Trading Strategies and Concepts

Question 1

What is trend following?

Answer 1

Buy when the market is going up, sell or short when it’s going down.

Question 2

Which indicator helps identify trends?

Answer 2

Moving averages (50-day, 200-day).

Question 3

What is mean reversion?

Answer 3

Prices return to their average after going too high or too low.

Question 4

Which indicator shows when a stock is overbought or oversold?

Answer 4

RSI (Relative Strength Index).

Question 5

What is scalping?

Answer 5

Make many quick trades to capture small price moves.

Question 6

What is swing trading?

Answer 6

Hold positions for a few days or weeks to catch price swings.

Question 7

What is position trading?

Answer 7

Hold positions for long-term gains based on fundamentals.

Question 8

What is a stop-loss order?

Answer 8

Sell automatically to limit losses when a price drops too low.

Question 9

What is position sizing?

Answer 9

Deciding how much to invest in each trade based on risk.

Question 10

What is sentiment analysis?

Answer 10

Gauging the market’s mood (bullish or bearish) to make trades.

Question 11

What is algorithmic trading?

Answer 11

Using computer programs to make trades automatically.

Question 12

What is news and event trading?

Answer 12

Trading based on big news like earnings reports or market events.

Question 13

What is a good risk-to-reward ratio?

Answer 13

Aim for 3:1, where the potential reward is 3 times the risk.

Question 14

What’s key to good risk management?

Answer 14

Cut losses quickly, let winners run.

Question 15

What is Warren Buffett’s approach to trading?

Answer 15

Invest in strong companies for the long term.

Question 16

How did George Soros get rich?

Answer 16

Used big bets based on economic trends and sentiment.

Question 17

What does the MACD tell traders?

Answer 17

Shows changes in momentum and buy/sell signals.

Question 18

What does the head and shoulders pattern indicate?

Answer 18

A reversal pattern that signals the price will go down.

Question 19

What does the double top pattern mean?

Answer 19

A reversal pattern signaling price will drop.

Question 20

What does the P/E ratio tell you?

Answer 20

How much you’re paying for a company’s earnings. High = growth, low = value.