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Basic Day Trading MCQ

1. What is a speculative trader?

A trader who trades without the proper knowledge of the market

A trader who trades in volatile and higher risk stocks only

A trader who trades only in stocks listed on the OTCBB

A trader who does business in currency exchange transactions only

Answer

Correct Answer: A trader who trades in volatile and higher risk stocks only

Note: This Question is unanswered, help us to find answer for this one

2. Why is arbitrage trading a day trading method only?

Because the transactions on both markets are made simultaneously

Because it is required by law that all arbitrage transactions be cleared out daily

Because it is too risky for the average investor

Because it mitigates the tax implications

Answer

Correct Answer: Because the transactions on both markets are made simultaneously

Note: This Question is unanswered, help us to find answer for this one

3. What is "fundamental analysis"?

Stock analysis based on price and volume

Stock analysis based on the fundamentals of a company such as financial reports

Stock analysis based on a normal trading band

Stock analysis based on the previous day's trading mistakes

Answer

Correct Answer: Stock analysis based on the fundamentals of a company such as financial reports

Note: This Question is unanswered, help us to find answer for this one

4. How effective is fundamental analysis in day trading?

It guarantees profit and success.

It identifies short sale opportunities only.

Not as effective as it is thought to be; it can at best be used for identifying long term pricing.

It is never effective and is a waste of time

Answer

Correct Answer: Not as effective as it is thought to be; it can at best be used for identifying long term pricing.

Note: This Question is unanswered, help us to find answer for this one

5. What is meant by a margin call?

When a brokerage asks the investor to put money up front before extending the margin

When a brokerage requires a stock trader to pay for loans the brokerage has made to the trader

When an investor executes a call option

When an investor executes a short sale

Answer

Correct Answer: When a brokerage requires a stock trader to pay for loans the brokerage has made to the trader

Note: This Question is unanswered, help us to find answer for this one

6. When a stock has a breakout, what has happened?

The stock has taken off quickly and its popularity grown like a virus breakout.

The price has moved outside of the normal trading range either on the higher or on the lower end.

The price has declined so quickly that the company is forced to close its doors.

The volume has tripled.

Answer

Correct Answer: The price has moved outside of the normal trading range either on the higher or on the lower end.

Note: This Question is unanswered, help us to find answer for this one

7. Why should an investor have predetermined exit points?

To maintain their trading goals and profit margins

Because they are required to by law

To make sure they stay classified as a day trader

Because it allows for low taxes

Answer

Correct Answer: To maintain their trading goals and profit margins

Note: This Question is unanswered, help us to find answer for this one

8. How can an investor ensure a specific entry point?

By placing stop loss orders

By placing a limit order

By short selling a stock

By not trading it

Answer

Correct Answer: By placing a limit order

Note: This Question is unanswered, help us to find answer for this one

9. What would be an entry point for a range trader who is going long?

The high point in a price band

A price in the middle of a price range band

A price near or at the typically lower end of the range for a security

When the stock of an appliance manufacturer hits a new low

Answer

Correct Answer: A price near or at the typically lower end of the range for a security

Note: This Question is unanswered, help us to find answer for this one

10. What type of trading style is short selling?

Growth

Conservative

Return based

Speculative

Answer

Correct Answer: Speculative

Note: This Question is unanswered, help us to find answer for this one

11. How is "days to cover" calculated?

Always ten days as a rule

Number of shares outstanding / Daily share volume

Number of shares less shares held by execs / Daily share volume

Depends on the stock market; the formula varies from market to market

Answer

Correct Answer: Number of shares outstanding / Daily share volume

Note: This Question is unanswered, help us to find answer for this one

12. How have some day traders avoided being classified as day traders under the legal definition?

By not alerting the broker

By holding at least 1 in 4 trades overnight

By setting up illegal brokerage houses

By telling the broker they have full time jobs apart from trading

Answer

Correct Answer: By holding at least 1 in 4 trades overnight

Note: This Question is unanswered, help us to find answer for this one

13. Why are margin requirements often lower for spread traders?

Because they do not have to pay taxes

Because they often do not trade on margin

Because they trade outside of the government's jurisdiction

Because they have opposing positions, with offsetting risk

Answer

Correct Answer: Because they have opposing positions, with offsetting risk

Note: This Question is unanswered, help us to find answer for this one

14. Why is it dangerous for a day trader to place market orders?

Because they are illegal

Because there is a higher tax rate on the transactions

Because price changes can happen instantly and they may not receive the buy/sell price they hoped for

Because it may deplete their entire margin account

Answer

Correct Answer: Because price changes can happen instantly and they may not receive the buy/sell price they hoped for

Note: This Question is unanswered, help us to find answer for this one

15. How are day traders able to quickly analyze information in order to make decisions?

They are math geniuses.

