CPT Trading Psychology & Discipline 3

Question 1

A trader who consistently takes profits too early because they fear a winner will reverse is exhibiting which psychological pattern?

Accepted Answer

Premature profit-taking driven by fear

Answer

Fear of giving back open profits causes traders to exit winning trades before targets are reached, systematically reducing the reward side of their risk-reward ratio.

Question 2

The 'hot hand fallacy' in trading refers to the mistaken belief that:

Accepted Answer

A trader on a winning streak has an elevated probability of winning the next trade

Answer

The hot hand fallacy incorrectly attributes a random winning streak to increased skill, leading traders to overtrade and oversize based on an illusory edge.

Question 3

Which practice BEST helps a trader maintain discipline during a high-volatility news event that is outside their trading plan?

Accepted Answer

Step away from the screen and take no action until volatility normalizes

Answer

Sitting on hands during events outside the trading plan preserves capital and prevents emotional, unplanned trades that typically occur during news-driven chaos.

Question 4

A trader sets a hard stop at $1,000 per trade but mentally moves it wider when the trade goes against them. This behavior is called:

Accepted Answer

Stop-loss creep (moving the goalposts)

Answer

Moving stops wider after entry violates pre-defined risk parameters and is a hallmark of poor discipline, often leading to catastrophic single-trade losses.

Question 5

Which psychological state is characterized by a trader feeling invincible, ignoring risk rules, and increasing size dramatically after a major win?

Accepted Answer

Euphoric overconfidence (trader's high)

Answer

A 'trader's high' following a big win triggers dopamine-driven overconfidence that makes sound risk management feel unnecessarily restrictive.

(CPT) Certified Pro Trader Practice Test

(CPT) Certified Pro Trader Practice Test

CPT Trading Psychology & Discipline 3