FREE CTA Risk Management & Trading Strategies Questions and Answers

Question 1

What is the main goal of risk management in trading?

Accepted Answer

Minimize losses and protect capital

Answer

Maximize quick profits.

Answer

Double portfolio size monthly.

Answer

Increase market exposure.

Question 2

What does a stop-loss order do?

Accepted Answer

Sells shares to limit losses

Answer

Buys more shares automatically.

Answer

Freezes the trading account.

Answer

Delays trade execution.

Question 3

Which strategy involves diversifying investments?

Accepted Answer

Diversification

Answer

Concentration strategy.

Answer

Short-selling only.

Answer

Margin trading.

Question 4

What defines a risk/reward ratio?

Accepted Answer

Comparison of potential reward to risk

Answer

Net annual return.

Answer

Total trading volume.

Answer

Percentage of dividends.

Question 5

Which trading strategy profits from falling prices?

Accepted Answer

Short selling

Answer

Long position.

Answer

Swing trading.

Answer

Value investing.

Question 6

What is a trailing stop order?

Accepted Answer

Dynamic stop that moves with price

Answer

Fixed stop-loss.

Answer

Initial public offering.

Answer

Options expiration rule.

Question 7

What is position sizing in trading?

Accepted Answer

Determining trade size based on risk

Answer

Calculating company earnings.

Answer

Choosing market sectors.

Answer

Counting open trades.

Question 8

What is the purpose of a trading plan?

Accepted Answer

Provide structure and rules for trading

Answer

Increase emotional trading.

Answer

Maximize number of trades.

Answer

Follow social media trends.

Question 9

What type of risk is associated with unexpected global events?

Accepted Answer

Systematic risk

Answer

Unsystematic risk.

Answer

Personal risk.

Answer

Voluntary risk.