Stock Trading MCQs (Chapterwise Multiple Choice Questions)

Which type of analysis relies on charting?

Fundamental

Technical

Both Fundamental and Technical

Neither Fundamental nor Technical

Answer & Explanation

Correct Answer: Technical

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Is a stop loss order a buy or sell order?

A buy order

A sell order

Can be either

Is neither

Answer & Explanation

Correct Answer: A sell order

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What factors does technical analysis primarily rely on?

Financial reports

Management reports

Past Price and volume

Market indicators

Answer & Explanation

Correct Answer: Past Price and volume

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Why would an investor use a limit order to buy?

Because they want to pay more than the current price

Because they want to sell the stock in the future

Because they want to purchase a certain stock at a price lower than its current price without constantly monitoring the stock price

Because they want to limit their market risk

Answer & Explanation

Correct Answer: Because they want to purchase a certain stock at a price lower than its current price without constantly monitoring the stock price

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If a stock is correctly priced, then you know that ____________.

The dividend payout ratio is optimal

The sum of the stock's expected capital gain and dividend yield is equal to the stock's required rate of return

The stock's required return is equal to the growth rate in earnings and dividends

The present value of growth opportunities is equal to the value of assets in place

Answer & Explanation

Correct Answer: The sum of the stock's expected capital gain and dividend yield is equal to the stock's required rate of return

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

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

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

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

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

Answer & Explanation

Correct Answer: Stock traders profit on short term price changes, stock investors profit on long term growth.

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

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

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

BY using it as a loose guideline

By asking their friends to keep them on track

Answer & Explanation

Correct Answer: By setting limit and stop loss orders on all transactions using those criteria

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What is meant by a "leading indicator"?

A market statistic which changes after a change in stock prices

A report put out by the stock market

Insider information

A market statistic which typically indicates ahead of time what the market will do

Answer & Explanation

Correct Answer: A market statistic which typically indicates ahead of time what the market will do

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What is the primary goal of technical analysis?

Identifying trends to predict short term price movements

Helping build a retirement plan

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

Finding indications of interest rate direction

Answer & Explanation

Correct Answer: Identifying trends to predict short term price movements

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What is a secular trend?

A near term trend

A predicted trend in the future

A past trend

A long term trend

Answer & Explanation

Correct Answer: A long term trend

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Stock Trading Quick Quiz

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