Stock Trading Cheat Sheet 2026

The 30 highest-yield Stock Trading facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. A trader finds that a momentum strategy generated 18% annual returns in backtest but only 6% in live trading. This discrepancy is most likely due to: → Overfitting the strategy to historical data
2. What does high trading volume during a price breakout suggest? → The breakout has stronger conviction and is more reliable
3. Which statement best describes an out-of-the-money (OTM) put option? → The put's strike price is below the current stock price
4. How does increasing position size after a series of losses (known as 'revenge trading') violate sound risk management principles? → It increases exposure when account equity is reduced, amplifying the drawdown risk
5. Which provision of Dodd-Frank established the SEC's whistleblower program, offering awards of 10-30% of sanctions exceeding $1 million? → Section 922
6. What does 'best execution' require of broker-dealers when executing client orders? → Seeking the most favorable terms reasonably available for the customer's transaction
7. Value investors frequently utilize the DCF method to determine the fair value of a company or business. The acronym DCF stands for → Discounted Cash Flow
8. How should an Stock Trading professional present complex information to non-experts? → Translate into accessible language, use visuals, and check for understanding
9. Under FINRA Rule 3110, member firms are required to establish supervisory systems. Which of the following is a key component of this requirement? → Designating a registered principal to supervise each type of business activity
10. A bull call spread involves: → Buying a lower-strike call and selling a higher-strike call with the same expiration
11. What is a 'moat' in the context of fundamental stock analysis? → A sustainable competitive advantage that protects market share
12. What role does active listening play in Stock Trading practice? → It ensures accurate understanding, demonstrates respect, and improves outcomes
13. When a broker-dealer executes a trade as a 'principal,' this means: → The broker bought or sold securities from its own inventory account
14. What does a beta of 1.5 indicate about a stock's risk relative to the S&P 500? → The stock tends to move 1.5 times the magnitude of the market
15. During a post-trade review, a desk finds fill prices consistently worse than the mid-price at order submission. This most likely indicates a problem with: → Execution quality or routing
16. A protective put is best described as: → Buying a put option on a stock you already hold to limit downside risk
17. When evaluating a stock research report, which element most indicates potential bias? → Disclosure that the analyst's firm holds shares in the rated company
18. What is the primary purpose of a Monte Carlo simulation in trading research? → To model the range of possible outcomes by running thousands of random scenarios
19. What does the Stochastic Oscillator measure? → A security's closing price relative to its price range over a specific period
20. A company announces a 2-for-1 stock split. An investor who held 150 shares at $200 each now holds: → 300 shares at $100
21. What does the term 'algorithmic trading' refer to? → Using computer programs to execute trades based on predefined rules
22. Which document is a company required to file with the SEC within four business days of a material corporate event, such as a merger announcement? → Form 8-K
23. Implied volatility (IV) in options pricing represents: → The market's expectation of future price volatility embedded in option prices
24. What risk does using public Wi-Fi pose for traders accessing their brokerage accounts? → Man-in-the-middle attacks that can intercept login credentials and account data
25. What is the first step in risk assessment for Stock Trading professionals? → Identifying potential hazards and vulnerabilities in the specific context
26. A trader notices a stock forming a 'death cross' — the 50-day MA crossing below the 200-day MA. What is the conventional interpretation? → A bearish trend-change signal
27. A large institutional shareholder votes against a board director's re-election due to poor governance. This action is an example of: → Shareholder activism through engagement rather than public confrontation
28. Which type of research study design provides the strongest causal evidence for a trading strategy's effectiveness? → Randomized controlled experiment on live trading accounts
29. A trader who uses material non-public information about a pending merger to profit in the options market violates which primary rule? → SEC Rule 10b-5
30. What is the significance of the current ratio in fundamental analysis? → It assesses a company's ability to pay short-term obligations