1. What is a market order?
A) An order to buy or sell a currency at a specific price
B) An order to buy or sell a currency immediately at the current market price
C) An order that expires after a certain time
D) An order to cancel an existing trade
Answer: B) An order to buy or sell a currency immediately at the current market price
2. What does a limit order do?
A) Executes a trade at the market price
B) Sells a currency at a higher price or buys it at a lower price
C) Closes a trade to prevent further loss
D) Automatically converts one currency to another
Answer: B) Sells a currency at a higher price or buys it at a lower price
3. What is a stop-loss order used for?
A) To guarantee profits on a trade
B) To minimize losses by closing a trade at a specified price
C) To set a target price for taking profits
D) To automatically open a new trade
Answer: B) To minimize losses by closing a trade at a specified price
4. When would a trader typically use a limit order?
A) When they want to ensure immediate execution
B) When they believe the market price will reach a specific level
C) When they want to prevent losses
D) When they want to change their account settings
Answer: B) When they believe the market price will reach a specific level
5. How does a stop-loss order help traders?
A) It helps increase their leverage
B) It helps manage risk by setting a price to exit a losing trade
C) It guarantees profits
D) It allows trading on margin
Answer: B) It helps manage risk by setting a price to exit a losing trade
6. What happens if the market price hits a stop-loss order?
A) The order is ignored
B) The order is executed at the next available market price
C) The order is canceled
D) The order changes to a market order
Answer: B) The order is executed at the next available market price
7. What is a buy limit order?
A) An order to sell at the market price
B) An order to buy at a specified price that is lower than the current market price
C) An order to buy at a specified price that is higher than the current market price
D) An order to sell at a specified price
Answer: B) An order to buy at a specified price that is lower than the current market price
8. Which of the following is true about a sell stop order?
A) It is placed above the current market price
B) It is used to enter a trade after the price has declined to a certain level
C) It is executed immediately at the market price
D) It guarantees a specific profit margin
Answer: B) It is used to enter a trade after the price has declined to a certain level
9. What is the main advantage of using limit and stop-loss orders?
A) They allow traders to act emotionally
B) They help traders automate their trading strategies and manage risks
C) They guarantee a profit on every trade
D) They eliminate the need for market analysis
Answer: B) They help traders automate their trading strategies and manage risks
10. Can a trader use both limit and stop-loss orders for the same trade?
A) Yes, to manage both entry and exit points
B) No, they must choose one or the other
C) Yes, but only for buy orders
D) No, it is against trading rules
Answer: A) Yes, to manage both entry and exit points