Question 1

What does it mean when an asset is considered overbought in technical analysis?

Accepted Answer

An asset is considered overpriced and may reverse downwards.

Answer

An asset is worthless and should be sold immediately.

Answer

An asset is stable and will continue the same trend.

Answer

An asset is underpriced and may reverse upwards.

Question 2

What is the role of economic news in trading?

Accepted Answer

Economic news can cause significant market volatility and influence asset prices.

Answer

Economic news only influences long-term investments.

Answer

Economic news only affects stock prices.

Answer

Economic news has no effect on the market.

Question 3

What is diversification in trading, and why is it important?

Accepted Answer

Diversification involves spreading investments across different assets or markets to reduce risk.

Answer

Diversification eliminates all trading risks.

Answer

Diversification means concentrating investments in one asset.

Answer

Diversification is the practice of trading only stocks.

Question 4

What is a gap in trading, and what does it indicate?

Accepted Answer

A gap occurs when an asset's price opens significantly higher or lower than its previous close.

Answer

A gap is a type of market order.

Answer

A gap represents a price stabilization.

Answer

A gap indicates that the market is closed.

Question 5

How can you calculate the risk-reward ratio, and why is it important?

Accepted Answer

Risk-Reward Ratio = Potential Reward / Potential Risk.

Answer

Risk-Reward Ratio = Potential Risk / Potential Reward.

Answer

Risk-Reward Ratio is not calculable.

Answer

Risk-Reward Ratio is a fixed value in trading.

Question 6

What is a breakout in trading, and how can you identify it?

Accepted Answer

A breakout occurs when the price moves above resistance or below support with increased volume.

Answer

A breakout happens when prices do not change.

Answer

A breakout is a price stagnation.

Answer

A breakout is identified by low trading volume.

Question 7

What is the importance of a trading journal?

Accepted Answer

A trading journal helps traders track decisions, evaluate performance, and improve over time.

Answer

A trading journal is only for recording profits.

Answer

A trading journal tracks only market news.

Answer

A trading journal is unnecessary for successful trading.

Question 8

What is confluence in trading, and why is it important?

Accepted Answer

Confluence occurs when multiple technical signals align, increasing the probability of a successful trade.

Answer

Confluence is unrelated to trading strategies.

Answer

Confluence indicates a lack of trading opportunities.

Answer

Confluence means conflicting signals.

Question 9

What is a pullback, and how does it differ from a reversal?

Accepted Answer

A pullback is a temporary counter-trend move in a trend, while a reversal is a complete change in the trend's direction.

Answer

A reversal is a continuation of the trend.

Answer

A pullback represents a market crash.

Answer

Pullbacks and reversals are the same.

Question 10

How do you identify a fakeout in trading?

Accepted Answer

Fakeouts occur when the price moves past a key level but quickly reverses; look for low volume or lack of confirmation.

Answer

Fakeouts indicate a strong market trend.

Answer

Fakeouts are always preceded by high volume.

Answer

Fakeouts are never profitable.

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