Are You Ready To Trade? Take The Quiz

Everybody wants to get rich quick in the stock market. I’m not sure why there’s an emphasis on quick or rich, but we all know what is meant when we hear that comment. Haven’t they heard that if something can make you rich in a hurry, it can make you poor in a hurry as well?

One thing we all know is that it doesn’t work that way. Rich and quick are relative terms, aren’t they?

Below are questions, which I think any potential trader basically needs to answer before jumping in our blessed/cursed stock market to “get rich.” You need to score above 95 (my not so arbitrary cutoff number) to call yourself knowledgeable (which still has nothing to do with how successful you might be). Some questions are a little subjective.

All of these questions, and more, are covered during any of my training sessions with students. They are usually shocked at the volume of material that is covered and how truly vast this business of learning to trade the market can be.

Trading may not be rocket science, but you do have to know what a rocket looks like and what propels it.

Ready?

  1. What’s the ultimate difference between a trader and an investor?
  2. What is a swing trader vs. a day trader?
  3. What time frame do you need for a swing trade? (It’s not necessarily what you’ve read.)
  4. Between these indicators: MACD, stochastics, Bollinger, RSI, MFI, Volume, DMI, candles, SMA, price… which is most significant?
  5. If you had to pick only one indicator to work with, what would you choose?
  6. What’s the difference between a primary, intermediate, and a current trend?
  7. What’s the difference between scalping and day trading?
  8. What dollar amount would you take in a single trade with a $5,000, $20,000, or $50,000 account size.
  9. How much would you risk in each of those single trades?
  10. What should be your risk/reward ratio minimum?
  11. How significant is a P/E ratio to a trader and how would you use it in your trade? Or would you?
  12. Should you go long before or after an earnings release?
  13. If swing trading, (remember how you answered #3) which option contracts would you use: ITM, OTM, ATM?
  14. You are “sure” price is going to move up…which option do you use: ITM, OTM, ATM?
  15. You are “not so sure” price is going to move up…which option do you use: ITM, OTM, ATM?
  16. If you wrote a put or a call, what did you just do?
  17. When you see a huge spike in volume, 3x or 4x greater than most recent price action of recent trend, what are you then looking for? Why?
  18. You’ve entered a trade and price goes below the previous day’s low… under what circumstances would you exit that trade if a day trade or if it was intended to be a longer term trade?
  19. Why is the bond market so important to the stock market and what bond charts would you watch?
  20. Which asset classes are helped and/or hurt by a rising U.S. dollar?
  21. When is good news bad news and vice versa for the market and how can you tell from the market action?
  22. What does it mean when the news is very good but the market hardly moves? Or the opposite, when the news is bad and there’s no movement?
  23. What trumps everything, be it charts, fundamentals, economic outlook, etc. … there is only one element that is more powerful than anything?
  24. As a day trader or swing trader (again remember #3 answer) where do you set a sell stop if long?
  25. How are futures charts different from regular equity charts? (trick question)
  26. Define an uptrend and downtrend. How can you spot a reversal?
  27. Your VIX index is on its lower Bollinger and the SPX is on its upper Bollinger. Is this meaningful?
  28. Which is more important: the actual earnings release or the conference call that usually follows hours later? How would you trade that?
  29. You’re noticing all price action moving down but the VIX is stable… is this a clue to something?
  30. The market has advanced for a few days but the $BKX is not, or it may be reversing… what might you expect for the market?
  31. What is a trend-up or trend-down day… describe what I’d see on the minute chart action?
  32. Price breaks above resistance, but with less volume than previous day, what action do you take?
  33. You’re in a trade that has broken out then pulled back to the breakout point and advances to a new high… what do you do with your trade?
  34. Why do we care about how the Asian and European markets did overnight?
  35. Describe 3D (3 dimensional) charting? How do you use it? What is it you’re looking for?
  36. Why is your trade time frame so significant?
  37. The market has advanced and starts to consolidate, what would you expect next?
  38. The delta of your option is .75 … your stock moves up .95 cents in the day.. you paid 1.00 for your option… how much is your option worth?
  39. Same question as #38 but your stock price moves up 1.25, how much is your option worth now?
  40. You write options for the premium… what is the best price action to look for in the chart?
  41. How significant is a long-tailed hammer candle at support?
  42. Which indicators are the “leading” indicators… Stochastics, MACD, RSI, MFI, Price, Volume, Bollinger… any others you can think of?
  43. How would you hedge a 1000 share purchase of any stock?
  44. How much spread would you allow in an option purchase?
  45. What does open interest relative to options mean?
  46. You notice lumber, steel, iron, copper are all moving down… what industry would you look at for a trade?
  47. Congress is about to pass legislation that will affect capital gains negatively… what’s the market’s reaction? (A no brainer.)
  48. You hear on CNBC several stories about the growth prospects of a stock… what do you do?
  49. What is the first thing you should be doing when you pull up a chart, especially of a stock you don’t know?
  50. As a day trader or very short-term trader (several days) which time views should you use on your chart?

How did you do? I will respond to any questions, and good luck in your trading.

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About wallstreetpirate

Thirty-five years in financial services from insurance to registered investment adviser, and trader (now retired). Currently helping wanna-be traders and experienced alike as a trading coach and mentor. I've been in and around, on top of, in the middle of, and on the bottom of the stock market for a long, long time. Here's all I've learned: Trading is about behavior, psychology, and appreciating what the charts are saying technically. You can't fake it. Either you know what you're doing or you don't. And as much as this isn't rocket science, it takes knowledge and a skill set to survive.
This entry was posted in day trading, economy, investment quiz, options, position trading, psychology, speculation, Stock Market, stock market trading, swing trading, Trading Stock Market and tagged , , , , , , , , , . Bookmark the permalink.

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