Day Trading Competency Assessment — Questions and Answers

Question 1: What is a 'circuit breaker' in US stock market trading?

A tool brokers use to cut off losing traders
A regulatory halt triggered when major indexes drop by set percentages (Correct answer)
An SEC rule limiting short selling
A stop-loss order placed automatically by the exchange

Correct answer: A regulatory halt triggered when major indexes drop by set percentages

Circuit breakers are market-wide trading halts triggered when the S&P 500 drops 7%, 13%, or 20% in a single day to prevent panic selling.

Question 2: Which time period is commonly known as 'power hour' in US day trading?

11:00 AM–12:00 PM ET
2:00–3:00 PM ET
9:30–10:30 AM ET
3:00–4:00 PM ET (Correct answer)

Correct answer: 3:00–4:00 PM ET

The final hour of trading (3:00–4:00 PM ET) is called 'power hour' because volume and volatility typically surge as institutions rebalance and traders close positions.

Question 3: What is a 'breakout' in day trading?

When the price moves beyond a defined support or resistance level with increased volume (Correct answer)
When a stock price drops to zero
When you exit a trade
When the market opens

Correct answer: When the price moves beyond a defined support or resistance level with increased volume

A breakout occurs when price moves through a key level (support/resistance) with conviction, often accompanied by increased volume, signaling potential trend continuation.

Question 4: Which concept describes how the bid-ask spread widens around major economic news releases, and what risk does it create?

Spread normalization; it signals fair value has been reached
Spread expansion; it increases transaction costs and execution risk during volatile periods (Correct answer)
Spread inversion; it triggers circuit breakers
Spread compression; it benefits scalpers entering quickly

Correct answer: Spread expansion; it increases transaction costs and execution risk during volatile periods

Around major economic releases, market makers widen spreads to protect themselves from directional risk, which can dramatically increase entry and exit costs for day traders.

Question 5: A 'falling wedge' in a downtrend is generally considered what type of signal?

Bearish reversal
Neutral sideways signal
Bullish reversal (Correct answer)
Bearish continuation

Correct answer: Bullish reversal

A falling wedge in a downtrend is a bullish reversal pattern because converging downward trendlines show diminishing selling pressure before a breakout higher.

Question 6: What characterizes a 'liquidity vacuum' in day trading, and why is it dangerous?

A technical pattern predicting a trend reversal
A broker's margin call that drains account equity
A price zone with very few resting orders, allowing price to move rapidly through it (Correct answer)
A period where trading volume is extremely high, causing slippage

Correct answer: A price zone with very few resting orders, allowing price to move rapidly through it

A liquidity vacuum is an area in the order book with few limit orders, so when price enters this zone it can move very quickly, creating significant slippage for traders with stop orders.

Question 7: Which indicator would a day trader most likely use to confirm that a breakout is supported by institutional participation?

Bollinger Band width
Parabolic SAR
Stochastic Oscillator
Volume relative to the 50-period average volume (Correct answer)

Correct answer: Volume relative to the 50-period average volume

Comparing current volume to the average volume confirms whether large institutional players are behind a price breakout.

Question 8: In a 'double top' pattern, where is the traditional stop-loss placed for a short trade?

At the midpoint between the two tops
Just below the neckline
At the first peak level
Just above the second peak (Correct answer)

Correct answer: Just above the second peak

For a double top short trade, the stop-loss is placed just above the second peak because a move above it invalidates the pattern.

Question 9: VWAP stands for Volume Weighted Average Price. In day trading, it is most commonly used as:

A substitute for the opening range breakout level
A measure of after-hours trading volume
An intraday benchmark for institutional order flow and trade quality (Correct answer)
A long-term trend indicator spanning multiple weeks

Correct answer: An intraday benchmark for institutional order flow and trade quality

VWAP is an intraday indicator used by institutions as a benchmark; price above VWAP is considered bullish and below is bearish.

Question 10: What is the purpose of the 'Commitment of Traders' (COT) report for a day trader focusing on futures?

It reveals the net positioning of commercial hedgers, large speculators, and small traders on a weekly basis (Correct answer)
It provides real-time bid-ask spreads for futures contracts
It lists all margin calls issued by clearing houses that week
It shows intraday volume broken down by trade size

Correct answer: It reveals the net positioning of commercial hedgers, large speculators, and small traders on a weekly basis

The COT report, published by the CFTC weekly, shows how different categories of futures market participants are positioned, which can reveal when speculative positioning is extreme.

