Trading Jobs Day Trading Strategy 5

Question 1

What is the Pattern Day Trader (PDT) rule in the United States?

Accepted Answer

Accounts under $25,000 are limited to 3 day trades per 5 business days

Answer

The PDT rule requires a minimum $25,000 equity to make more than three day trades within five business days in a margin account.

Question 2

How does leverage affect a day trading strategy?

Accepted Answer

It amplifies both potential gains and potential losses

Answer

Leverage magnifies exposure, so it increases the size of both winning and losing outcomes.

Question 3

Which factor makes a stock more suitable for day trading?

Accepted Answer

High average daily volume and volatility

Answer

Liquid, volatile stocks offer the price movement and easy execution day traders need.

Question 4

What is a 'catalyst' in the context of a news-based day trading strategy?

Accepted Answer

An event like earnings or an FDA decision that drives sharp price moves

Answer

A catalyst is a news event that sparks volume and volatility, creating intraday trading opportunities.

Question 5

Why is backtesting valuable when developing a day trading strategy?

Accepted Answer

It tests the strategy's historical performance before risking real capital

Answer

Backtesting evaluates how a strategy would have performed on past data, helping refine it before live trading.

Trading Jobs Practice Test