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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
A trending market is:
Explanation
A trending market is one where the price of an asset is moving in one overall direction, whether up or down.
True or false: Uptrends are seen when there are higher highs and higher lows.
Explanation
Uptrends are usually noted by higher highs and higher lows while downtrends will show lower highs and lower lows.
Can a strategy with a low win-loss ratio still be profitable?
Explanation
A strategy with a low win-loss ratio can still be profitable if your average winning trade is significantly larger than the average losing trade (due to a higher risk-reward ratio).
For what reason(s) might a trend form? Select all answers that apply
Explanation
Trends can form for a variety of reasons, including an imbalance in supply and demand, a market responding optimistically or pessimistically to news, changes in economic factors, herding behaviour (where traders jump on the bandwagon of others following a trend), and institutional activity, such as trading decisions made by large hedge funds, that influences the behaviours of other market participants.
True or false: trends can develop on all time frames.
Explanation
Trends develop on all time frames, although what is considered an uptrend on a short-term timeframe can be nothing more than a counter trend on a longer-term time frame. Your focus when trend trading should be on the time frame that most closely matches your objectives.
Which of the following statements is true? A moving average is:
Explanation
A moving average helps traders to spot emerging trends by finding the average of various data points. It is calculated by adding up the prices for a certain number of periods (such as days or hours) and then dividing by the number of periods.
RSI is: Select all statements that apply.
Explanation
Relative Strength Index (RSI) is a key tool used in technical analysis that assesses the momentum of assets to gauge whether they are in overbought or oversold territory. It shows traders how quickly prices are moving in one direction and gives a number between 0 and 100. Generally, readings above 70 indicate overbought conditions and readings below 30 indicate oversold conditions.
Which of the following statements is true? Average Directional Index (ADX) is a technical indicator that shows how quickly prices are moving
Explanation
Average Directional Index (ADX) is a technical indicator used to determine the strength of a price trend in a financial market on a scale of 0 to 100. Unlike other indicators that indicate the direction of a trend, the ADX provides insights into the trend's strength or weakness. A value of more than 25 is considered a strong trend.
True or false? Pullback trading is a strategy where traders try to take advantage of temporary price reversals within an existing trend
Explanation
Pullback trading is a strategy where you try to take advantage of temporary price reversals (pullbacks) within an existing trend. The goal is to enter the market at a favourable price level and to follow the trend to its end.
Bollinger bands are:
Explanation
Bollinger bands are a form of technical price indicator invented by John Bollinger made up of three sets of bands that help traders to gauge market volatility. If the bands are wider, it means that a market is more volatile; while narrower bands mean that a market is more stable. Bollinger Bands are a lagging indicator, so they don’t predict price patterns – they follow current market movements.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.
The value of shares, ETFs and ETCs bought through a share dealing account, a stocks and shares ISA or a SIPP can fall as well as rise, which could mean getting back less than you originally put in. Past performance is no guarantee of future results.
CFD accounts provided by IG Markets Ltd, spread betting provided by IG Index Ltd and share dealing and stocks and shares ISA accounts provided by IG Trading and Investments Ltd. IG is a trading name of IG Markets Ltd (a company registered in England and Wales under number 04008957), IG Index Ltd (a company registered in England and Wales under number 01190902) and IG Trading and Investments Ltd (a company registered in England and Wales under number 11628764). Registered address at Cannon Bridge House, 25 Dowgate Hill, London EC4R 2YA. IG Markets Ltd (Register number 195355), IG Index Ltd (Register number 114059) and IG Trading and Investments Ltd (Register number 944492) are authorised and regulated by the Financial Conduct Authority.
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