They hire a team of people to analyze the data ongoing.

They just make random guesses.

Complex software is available to conduct analysis and give alerts based on the traders' criteria.

Answer

Correct Answer: Complex software is available to conduct analysis and give alerts based on the traders' criteria.

Note: This Question is unanswered, help us to find answer for this one

16. What is "margin trading?"

Trading only in stocks with high potential for return

Using money borrowed from the brokerages to conduct stock transactions

Trading stocks of companies who have high gross margins

Selling stocks without owning them

Answer

Correct Answer: Using money borrowed from the brokerages to conduct stock transactions

Note: This Question is unanswered, help us to find answer for this one

17. What is the assumption of a trader who cannot produce the $25,000 margin?

They are using their money for trading risky stocks.

They would rather buy homes.

They have their money tied up in bonds instead of stocks.

They are less wealthy, less sophisticated, and cannot sustain a sizeable loss

Answer

Correct Answer: They are less wealthy, less sophisticated, and cannot sustain a sizeable loss

Note: This Question is unanswered, help us to find answer for this one

18. What is meant by trend trading?

Looking for trends in the retail world and purchasing stocks of those companies

Recognizing an ongoing trend in a stock price and assuming the trend will go the opposite way quickly

Recognizing an ongoing trend in a stock price and assuming the trend will continue for some period of time

Short selling stocks before the holiday season

Answer

Correct Answer: Recognizing an ongoing trend in a stock price and assuming the trend will continue for some period of time

Note: This Question is unanswered, help us to find answer for this one

19. Why is the ruling of a minimum margin often argued?

Because traders feel the government is impeding their ability to make decisions in their own best interest

Because it creates red tape in the process of becoming a day trader

Because it eliminates a lot of people's ability to become a full time day trader

Because the government has no authority to do so

Answer

Correct Answer: Because traders feel the government is impeding their ability to make decisions in their own best interest

Note: This Question is unanswered, help us to find answer for this one

20. When a range trader sees a breakout, what does he see?

A stock is new to the market.

A stock is now trading outside of its normal price band.

A stock has issued a press release.

A stock has had lower than the normal volume of trading.

Answer

Correct Answer: A stock is now trading outside of its normal price band.

Note: This Question is unanswered, help us to find answer for this one

21. Why is it risky to utilize margin accounts?

Because if the transactions do not result in success, the trader will be responsible for paying for the losses

Because there are higher taxes on them

Because if other brokers know you are trading on margin, they will purposefully make your deal not work

Because it is illegal

Answer

Correct Answer: Because if the transactions do not result in success, the trader will be responsible for paying for the losses

Note: This Question is unanswered, help us to find answer for this one

22. What is the ruling for margin requirement?

Exchange Rule 431

Exchange Rule 200

Exchange Rule 001

FASB 111

Answer

Correct Answer: Exchange Rule 431

Note: This Question is unanswered, help us to find answer for this one

23. What is the idea behind fundamental analysis?

Extensive mathematics will find winning stocks.

Fraud can be spotted.

The fundamentals of a company help dictate what the share price should be.

Opportunities for arbitrage trading can be found

Answer

Correct Answer: The fundamentals of a company help dictate what the share price should be.

Note: This Question is unanswered, help us to find answer for this one

24. What is "news trading?"

Buying and selling stocks based on recently released news information

Buying stocks in newspaper companies

The buying and selling of news stories

Giving other traders false information

Answer

Correct Answer: Buying and selling stocks based on recently released news information

Note: This Question is unanswered, help us to find answer for this one

25. Why are traders sufficiently secure in leveraging their capital?

Because they don't know any better

Because they think they can disappear if they lose the borrowed money

Because it lowers their tax burden

Because they have a proven model which works for them, consistently returning profits

Answer

Correct Answer: Because they have a proven model which works for them, consistently returning profits

Note: This Question is unanswered, help us to find answer for this one

26. What is the usual way traders will leverage their trading capital?

Borrowing money from friends and family

Taking out a bank loan

Trading on margin, borrowed money

Mortgaging their homes

Answer

Correct Answer: Trading on margin, borrowed money

Note: This Question is unanswered, help us to find answer for this one

27. What is the requirement on short sellers regarding locates?

Locates must be in place before a short sale can be made.

