Quiz Issue HOMEWORK ALERT – Complete your homework before starting Class 3 Chapter 2 - Risk Management: Homework #2 Completing your homework is for your own benefit. Answers should be in Paragraph form. If you want to succeed as a trader, you have to show motivation & discipline. Name Email Welcome to your ACTIVE - DTC: #2 Quiz Name Email 1. What is float? Float is a drink with Soda and Ice Cream Float is the number of outstanding shares available to trade Float can greatly impact the volatility of a stock All of the Above 2. How long does a circuit breaker halt last? 10 minutes 15 minutes 5 minutes 60 minutes 3. What can cause a trading halt? A move of more than 10% in less than 5 minutes A company announcing breaking news SEC investigating a company All of the Above 4. What is the leading cause of failure as a Day Trader? The inability to manage risk The lack of capital The Pattern Day Trader Rule (PDT Rule) Not having the correct tools 5. Trader A says we can greatly improve our odds of success by selecting the right stocks and chart patterns. Trader B says we can greatly improve our odds of success by applying the fundamentals of risk management. Who is correct? Trader A Trader B Both A and B are correct Neither A nor B are correct 6. Trader A says if you have a high profit loss ratio you can’t be wrong a lot and make money. Trader B says that the profit loss ratio you trade with directly relates to the percentage of success required to be profitable. Who is correct? Trader A Trader B Both A and B are correct Neither A nor B are correct 7. ____ think about profit, Traders think of about risk. Engineers Actors Gambles Firefighters 8. Is it possible to gamble with your day trading account? No, day trading isn't gambling. No, your broker will prevent you from gambling. Yes, any trades where you don't establish a max risk and a profit target could be considered a gamble. None of the above 9. What is the min profit loss ratio before trading with real money? .5:1 1:1 1.5:1 2:1 10. If you trade with 33% accuracy, what profit loss ratio is required to be breakeven? 1:1 1.5:2 2:1 3:1 11. Ross is wrong more than 30% of the time but is still profitable. How is this possible? This is because his winners are larger than his losers on average Because with 60-70% accuracy, he only needs a 1:1 ratio to be profitable This is because he maintains a positive profit loss ratio All of the above 12. As a breakout trader, the best trades work almost immediately. If you aren't in the profit within 2min of entering a trade what should you consider doing? Doubling the position Setting a profit target Setting a max loss Selling or "bailing out" 13. What is averaging down? This is when moving average moves down This is when the stock indices move down This is when you buy more shares at a lower price to reduce your cost basis None of the above 14. Why is averaging down generally a bad idea for beginner day traders? It increases your position size on a trade that is going down. It is "throwing good money after bad money" It will often amplify losses at worse, and help you get out only breakeven at best. All of the above 15. How can you prevent revenge trading (aggressively trading to bounce back from a loss)? Ask your broker to set a max loss on your account so you can't take new trades if you are down more than X amount. Set a personal rule that if you are down more than X amount you walk away. Set a personal rule that after 3 red trades you walk away. All of the above 16. Why should a beginner trader trade in a Simulator for a min of 30 days? Trading in a simulator is about learning a skill. It's safer to learn a skill with SIM money. Trading in a simulator builds confidence & experience without risking real money. All beginners make mistakes, it's better to make them with SIM money. All of the above 17. When you graduate from trading in a simulator, how much size should you trade when you start for the first time with real money? The same size you were using in the trading sim. 1/2 the size as the trading sim. 100-200 shares for at least 1 week. None of the above. 18. What is your goal of the day? Making as much money as possible. Building a profit cushion with a low risk trade then walking away green as many days in a row as possible. Using trailing stop orders to try to maximize winners All of the above. 19. As a beginner trader, how many trades should you be taking each day? 1-3 3-5 5-10 10+ 20. What does it mean to balance your risk? Trade with roughly the same amount of risk on every trade. This means to look at your average loss amounts to determin your risk levels. This means to add your avg loss to avg profit to see the net positive or minus. All of the above.