that the potential profits outweigh the potential losses, providing a favorable risk-reward balance.Rate this question:
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- 11.
Select the correct statement from the list below
- A.
Only trade over the data if you are over $100 in profit
- B.
Only enter before the data if you are certain of the number coming out
- C.
Do your analysis on just a 5 minute chart
- D.
Don't trade if you would end up going over your limit, even if you are 100% sure
Correct Answer
D. Don't trade if you would end up going over your limit, even if you are 100% sureExplanation
This statement advises against trading if it would exceed the trader's limit, regardless of how confident they are in the trade. It emphasizes the importance of risk management and sticking to predetermined limits, even if the trade seems highly promising. This approach helps to protect the trader from potential losses and maintain discipline in their trading strategy.Rate this question:
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- 12.
A dovish stance means high interest rates
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
A dovish stance actually means low interest rates. A dovish stance refers to a monetary policy approach where the central bank aims to stimulate economic growth by reducing interest rates or keeping them low. This is done to encourage borrowing and spending, which can help boost economic activity. Therefore, the statement that a dovish stance means high interest rates is incorrect.Rate this question:
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- 13.
The following comment is a hawkish comment : "We are going to taper our Quantitative Easing program and raise interest rates"
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The comment is considered hawkish because it suggests a tightening of monetary policy by tapering the Quantitative Easing program and raising interest rates. This approach is typically associated with a more aggressive stance towards inflation and a belief that the economy can handle higher interest rates.Rate this question:
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- 14.
Everyday we can see a pick up in volumes traded for Oil at around 2.00 pm
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The statement suggests that there is a consistent increase in the amount of oil being traded at around 2.00 pm every day. This indicates a pattern or trend in the market activity, which implies that there is a higher demand or trading activity during that specific time. Therefore, the answer "True" indicates that the statement is accurate and reflects the observed behavior in the oil trading market.Rate this question:
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- 15.
At what time UK economic data are usually released ?
- A.
8.30am
- B.
9.30am
- C.
10.00am
- D.
11.30am
Correct Answer
B. 9.30amExplanation
UK economic data is usually released at 9.30am. This timing allows for the data to be released early in the day, giving market participants and analysts enough time to digest and react to the information. Additionally, releasing the data at a consistent time helps in maintaining transparency and ensuring that all market participants have equal access to the information.Rate this question:
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- 16.
It is 5 minutes before the release of the UK Services PMI, and we are trading near the low of yesterday where I want to go long from. What should I do ?
- A.
It is 8.25am and I get in the trade right now because Services PMI is not an important piece of economic data for the UK
- B.
It is 9.25am and I get in the trade right now because Services PMI is not an important piece of economic data for the UK
- C.
It is 9.25am and I wait for the data to be released before getting involved because the data could reverse my bias
- D.
It is 10.25am and I wait for the data to be released before getting involved because the data could reverse my bias
Correct Answer
C. It is 9.25am and I wait for the data to be released before getting involved because the data could reverse my biasExplanation
The correct answer is to wait for the data to be released before getting involved because the data could reverse the trader's bias. This is because the trader is near the low of yesterday and wants to go long, but the release of the UK Services PMI could potentially change the market conditions and the trader's bias. Therefore, it is important to wait for the data to be released before making any trading decisions.Rate this question:
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- 17.
The Gold and T-Notes pit floors open at 1.20pm everyday
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The statement is true because it states that the Gold and T-Notes pit floors open at 1.20pm every day. This implies that there is a specific time when these pit floors open, and that time is consistently 1.20pm. Therefore, the answer is true.Rate this question:
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- 18.
Which one do you like?
- A.
Option 1
- B.
Option 2
- C.
Option 3
- D.
Option 4
Correct Answer
A. Option 1 -
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