Locates must be made if requested by the broker.

Locates are not required.

Locates must be wealthy individuals.

Answer

Correct Answer: Locates must be in place before a short sale can be made.

Note: This Question is unanswered, help us to find answer for this one

28. What view of the market does a short seller have?

Bearish

Bullish

Indifferent

It does not factor into short selling.

Answer

Correct Answer: Bearish

Note: This Question is unanswered, help us to find answer for this one

29. Why is short selling looked on negatively by some traders?

Because short sellers make larger profits

Because short sellers introduce volatility to the market

Because short sellers profit on the misfortune of others

Because short sellers are too cavalier

Answer

Correct Answer: Because short sellers profit on the misfortune of others

Note: This Question is unanswered, help us to find answer for this one

30. What is the fundamental idea behind arbitrage trading?

That profit can be made on the pricing differences between two markets on the same security

That profit can be made based on information leaked by an insider

That profit can be made by short selling stocks

That profit can be made by artificially promoting a stock

Answer

Correct Answer: That profit can be made on the pricing differences between two markets on the same security

Note: This Question is unanswered, help us to find answer for this one

31. Which of the following is a method of leveraging the capital available?

Going into currency exchange even if you know nothing about it

Diversifying trading into multiple stocks

Stopping trading all together

Investing in the community

Answer

Correct Answer: Diversifying trading into multiple stocks

Note: This Question is unanswered, help us to find answer for this one

32. What is the primary risk with short selling?

Other brokers see your transactions and try to profit as well.

The stock price never goes down, and the broker calls on the trader to pay for the security.

It is illegal.

Taxes on short sale transactions are higher.

Answer

Correct Answer: The stock price never goes down, and the broker calls on the trader to pay for the security.

Note: This Question is unanswered, help us to find answer for this one

33. What is "spread"?

The difference in price between the bid and ask amounts

The difference between opening and closing prices

The difference between the price of the same security on two markets

The difference between strike price and current price

Answer

Correct Answer: The difference in price between the bid and ask amounts

Note: This Question is unanswered, help us to find answer for this one

34. What is meant by days to cover?

The number of days available for trading in the month

The number of days until a locate must be found

The number of days until a transaction clears

The maximum number of days available to the trader to cover their short position

Answer

Correct Answer: The maximum number of days available to the trader to cover their short position

Note: This Question is unanswered, help us to find answer for this one

35. Why is news trading a relatively simple strategy?

Because it is cheaper to trade

Because it can be done months in advance

Because it does not require as much analysis

Because brokerages will provide you with the news and tell you what to do

Answer

Correct Answer: Because it does not require as much analysis

Note: This Question is unanswered, help us to find answer for this one

36. What is meant by "range trading"?

Trading in stocks of appliance manufacturers

Trading in stocks based on news releases

Trading in stocks based on the analysis of company financials

Buying and selling stocks based on the history of trading within a certain price range

Answer

Correct Answer: Buying and selling stocks based on the history of trading within a certain price range

Note: This Question is unanswered, help us to find answer for this one

37. Why is it important for a day trader to have a methodology to adhere to?

Because it is required to by law

Because it reduces their tax obligations

Because the brokerage will ask from time to time what their strategy is

In order to consistently pick stocks which fit their portfolio without getting distracted by other opportunities

Answer

Correct Answer: In order to consistently pick stocks which fit their portfolio without getting distracted by other opportunities

Note: This Question is unanswered, help us to find answer for this one

38. How does a day trader fundamentally leverage their capital?

By referring friends to a brokerage and thus earning referral fees

By consistently buying and selling and thus increasing value

By not executing some transactions just to save the $10 commission

By not reporting their activity to the government

Answer

Correct Answer: By not executing some transactions just to save the $10 commission

Note: This Question is unanswered, help us to find answer for this one

39. What is a "locate"?

A person who locates hot stock tips

A person who locates potential short sale deals

A person who will provide the securities being sold temporarily, typically a brokerage

A person who locates short sales which are out of compliance

Answer

Correct Answer: A person who will provide the securities being sold temporarily, typically a brokerage

Note: This Question is unanswered, help us to find answer for this one

40. What would a news trader potentially do if a stock price falls on seemingly good news?

Nothing; they are only interested in bad news.

Short sell the stock.

Purchase the stock as it may rebound quickly.

Tell their friends to short sell the stock.

Answer

Correct Answer: Purchase the stock as it may rebound quickly.