Question 11: What defines day trading?

Trading for an entire day
Buying and selling financial instruments within the same trading day, closing all positions before market close (Correct answer)
Trading only during daytime hours
Trading once per day

Correct answer: Buying and selling financial instruments within the same trading day, closing all positions before market close

Day traders open and close positions within the same trading session, avoiding overnight risk and seeking to profit from intraday price movements.

Question 12: After a string of five winning trades, a day trader doubles their position size without adjusting their risk parameters. This is most likely caused by:

Anchoring bias
Overconfidence bias (Correct answer)
Recency bias
Confirmation bias

Correct answer: Overconfidence bias

Overconfidence bias leads traders to overestimate their skill after a winning streak, causing excessive risk-taking.

Question 13: What is 'slippage' in the context of day trading?

The difference between expected and actual execution price (Correct answer)
A broker's error in recording a trade
An illegal practice of front-running orders
A pattern where price slides below support

Correct answer: The difference between expected and actual execution price

Slippage occurs when a trade executes at a different price than expected, often due to fast-moving markets or low liquidity.

Question 14: What is the primary purpose of pre-market trading hours?

To set the official opening price via auction
To execute only institutional block trades
To allow retail investors to trade before institutions
To react to overnight news and earnings before the regular session opens (Correct answer)

Correct answer: To react to overnight news and earnings before the regular session opens

Pre-market trading (4:00–9:30 AM ET) lets traders react to overnight earnings reports, economic data, or news before the regular session begins.

Question 15: What does the Relative Strength Index (RSI) primarily measure?

The number of advancing versus declining stocks
The speed and magnitude of recent price changes to evaluate overbought or oversold conditions (Correct answer)
The distance between two moving averages
The volume of shares traded relative to average

Correct answer: The speed and magnitude of recent price changes to evaluate overbought or oversold conditions

RSI measures the velocity of recent price movements on a scale of 0–100, signaling overbought (>70) or oversold (<30) conditions.

Question 16: What is the VWAP (Volume Weighted Average Price)?

A weather measurement
The highest price of the day
A type of trading platform
The average price weighted by volume throughout the trading day, used as a benchmark (Correct answer)

Correct answer: The average price weighted by volume throughout the trading day, used as a benchmark

VWAP calculates the average price weighted by volume, showing whether buyers or sellers have been in control. Institutions often use it as a trading benchmark.

Question 17: What happens to a day trader's PDT status if their account drops below $25,000?

Trading is suspended until the account is closed
They are fined by FINRA
They may be restricted to 3 round-trip trades per 5 rolling business days (Correct answer)
They must convert to a cash account immediately

Correct answer: They may be restricted to 3 round-trip trades per 5 rolling business days

If a PDT-flagged account falls below $25,000, the broker typically restricts the trader to 3 day trades per 5 rolling business days.

Question 18: Triangle patterns fall into one of three groups. That which follows does not have a triangle pattern?

The ascending triangle
The descending triangle
The symmetrical triangle
The asymmetrical triangle (Correct answer)

Correct answer: The asymmetrical triangle

Triangle patterns in technical analysis are generally classified into three main types: the ascending triangle (bullish), the descending triangle (bearish), and the symmetrical triangle (indecisive). These patterns are defined by specific converging or flat trendlines. 'Asymmetrical triangle' is not a standard or recognized classification within the established framework of chart patterns.

Question 19: Pivot points in day trading are calculated using the previous day's:

Open, Close, and Volume
Open, High, and Low
High, Low, and Close (Correct answer)
Close, Volume, and RSI

Correct answer: High, Low, and Close

Standard pivot points are calculated as the average of the prior day's High, Low, and Close prices.

Question 20: When a stock's price makes a new high but the RSI fails to confirm with a new high, this is called:

Bearish divergence (Correct answer)
A golden cross
Volume confirmation
A Doji signal

Correct answer: Bearish divergence

Bearish divergence occurs when price reaches a new high while RSI makes a lower high, warning of potential trend reversal.

Question 21: What does a risk-to-reward ratio of 1:3 mean?

Your stop-loss is 3 times your target
You risk $3 to make $1
You win 3 out of every 4 trades
You risk $1 to potentially make $3 (Correct answer)

Correct answer: You risk $1 to potentially make $3

A 1:3 risk-to-reward ratio means you risk $1 on a trade where the profit target is $3.

Question 22: What is 'market microstructure' and why is understanding it an edge for advanced day traders?

