Senior Year Flashcards
When does trading become gambling?
A. When you go to a casino with your laptop and trade there
B. When your potential reward is small
C. When you don’t enforce money management rules
When you don’t enforce money management rules
Which among the following statements is true?
A. Money management rules only protect you in the sense of minimizing your risk
B. Money management rules only make you profitable
C. Money management rules protect you and make you profitable in the long-run
Money management rules protect you and make you profitable in the long-run
What’s the benefit of taking classes and having mentors to guide you in forex?
A. They’re expensive
B. They’re cheap
C. They shorten your learning curve
They shorten your learning curve
Retail brokers offer minimum account deposits as low as ___.
$25
Why is it recommended that you start currency trading with a relatively large amount?
A. You have enough capital to weather losses.
B. You have to be able to take as much trades as you can so you can learn faster.
C. You have to have enough credits to get instantaneous and accurate news feeds.
You have enough capital to weather losses.
What is a drawdown?
A. The reduction of one’s capital after a certain number of trades
B. The reduction of one’s capital after a series of losing trades
C. The reduction of one’s capital after a certain duration of time
The reduction of one’s capital after a series of losing trades
How do you calculate for your drawdown?
A. You divide your total loss by your initial capital.
B. You get the difference between a relative peak in equity capital minus a relative trough.
C. You multiply a relative peak in equity capital by a relative trough.
You get the difference between a relative peak in equity capital minus a relative trough.
Which of the following statements is true?
A. If your trading system is 70% profitable, this means for every 100 trades you make, you will win 7 out of every 10.
B. Successful traders have trading plans that allow them to avoid drawdowns.
C. Drawdowns are part of trading.
Drawdowns are part of trading.
True or false. In order to make it back to your original account size, you just have to win the same number of trades that you lost.
False
Which of the following is not a reason why you should only risk a small percentage of your account in each trade?
A. So that you can survive your losing streaks
B. In order to avoid a large drawdown in your account
C. So that it’s easier for you to make up for the trades you lost
So that it’s easier for you to make up for the trades you lost
What does a 5:1 reward-to-risk ratio mean?
A. You stand to win $5,000 if you risk $25,000.
B. If you risk $350 you have a chance of winning $1,750.
C. If you risk $250 you can lose $1,250.
If you risk $350 you have a chance of winning $1,750.
Which among the following must you consider in setting risk-to-reward ratios?
A. The time of the day you’re trading
B. Your entry and exit points
C. Your favorite currency pair
Your entry and exit points
Along with not understanding leverage, what’s the number one reason why new traders fail?
A. They are undercapitalized.
B. They open only mini accounts.
C. They suck.
They are undercapitalized.
True or false. Just because a broker may allow you to open an account with only $25, that does NOT mean you should.
True
What is leverage?
A. Amount of money needed by your broker to open your position.
B. The ability to control a large amount of money using none or very little of your own money and borrowing the rest.
C. The capital you need to start trading forex.
The ability to control a large amount of money using none or very little of your own money and borrowing the rest.
For example, to control a $100,000 position, your broker will set aside $2,000 from your account. What is your margin?
A. 50:1
B. 2%
C. 20%
2%
What do you call the money in your account that is available to open new positions?
A. Account margin
B. Used margin
C. Usable margin
Usable margin
You will get a margin call when the value of your losing positions drop beyond your…
A. …account margin levels
B. …used margin levels
C. …usable margin levels
.usable margin levels
Your equity falls when…
A. Your trade goes against you.
B. Your trade goes your way.
C. You close your trade too early.
Your trade goes against you.
What’s the advantage of trading on margin?
A. It increases your buying power.
B. It allows you more access to pairs.
C. It allows you to give your trades more room to move
It increases your buying power.
What do you get when your margin deposits fall below the required minimum level?
Margin call
True or false. Your broker cannot liquidate your account before giving you a margin call.
False
Which of the following statements is true?
A. If a 1% margin is required, you have a 100:1 leverage.
B. Your leverage ratio depends on the value of your total losses relative to the amount you deposited to your account.
C. Maximum leverage is the same as true leverage.
If a 1% margin is required, you have a 100:1 leverage.
What is true leverage?
A. The maximum leverage that you can trade with.
B. The full value of all your open positions divided by the equity value of your trading account.
C. Full amount of your total losses divided by the amount of money deposited in your trading account.
The full value of all your open positions divided by the equity value of your trading account.
Fill in the blanks: The ____ leverage you use, the ___ “breathing room” you have for the market to move before a margin call.
A. More, more
B. Less, more
C. More, less
More, less
Why is it recommended to trade with low leverage and ample capitalization?
A. Your losses are very small.
B. Your wins are multiplied by the dozen.
C. The spread is cheaper.
Your losses are very small.
Which of the following statements is not true?
A. Leverage is how many times you lever your whole account.
B. The maximum amount that you are allowed to lever is dependent on your margin requirement.
C. Your leverage increases along with your account balance.
Your leverage increases along with your account balance.
Fill in the blanks: The ____ your leverage, the ____ your transaction cost as a percentage of your trading capital.
A. higher, higher
B. higher, lower
C. lower, lower
higher, higher
Which of the following is a reason why using huge leverage appeals so much to new traders?
A. Spreads are smaller with high leverage
B. Leverage magnifies one’s profits
C. High leverage equal to more trades
Leverage magnifies one’s profits
True or false. The more you trade, the less your broker makes on the spread.
False
Which of the following statements is true?
a. Balance is used to determine usable margin.
b. Balance is used to determine used margin.
c. Equity is used to determine usable margin.
Equity is used to determine usable margin.
This is the most important skill in a trader's skill set. A. leveraging B. scalping C. position sizing D. swing trading
position sizing