Note: This Question is unanswered, help us to find answer for this one

41. What is meant by "swing trading"?

Trading 10 or more times in one day

Trading stocks with your friends

Holding stocks for more than a day, but typically not more than a few weeks

Trading stocks as a hobby

Answer

Correct Answer: Holding stocks for more than a day, but typically not more than a few weeks

Note: This Question is unanswered, help us to find answer for this one

42. What would be the best technique for a day trader to utilize?

Fundamental analysis

Technical analysis

Multiple techniques

Charting

Answer

Correct Answer: Multiple techniques

Note: This Question is unanswered, help us to find answer for this one

43. What is meant by "arbitrage"?

Selling a stock without owning it

Profiting on price differences between the markets

Selling stock options

Illegally selling stocks

Answer

Correct Answer: Profiting on price differences between the markets

Note: This Question is unanswered, help us to find answer for this one

44. Which of the following provides some form of ongoing return on investment?

Investing in companies with drastic price range history

Investing in companies with a solid history of consistent dividends

Investing in new companies

Short selling only

Answer

Correct Answer: Investing in companies with a solid history of consistent dividends

Note: This Question is unanswered, help us to find answer for this one

45. What stipulation does the SEC place on a pattern day trader?

They must make at least ten transactions a week.

They must pay minimum commissions of $10 per transaction.

They must maintain at least $25,000 in a margin account.

They can only trade on the US exchanges.

Answer

Correct Answer: They must maintain at least $25,000 in a margin account.

Note: This Question is unanswered, help us to find answer for this one

46. What is the "settlement date"?

The date on which a transaction is executed

The date on which an account holder's statement comes out

The date on which a company's dividend is declared

The day on which a transaction is finalized by the broker transferring ownership of the security

Answer

Correct Answer: The day on which a transaction is finalized by the broker transferring ownership of the security

Note: This Question is unanswered, help us to find answer for this one

47. What is "technical analysis"?

Stock analysis based on price movements and charting

Stock analysis based on company fundamentals such as financial statements

Stock analysis based on new reports during the day

Stock analysis based on volume sales

Answer

Correct Answer: Stock analysis based on price movements and charting

Note: This Question is unanswered, help us to find answer for this one

48. What is the main risk a day trader is subject to?

Trade risk

Intraday risk

Exchange rate risk

Interest rate risk

Answer

Correct Answer: Intraday risk

Note: This Question is unanswered, help us to find answer for this one

49. When is stock analysis performed?

After the trading day to plan for the following day

A week in advance

Over several months

Always on the fly

Answer

Correct Answer: After the trading day to plan for the following day

Note: This Question is unanswered, help us to find answer for this one

50. Why would an investor have an exit before entry?

Because they do not know how to trade properly

Because they are trading on margin

Because they are short selling a stock

Because they are writing options contracts

Answer

Correct Answer: Because they are short selling a stock

Note: This Question is unanswered, help us to find answer for this one

51. On which of the following counts are the legal requirements on day traders criticized?

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.

No one can afford a $25,000 margin account.

It makes day trading non accessible to inexperienced people.

The government should not meddle in the public's well being.

Answer

Correct Answer: 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.

Note: This Question is unanswered, help us to find answer for this one

52. What is short selling?

Selling less shares than you own

Selling a security before owning it, with the intent of later purchasing it at a lower price

Selling a stock for less than it is trading for

Creating a limit order for a lower price than the current market price

Answer

Correct Answer: Selling a security before owning it, with the intent of later purchasing it at a lower price

Note: This Question is unanswered, help us to find answer for this one

53. What would a trader do if they calculated a price based on fundamental analysis which was higher than the current market price?

Purchase the stock as it will potentially normalize back to the calculated price.

Nothing; they would wait and see what happens.

Tell their friends to short sell the stock.

Call the company and ask why.

Answer

Correct Answer: Purchase the stock as it will potentially normalize back to the calculated price.

Note: This Question is unanswered, help us to find answer for this one

54. What is a simple technique a beginning day trader would use?

Options contracts trading

Fundamental analysis

Regression analysis

News trading — using news releases about companies as indicators of stock prices

Answer

Correct Answer: News trading — using news releases about companies as indicators of stock prices

Note: This Question is unanswered, help us to find answer for this one

55. What can affect the amount of margin required, apart from minimum requirements?

The exchange the trader trades on

The credit risk of the investor

The amount of capital the trader has outside of their account

The history the trader has of success

Answer

Correct Answer: The credit risk of the investor

Note: This Question is unanswered, help us to find answer for this one

56. What does a limit order do?

It limits other traders' ability to buy the same stock.