The regulatory framework governing after-hours trading
The structure of a company's balance sheet as analyzed intraday
The mechanics of how orders interact in the matching engine to create price discovery, spreads, and liquidity (Correct answer)
The macroeconomic factors that drive daily market trends

Correct answer: The mechanics of how orders interact in the matching engine to create price discovery, spreads, and liquidity

Market microstructure studies how the mechanics of order types, matching engines, market makers, and bid-ask dynamics influence price formation, giving traders insight into execution quality and short-term price behavior.

Question 23: Pick the right candle's A, B, C, and D points.

A=HIGH B=CLOSE C=OPEN D=LOW
A=HIGH B=OPEN C=CLOSE D=LOW (Correct answer)

Correct answer: A=HIGH B=OPEN C=CLOSE D=LOW

This question refers to the standard anatomy of a candlestick, which visually represents price movements over a period. For any candlestick, the 'HIGH' point (A) is the highest price reached, and the 'LOW' point (D) is the lowest price reached, both indicated by the wicks. The 'OPEN' (B) is the price at which trading began, and the 'CLOSE' (C) is the price at which trading ended for that period, forming the body of the candle. The correct answer accurately assigns these points based on standard charting conventions.

Question 24: A 'hammer' candlestick has which of the following characteristics?

Large real body with equal upper and lower shadows
Wide opening range with a close near the midpoint
Small real body at the bottom, long upper shadow, little to no lower shadow
Small real body at the top, long lower shadow, little to no upper shadow (Correct answer)

Correct answer: Small real body at the top, long lower shadow, little to no upper shadow

A hammer has a small real body at the top of the candle's range, a long lower shadow at least twice the body's size, and little to no upper shadow.

Question 25: Which of these is not a financial market sentiment indicator?

Long interest (Correct answer)
Bull ratios
Applied volatility
Bear ratios

Correct answer: Long interest

Financial market sentiment indicators are designed to measure the overall mood or attitude of investors towards a market or asset. Bull ratios, bear ratios, and implied volatility (often referred to as applied volatility) are all metrics used to gauge sentiment. 'Long interest' is not a standard, recognized sentiment indicator; while related to market activity (open long positions), it doesn't function as a composite sentiment gauge like the others.

Question 26: An Electronic Communication Network (ECN) in day trading is:

Software used to plot and analyze technical chart indicators
A government regulatory body that oversees all market transactions
An automated system that electronically matches buy and sell orders (Correct answer)
A type of brokerage account designed specifically for beginner traders

Correct answer: An automated system that electronically matches buy and sell orders

ECNs are automated trading systems that directly match buy and sell orders from various market participants, often providing faster execution and tighter bid-ask spreads.

Question 27: Which volume characteristic confirms a valid symmetrical triangle breakout?

Volume remains flat throughout the pattern
Volume declines sharply at the breakout bar
Volume only matters on bearish breakdowns
Volume spikes significantly on the breakout bar (Correct answer)

Correct answer: Volume spikes significantly on the breakout bar

A valid symmetrical triangle breakout is confirmed by a significant volume surge on the breakout bar, indicating strong conviction.

Question 28: A trader has a $10,000 account and uses the 2% risk rule. What is the maximum dollar amount they should risk per trade?

$500
$20
$100
$200 (Correct answer)

Correct answer: $200

2% of a $10,000 account equals $200, which is the maximum risk per trade under this rule.

Question 29: When scaling out of a winning position, a trader sells partial shares at multiple price levels. This technique primarily helps to:

Avoid pattern day trader restrictions
Reduce the bid-ask spread paid
Increase the average cost basis
Lock in partial profits while allowing remaining shares to capture further upside (Correct answer)

Correct answer: Lock in partial profits while allowing remaining shares to capture further upside

Scaling out secures profits on part of the position while keeping exposure for additional gains if the trend continues.

Question 30: An 'ascending triangle' is considered bullish because of which structural feature?

The lower trendline slopes upward while the upper trendline is flat (Correct answer)
Both trendlines slope upward at different angles
The upper trendline slopes upward while the lower is flat
Price contracts symmetrically toward an apex

Correct answer: The lower trendline slopes upward while the upper trendline is flat

An ascending triangle is bullish because higher lows (rising lower trendline) push against a flat resistance, indicating buyers are consistently entering at higher prices.

