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Trading Strategies: From Basics to Advanced

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Trading Strategies: From Basics to Advanced

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Questions and Answers

What is the primary concept behind the "Buy and Hold" strategy?

Buying a security and holding it for a long period, regardless of market fluctuations (correct)

Buying and selling within the same trading day to capture quick profits

Investing a fixed amount at regular intervals to average out the cost

Capturing short-term gains by taking advantage of market volatility

What is the benefit of Dollar-Cost Averaging?

Realizing profits from small price movements in the market consistently

Reducing the impact of market volatility and lowering the average cost per share over time (correct)

Capturing medium-term gains by strategically entering and exiting positions

Identifying strong price movements and making quick trading decisions accordingly

Which trading strategy involves making multiple trades within a single trading day?

Swing Trading

Position Trading

Day Trading (correct)

Momentum Trading

What is the goal of Breakout Trading?

Entering a position when the price breaks through a significant level of support or resistance (B) Signup and view all the answers

What is Reversal Trading?

Identifying points where a trend is likely to reverse (B) Signup and view all the answers

What does the Moving Average Crossover strategy involve?

Using two moving averages (one short-term and one long-term) to identify buying and selling points (B) Signup and view all the answers

What is Algorithmic Trading?

Using computer algorithms to execute trades based on pre-defined criteria (B) Signup and view all the answers

What does Arbitrage involve?

Exploiting price differences between markets or instruments (C) Signup and view all the answers

What is the purpose of Hedging?

Reducing risk by taking a position in a related security (B) Signup and view all the answers

Which advanced strategy involves using options contracts to speculate on price movements or hedge against other positions?

Options Trading (C) Signup and view all the answers