When the stock price hits a certain trigger point, a market order to sell or buy a stock becomes effective.

It limits your taxation.

It limits how many transactions you can make in a day.

Answer

Correct Answer: When the stock price hits a certain trigger point, a market order to sell or buy a stock becomes effective.

Note: This Question is unanswered, help us to find answer for this one

57. What type of order will a short seller subsequently place in order to limit their potential losses?

Purchase limit order

Option contract purchase

Stop loss order

Arbitrage trade

Answer

Correct Answer: Stop loss order

Note: This Question is unanswered, help us to find answer for this one

58. By doing which of the following would a day trader be leveraging capital?

Buying 100 shares of a hot new company

Buying stock options

Short selling stock

Passing on a transaction

Answer

Correct Answer: Short selling stock

Note: This Question is unanswered, help us to find answer for this one

59. What is the purpose of sliding the stop loss upwards?

It allows for less taxes on additional profits.

It allows the trader to short sell the stock.

It is only for risky traders.

It allows the trader to lock in additional profits on a stock that is increasing in price.

Answer

Correct Answer: It allows the trader to lock in additional profits on a stock that is increasing in price.

Note: This Question is unanswered, help us to find answer for this one

60. Why do arbitrage opportunities seldom exist?

Because the SEC looks for them and fixes them before traders can profit

Because the profits are so small they are not worthwhile

Because the law of one price — supply and demand will close the gap quickly

Because they are illegal

Answer

Correct Answer: Because the law of one price — supply and demand will close the gap quickly

Note: This Question is unanswered, help us to find answer for this one

61. What is "FOREX"?

Over the Counter Bulletin Board

A stock exchange

An options exchange

A foreign currency exchange

Answer

Correct Answer: A foreign currency exchange

Note: This Question is unanswered, help us to find answer for this one

62. What is the concept of ignoring predetermined exit points to allow for further profit?

Short selling

Selling options contracts

Letting a stock run

Margin trading

Answer

Correct Answer: Letting a stock run

Note: This Question is unanswered, help us to find answer for this one

63. Which of the following is a positive attribute often associated with short sellers?

They have lower commission rates.

They tend to do extensive dilligent research on securities due to the substantially risky nature of the trades.

Their errors create opportunities for others.

Their actions often indicate market direction.

Answer

Correct Answer: They tend to do extensive dilligent research on securities due to the substantially risky nature of the trades.

Note: This Question is unanswered, help us to find answer for this one

64. What is required of a brokerage when they spot a pattern day trader?

Automatically extend $25,000 in margin

Freeze the trader's account until the $25,000 margin requirement is met

Nothing; it is the trader's obligation to self regulate

Send a notice

Answer

Correct Answer: Freeze the trader's account until the $25,000 margin requirement is met

Note: This Question is unanswered, help us to find answer for this one

65. What is the main benefit of leveraging capital?

If the deal doesn't work, there is no obligation on the trader's part.

It has potential for substantially large returns using borrowed money.

It reduces taxes.

It allows them to avoid being classified as a day trader

Answer

Correct Answer: It has potential for substantially large returns using borrowed money.

Note: This Question is unanswered, help us to find answer for this one

66. How does a day trader immediately set their exit point?

By telling their friends to watch the stock for them

By placing a limit order to sell after purchase

By selling options contracts

By trying to arbitrage the stock

Answer

Correct Answer: By placing a limit order to sell after purchase

Note: This Question is unanswered, help us to find answer for this one

67. Which of the following is an additional requirement of a day traders account?

Deposits are restricted for two months.

Deposits cannot be withdrawn for two days.

They must make at least ten transactions a week or their account is closed.

The minimum trade commission is $10.

Answer

Correct Answer: Deposits cannot be withdrawn for two days.

Note: This Question is unanswered, help us to find answer for this one

68. Which of the following is closest in meaning to arbitrage trading?

Day trading

Short selling

Scalping

Profiting

Answer

Correct Answer: Scalping

Note: This Question is unanswered, help us to find answer for this one

69. What is the best way to reduce variable expenses?

Working at the library using their computers

Working with a brokerage which charges low commissions from frequent traders

Refusing to pay commissions

Refusing to pay the margin requirements

Answer

Correct Answer: Working with a brokerage which charges low commissions from frequent traders

Note: This Question is unanswered, help us to find answer for this one

70. What would an investor infer from a stock price which has steadily risen for three days?

That someone inside the company is giving false news reports

That insiders are selling all of their stock

That short sellers are covering their positions

That the stock will most likely continue in this direction

Answer

Correct Answer: That the stock will most likely continue in this direction

Note: This Question is unanswered, help us to find answer for this one

71. What requirements do brokerages have for day traders?

No requirements are there.