Question 31: How do you define "bearish"?

going down
It's going down
market going down (Correct answer)
decreasing

Correct answer: market going down

In financial markets, 'bearish' describes a sentiment or condition where prices are expected to fall, or are currently falling. A 'bear market' is characterized by a sustained period of declining prices, often driven by negative economic news or investor pessimism. Therefore, a bearish outlook implies that the market, or a specific asset, is trending downwards.

Question 32: What is 'slippage' and how does it affect risk management calculations?

Slippage is a broker fee added to each trade
Slippage refers to a missed trade signal
Slippage is the gap between bid and ask prices only
Slippage is the difference between expected and actual fill price, increasing real losses beyond planned risk (Correct answer)

Correct answer: Slippage is the difference between expected and actual fill price, increasing real losses beyond planned risk

Slippage occurs when orders fill at worse-than-expected prices, causing actual losses to exceed the planned risk amount.

Question 33: In day trading, 'leverage' amplifies both gains and losses. If a broker offers 4:1 intraday leverage and a trader uses it fully, a 1% adverse move results in a:

4% loss (Correct answer)
0.25% loss
10% loss
1% loss

Correct answer: 4% loss

At 4:1 leverage, a 1% adverse price move results in a 4% loss on the trader's actual capital.

Question 34: Which of the following best describes 'euphoric trading' and its associated risk?

Overtrading and over-sizing after a big winning day due to inflated confidence; high risk (Correct answer)
Using automated systems after a winning week; moderate risk
Reducing trades after strong gains to protect capital; low risk
Trading calmly after a planned strategy review; low risk

Correct answer: Overtrading and over-sizing after a big winning day due to inflated confidence; high risk

Euphoria after a large win inflates confidence and lowers risk perception, leading to reckless trades that can erase gains quickly.

Question 35: What is the primary purpose of a stop-loss order in day trading?

To increase position size
To delay trade execution
To lock in profits automatically
To limit the maximum loss on a trade (Correct answer)

Correct answer: To limit the maximum loss on a trade

A stop-loss order automatically exits a position when the price reaches a specified level, capping the trader's loss.

Question 36: What is a 'gap up' in day trading?

When a stock moves above its 52-week high during the session
When a stock's price jumps higher at open compared to the previous close (Correct answer)
When there is a large difference between bid and ask price
When volume surges during the last 30 minutes of trading

Correct answer: When a stock's price jumps higher at open compared to the previous close

A gap up occurs when a stock opens significantly higher than its previous closing price, often due to overnight news or earnings.

Question 37: The term "double top" is:

Reversal chart pattern when the price of a security increases to a certain level and then decreases from that level. It then increases again at that level before finally declining once again. (Correct answer)
Reversal chart pattern in which the price of an asset declines to a certain level and then rises from that level. Then it declines a second time at that level before ultimately turning back on.
Continuation chart pattern in which the price of an asset increases to a certain level before declining from that level. It then increases again at that level before eventually moving sideways.
A chart pattern that is indecisive when a security's price rises to a certain level, lowers to the floor, and then rises again. It then increases again at that level before finally declining once again.

Correct answer: Reversal chart pattern when the price of a security increases to a certain level and then decreases from that level. It then increases again at that level before finally declining once again.

A 'double top' is a bearish reversal chart pattern that forms after an uptrend, signaling a potential shift to a downtrend. It occurs when the price of an asset increases to a certain resistance level, declines, then rises again to approximately the same high level, forming two distinct 'tops.' The pattern is confirmed when the price subsequently declines and breaks below the support level established between the two tops.

Question 38: When placing a buy limit order, the order will execute only:

At any price the market is currently trading at
At the limit price or higher
At the limit price or lower (Correct answer)
Immediately regardless of the current price

Correct answer: At the limit price or lower

A buy limit order executes only at the specified limit price or lower, ensuring the trader never pays more than their maximum acceptable price.

Question 39: What does a 'death cross' signal on a daily chart?

An RSI reading below 20
A gap-down opening below the prior day's low
A bullish reversal after a prolonged downtrend
The 50-day SMA crossing below the 200-day SMA, signaling bearish momentum (Correct answer)

Correct answer: The 50-day SMA crossing below the 200-day SMA, signaling bearish momentum

A death cross occurs when the 50-day SMA crosses below the 200-day SMA, widely viewed as a long-term bearish signal.

Question 40: What is 'risk of ruin' in day trading?

