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Question 1 of 6
Why is the preservation of capital the overriding goal of money management?CorrectIncorrect
Question 2 of 6
Is the statement “you can never go broke taking a profit?” true or false?CorrectIncorrect
Question 3 of 6
Consider a small trader whose trading plan calls for a maximum risk on a trade of 1% of equity. She wishes to open a position where the risk to her technical stop is 5% of equity if the smallest possible position of one contract is taken. She makes the decision to take the trade and adjust her stop so that the risk is only 1% of equity. What has she done wrong and what should she have done?CorrectIncorrect
Question 4 of 6
A trader has tested a trading methodology successfully on the last two years of price history for the market in which he proposes to use it. Why might this be insufficient and what should he have done?CorrectIncorrect
Question 5 of 6
Assume that you have $20,000 in total equity. You identify an investment opportunity with an entry price of $9.50. Your technical stop loss level is $9.12. If your desired maximum risk is 1% of equity, what is the largest position size, in shares, you should consider buying?CorrectIncorrect
Question 6 of 6
An investor opens a $20,000 trading account. The trader’s trading plan sets the maximum risk on any given trade to be 1% of equity. The trader’s first three trades result in three losses. Those trades were closed without question when the stop loss level was reached by price action. Each trade was closed before a new trade was initiated.
Assume the following:
The stop loss placement was technically based
Each trade’s stop loss was at 1% of equity
For the sake of simplicity, assume there are no trading costs, brokerage fees, slippage, etc.
Calculate the expected remaining equity after the third trade:CorrectIncorrect