CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Welcome to the quiz

  • Take the quiz as many times as you like. We'll record your best effort if you log in or sign up for IG Academy
  • There's no time limit, so you can spend as long as you like on each question.
Retake the quiz More courses
Question 1 of 10

After purchasing 30 shares of Food Giant ABC at $50 each, you decide to set a stop loss at $45, and a limit order at $70. What is your risk vs reward ratio for this trade?

  • A 1:1
  • B 1:2
  • C 1:3
  • D 1:4

Explanation

Assuming there's no slippage, your maximum loss on this trade is $150 ($5 x 30 shares) while your maximum profit is $600 ($20 x 30 shares). That is a ratio of 1:4.

Next
Question 2 of 10

Say you buy 100 shares of Company XYZ plc at $40 each, but you don't want to risk more than $800. At what price would you need to set your guaranteed stop loss?

  • A $30
  • B $32
  • C $42
  • D $48

Explanation

If each of your 100 shares depreciated in value by $8 you would reach your risk limit of $800.

Previous
Next
Question 3 of 10

Match the following assets to the risk category they belong to:

Clear

Explanation

CFDs -> High-risk
Shares -> Medium-risk
Bank account -> Low -> risk

Previous
Next
Question 4 of 10

What is your trading capital?

  • A The amount of money you can dedicate to trading
  • B The amount of profit you make through trading
  • C The amount of your money passing through a stock exchange
  • D The amount of money you lose through trading

Explanation

Trading capital is the amount of money you can dedicate to trading. It's vital that you don't risk more than you can afford to lose.

Previous
Next
Question 5 of 10

Which of the following is not one of the four main styles of trading?

  • A Swing trading
  • B Scalping
  • C Day trading
  • D Bi-annual trading

Explanation

Position trading or investing is the other main style of trading.

Previous
Next
Question 6 of 10

Match the trading style with the amount of trading activity it involves:

Clear

Explanation

Scalping -> Very high
Day trading -> High
Swing trading -> Medium
Position trading -> Low

Previous
Next
Question 7 of 10

Which of the following statements are SMART goals?

Please select all answers that apply
  • 'I want to make £5000 through trading in the next six months.'
  • 'I want to make enough money to buy a yacht.'
  • 'I want to increase my trading capital by 20% in the next five years.'
  • 'I want to make some extra money to supplement my income.'

Explanation

To be a SMART goal the figures must be specific, you should be able to measure your success, they ought to be attainable and relevant, and they need to have explicit timeframes.

Previous
Next
Question 8 of 10

In finance, how is risk defined?

  • A The potential for the stock market to crash
  • B The potential for the return on an investment to be lower than expected
  • C The potential for falling foul of your broker
  • D The potential for insider trading

Explanation

Risk includes the potential for loss - and if you're trading using leverage, the potential to lose even more than you put in.

Previous
Next
Question 9 of 10

You are less likely to be affected by systemic risk if you...

  • A Invest only in one specific asset
  • B Invest in a diverse range of assets
  • C Invest mainly in emerging markets
  • D Only trade forex

Explanation

Although systemic risk is difficult for anyone to protect themselves against, investors with diverse portfolios tend to not be as badly affected as those who invest in just one sector or asset type.

Previous
Next
Question 10 of 10

Please select one answer to complete the following sentence: 'Traders with effective risk management strategies...'

  • A ...never lose a trade.
  • B ...can still make money if they lose more trades than they win.
  • C ...trade in small sizes.
  • D ...have a large number of open positions.

Explanation

Traders with particularly effective risk management strategies can still make money even if they lose more trades than they win, as their winning trades, on average, should be more profitable than their losses.

Previous
See answers