The probability of losing a single large trade
The chance of a stock being delisted
The risk of a broker going bankrupt
The probability that a trader's account will be depleted to zero (Correct answer)

Correct answer: The probability that a trader's account will be depleted to zero

Risk of ruin is the statistical probability that a trader will lose all capital given their win rate, risk per trade, and edge.

Question 41: What is the purpose of a stop-loss order in day trading?

To lock in profits when a stock hits a target price
To prevent a position from being opened above a specific price
To automatically exit a losing position at a predetermined price to limit losses (Correct answer)
To protect gains by trailing the price as it rises

Correct answer: To automatically exit a losing position at a predetermined price to limit losses

A stop-loss order automatically sells a security when it reaches a specified price, helping traders limit their maximum loss on a trade.

Question 42: What is a 'dark pool' and how can it affect day trading decisions?

An after-hours trading session with reduced liquidity
A broker's internal margin account for risky trades
A private exchange for large institutional trades that can signal hidden supply/demand (Correct answer)
A type of short-selling facility for hedge funds

Correct answer: A private exchange for large institutional trades that can signal hidden supply/demand

Dark pools are private venues where large institutional orders are executed away from public exchanges, and unusually large prints appearing on the tape can signal institutional interest.

Question 43: A 'squeeze' on the TTM Squeeze indicator signals that:

Bollinger Bands have contracted inside Keltner Channels, indicating a pending volatility breakout (Correct answer)
The stock has gapped up at the open
The MACD histogram has crossed zero
Volume has spiked to an unusual level

Correct answer: Bollinger Bands have contracted inside Keltner Channels, indicating a pending volatility breakout

A TTM Squeeze fires when Bollinger Bands compress inside Keltner Channels, showing low volatility that typically precedes a large directional move.

Question 44: The Stochastic Oscillator compares a security's closing price to its price range over a given period. A reading above 80 generally indicates:

A gap-up opening is likely tomorrow
Volume is unusually low
The asset is in overbought territory (Correct answer)
A strong downtrend is forming

Correct answer: The asset is in overbought territory

A Stochastic reading above 80 signals overbought conditions, suggesting the price may be due for a pullback.

Question 45: Why should day traders avoid 'averaging down' into a losing position?

It is prohibited by SEC regulations
It reduces the number of available trades for the day
It triggers the wash-sale rule
It increases total risk exposure as the position size grows while price moves against you (Correct answer)

Correct answer: It increases total risk exposure as the position size grows while price moves against you

Averaging down adds capital to a losing trade, compounding losses if the price continues to fall, violating sound risk management.

Question 46: The MACD indicator is calculated by subtracting which two exponential moving averages?

12-period EMA from 26-period EMA (Correct answer)
50-period EMA from 200-period EMA
20-period EMA from 50-period EMA
5-period EMA from 10-period EMA

Correct answer: 12-period EMA from 26-period EMA

MACD is the 12-period EMA minus the 26-period EMA, with a 9-period signal line plotted on top.

Question 47: What does this three-day bearish trend reversal pattern?

One White Soldier and Two Black Crows
Bearish Inside Down (Correct answer)
Bearish Outside Down

Correct answer: Bearish Inside Down

The Bearish Inside Down is a three-day bearish reversal pattern. It starts with a long bullish candle, followed by a smaller bearish candle completely contained within the first (an inside day). The third day is a strong bearish candle that closes below the second day's close, confirming the reversal.

Question 48: What is the purpose of a 'daily loss limit' for day traders?

To limit the broker's commission charges
To ensure the trader reaches a minimum profit each day
To restrict the number of stocks that can be traded per day
To automatically stop trading after losses exceed a preset threshold (Correct answer)

Correct answer: To automatically stop trading after losses exceed a preset threshold

A daily loss limit halts trading once cumulative losses hit a set amount, preventing emotional revenge trading.

Question 49: Which trading scenario demonstrates proper risk management?

Doubling position size after a loss to recover quickly
Limiting each trade's risk to a fixed percentage of account equity (Correct answer)
Ignoring stop-losses on high-conviction trades
Using full account margin on a single trade

Correct answer: Limiting each trade's risk to a fixed percentage of account equity

Limiting risk to a fixed percentage per trade preserves capital and prevents account blow-ups from a string of losses.

Question 50: A trader refuses to take a valid short setup because they personally believe the company is a great business. This is an example of:

Emotional bias overriding systematic signals (Correct answer)
A sound macro overlay filter
Risk-adjusted position sizing
Fundamental-technical analysis integration

Correct answer: Emotional bias overriding systematic signals

Letting personal opinions about a company override clear technical signals introduces emotional bias that undermines a systematic approach.

