Trading Jobs Day Trading Strategy 2 — Questions and Answers
Question 1: In a momentum breakout strategy, what confirms a valid breakout above resistance?
- A surge in trading volume on the breakout candle (Correct answer)
- A drop in volume as price rises
- A narrowing of the bid-ask spread only
- The breakout occurring at the market close
Correct answer: A surge in trading volume on the breakout candle
A genuine breakout is typically confirmed by a sharp increase in volume, signaling strong participation.
Question 2: What is a 'false breakout' in day trading?
- Price breaks a level then quickly reverses back inside the range (Correct answer)
- A breakout that happens overnight
- A breakout confirmed by three indicators
- Any breakout on low volatility days
Correct answer: Price breaks a level then quickly reverses back inside the range
A false breakout occurs when price pierces a key level but fails to hold and snaps back, trapping traders.
Question 3: Which strategy aims to profit from price bouncing between established support and resistance?
- Range trading (Correct answer)
- Trend following
- Scalping news spikes
- Gap-and-go
Correct answer: Range trading
Range trading buys near support and sells near resistance while price oscillates in a defined channel.
Question 4: In a 'gap-and-go' strategy, traders look to enter when a stock gaps up and then does what?
- Continues higher after holding above the opening range (Correct answer)
- Immediately fills the gap downward
- Trades flat for the first hour
- Reverses on the first red candle
Correct answer: Continues higher after holding above the opening range
Gap-and-go traders enter when a gapped-up stock continues its momentum higher after holding early support.
Question 5: What does a 'pullback' entry strategy involve?
- Buying a temporary dip within an established uptrend (Correct answer)
- Shorting at new all-time highs
- Entering only at the open
- Averaging down on losing positions
Correct answer: Buying a temporary dip within an established uptrend
A pullback strategy enters on a minor retracement in the direction of the prevailing trend for a better price.
Question 6: Which moving average is most responsive to recent price action, making it popular for day traders?
- Exponential moving average (EMA) (Correct answer)
- Simple moving average (SMA)
- Weighted yearly average
- 200-day SMA
Correct answer: Exponential moving average (EMA)
The EMA weights recent prices more heavily, reacting faster than the SMA to intraday moves.
Question 7: What is the purpose of identifying the 'opening range' in the first 15-30 minutes?
- To set high/low levels that act as breakout or breakdown triggers (Correct answer)
- To guarantee a profit before lunch
- To avoid all morning trading
- To calculate dividend yields
Correct answer: To set high/low levels that act as breakout or breakdown triggers
The opening range establishes early high and low boundaries traders use to plan breakout or breakdown entries.
Trading Jobs Day Trading Strategy 2
In a momentum breakout strategy, what confirms a valid breakout above resistance?