Minimum deposits must be at least $1,000.

They must come into the office and sign an agreement.

Brokerages must ask traders if they understand the risky style of trading and that there is a possibility of losing their investment capital.

Answer

Correct Answer: Brokerages must ask traders if they understand the risky style of trading and that there is a possibility of losing their investment capital.

Note: This Question is unanswered, help us to find answer for this one

72. What does algorithmic trading look to profit from?

From misinformation in news reports

From company financial statements

From misinforming other traders

From mistakes made during the previous trading day by other day traders

Answer

Correct Answer: From mistakes made during the previous trading day by other day traders

Note: This Question is unanswered, help us to find answer for this one

73. Why is short selling risky?

Because if the price of the security rises endlessly, there is no limit on the losses that can be incurred

Because the brokers can mandate the seller cover their position at any point

Because there are no laws protecting short sellers

Because inexperienced short sellers can create havoc in the market

Answer

Correct Answer: Because if the price of the security rises endlessly, there is no limit on the losses that can be incurred

Note: This Question is unanswered, help us to find answer for this one

74. What is "after hours trading"?

Trading on foreign exchanges

Setting limit orders which will be executed after market hours

Trading in currency transactions

Trading in stocks after the market has closed, creating orders which will be executed the following day

Answer

Correct Answer: Trading in stocks after the market has closed, creating orders which will be executed the following day

Note: This Question is unanswered, help us to find answer for this one

75. What would be the exit point for an arbitrage trader?

Within one year

Within one week

None; transactions are done simultaneously both for entry and exit

Some time during the day when the other side of the transaction can be completed

Answer

Correct Answer: None; transactions are done simultaneously both for entry and exit

Note: This Question is unanswered, help us to find answer for this one

76. What is the end result of most technical analyses?

Short selling stocks

A chart indicating price movements and a prediction for future price movements

Calling companies for more information about their stock price

Nothing; it usually results in useless information

Answer

Correct Answer: A chart indicating price movements and a prediction for future price movements

Note: This Question is unanswered, help us to find answer for this one

77. What is the "futures market"?

An exchange for futures contracts on commodities

An exchange for stocks based on anticipated prices one year from now

An exchange for options contracts

An exchange for foreign currency

Answer

Correct Answer: An exchange for futures contracts on commodities

Note: This Question is unanswered, help us to find answer for this one

78. What would a range trader who sees a breakout most likely do?

Nothing, wait and see what else happens.

Tell their friends to buy the stock.

Call the company to find out what is happening.

Purchase or sell the stock depending on the direction as the price is likely to continue in the same direction for some time

Answer

Correct Answer: Purchase or sell the stock depending on the direction as the price is likely to continue in the same direction for some time

Note: This Question is unanswered, help us to find answer for this one

79. What does the $25,000 margin account requirement do to protect a day trader?

It guarantees they will always have $25,000 money available if they decide to quit day trading.

Little — the requirement is more to protect the brokerage.

It is a reserve they can use for trading at some later date.

It buys insurance from the NASD

Answer

Correct Answer: Little — the requirement is more to protect the brokerage.

Note: This Question is unanswered, help us to find answer for this one

80. What is the SEC definition of a "pattern day trader"?

A trader who profits from short selling

A trader who buys and sells on the same trading day, and does this four or more times within a 5 day period

A trader who sells and buys stock options instead of stocks

A trader who makes profits; the ones who lose money are not day traders

Answer

Correct Answer: A trader who buys and sells on the same trading day, and does this four or more times within a 5 day period

Note: This Question is unanswered, help us to find answer for this one

81. Why is it important for day traders to close out all positions before the day is over?

If they do not, they are no longer day traders.

Taxes are lower if positions are closed out.

Overnight changes in the demand for the security can drastically affect the price.

They are required to if trading on margin.

Answer

Correct Answer: Overnight changes in the demand for the security can drastically affect the price.

Note: This Question is unanswered, help us to find answer for this one

82. What would a day trader do to ensure that profits earned from a security are maintained without selling it immediately?

Place a stop loss order

Short sell the stock

Sell an options contract on the stock

Just watch the price and see what happens

Answer

Correct Answer: Place a stop loss order

Note: This Question is unanswered, help us to find answer for this one

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Stock Trading MCQs

Venture Capital MCQs