Question 51: What is 'position sizing' in the context of day trading risk management?

Determining how many shares to buy based on risk tolerance (Correct answer)
Calculating the margin required by the broker
Setting the bid-ask spread for a security
Choosing the largest possible trade to maximize gains

Correct answer: Determining how many shares to buy based on risk tolerance

Position sizing determines the number of shares to trade so that the dollar risk aligns with the trader's risk limit.

Question 52: What is confirmation bias in trading?

A bias toward confirmed patterns
The tendency to seek out information that supports your existing view while ignoring contradictory evidence (Correct answer)
Confirming your order was placed
A type of technical indicator

Correct answer: The tendency to seek out information that supports your existing view while ignoring contradictory evidence

Confirmation bias causes traders to focus on data that supports their trade thesis while dismissing warning signs, leading to poor decisions.

Question 53: What is the value of industry certifications?

They validate knowledge, demonstrate commitment to the profession, and may be required by employers or regulations (Correct answer)
They are meaningless
They replace experience
They guarantee employment

Correct answer: They validate knowledge, demonstrate commitment to the profession, and may be required by employers or regulations

Certifications provide third-party validation of your knowledge and skills, showing employers and clients that you meet recognized professional standards.

Question 54: Which scenario best illustrates 'cognitive dissonance' in a day trader?

A trader who reduces size after a losing streak
A trader who follows their stop-loss rules consistently
A trader who believes in strict risk management but repeatedly skips stop-losses (Correct answer)
A trader who keeps a detailed journal of every trade

Correct answer: A trader who believes in strict risk management but repeatedly skips stop-losses

Cognitive dissonance is the mental discomfort from holding conflicting beliefs and actions, such as valuing discipline but behaving impulsively.

Question 55: A trader enters a long position at $50 with a stop-loss at $48 and a profit target at $56. What is the risk-to-reward ratio?

2:1
1:3 (Correct answer)
1:2
1:1

Correct answer: 1:3

Risk = $50 − $48 = $2; Reward = $56 − $50 = $6; Risk-to-reward ratio = $2:$6 = 1:3.

Question 56: Which of the following best describes 'drawdown' in day trading?

The daily profit target
The amount withdrawn from a brokerage account
The margin used for a leveraged position
The peak-to-trough decline in account value (Correct answer)

Correct answer: The peak-to-trough decline in account value

Drawdown measures the decline from an account's peak value to its lowest point before recovering.

Question 57: What does it mean when a stock's price 'walks the band' along the upper Bollinger Band?

The bands are too narrow to be useful
The stock is in a strong uptrend with sustained momentum (Correct answer)
Volume is declining relative to recent average
The stock is about to reverse sharply lower

Correct answer: The stock is in a strong uptrend with sustained momentum

Price hugging the upper Bollinger Band consistently indicates strong bullish momentum rather than an immediate reversal.

Question 58: In technical analysis, what does 'Average True Range' (ATR) measure?

The ratio of up-days to down-days in a period
The percentage of stocks above their 50-day moving average
The average volume of shares traded over a period
Market volatility by calculating average price range including gaps (Correct answer)

Correct answer: Market volatility by calculating average price range including gaps

ATR measures market volatility by averaging the true range (including overnight gaps) over a specified number of periods.

Question 59: A day trader uses the 9 EMA and 20 EMA. A bullish signal is triggered when:

The 9 EMA crosses above the 20 EMA (Correct answer)
The 9 EMA crosses below the 20 EMA
Price closes below both EMAs
Both EMAs are flat and horizontal

Correct answer: The 9 EMA crosses above the 20 EMA

The shorter 9 EMA crossing above the longer 20 EMA signals that short-term momentum has turned bullish.

Question 60: What is a trailing stop order?

A stop order that follows you
A permanent stop order
A stop-loss that automatically adjusts upward as the price rises, locking in profits while protecting against reversals (Correct answer)
An order placed at market close

Correct answer: A stop-loss that automatically adjusts upward as the price rises, locking in profits while protecting against reversals

Trailing stops move with the price in a favorable direction but stay fixed when the price moves against you, automatically locking in gains.

Day Trading Competency Assessment

The Day Trading Competency Assessment covers trading fundamentals, technical analysis, chart and candlestick patterns, technical indicators, risk management, trading psychology, and advanced trading strategies for aspiring active traders.

Questions

60 min

Time Limit

70%

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