Day Trading Order Types & Trade Execution 2

Question 1

How does a stop-limit order differ from a regular stop-loss order?

Accepted Answer

After the stop price is triggered, a stop-limit places a limit order instead of a market order

Answer

Once the stop price is reached, a stop-limit order places a limit order rather than a market order, giving price control but risking non-execution if the market moves past the limit price quickly.

Question 2

Level 2 quotes provide day traders with:

Accepted Answer

The full order book showing bids and asks at multiple price levels

Answer

Level 2 data shows all outstanding bids and asks at various price levels from multiple market participants, giving traders visibility into supply and demand depth beyond just the best bid/ask.

Question 3

A 'Fill or Kill' (FOK) order means:

Accepted Answer

The entire order quantity must be filled immediately or the order is canceled entirely

Answer

A FOK order requires the entire quantity to be filled immediately and in full; if this cannot be done instantly, the entire order is canceled with no partial fills accepted.

Question 4

The 'ask' price in a stock quote represents:

Accepted Answer

The lowest price a seller is currently willing to accept

Answer

The ask (or offer) price is the minimum price at which a seller is willing to sell shares; it is always higher than the bid price, and the difference is the bid-ask spread.

Question 5

A trailing stop order differs from a fixed stop-loss in that it:

Accepted Answer

Automatically adjusts its trigger price as the stock moves in your favor

Answer

A trailing stop dynamically adjusts its trigger price as the stock moves in the profitable direction by a set dollar amount or percentage, locking in gains while providing downside protection.

Day Trading Practice Test

Day Trading Practice Test

Day Trading Order Types & Trade Execution 2