Risk Management Subject Test — TradeSmart Academy

Question 1 of 20

What is risk to reward ratio?

A

The ratio of winners to losers

B

How much you risk compared to how much you aim to gain

C

Your account balance divided by position size

D

Leverage ratio

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Question 2 of 20

What is take profit?

A

An order to buy more

B

An order that automatically closes a winning trade at a target price

C

A type of stop loss

D

A risk calculation

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Question 3 of 20

What is risk per trade as a percentage recommended for beginners?

A

5-10%

B

1-2%

C

20%

D

0.1%

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Question 4 of 20

What is a trailing stop loss?

A

A fixed stop loss

B

A stop loss that moves with price to lock in profits

C

A mental stop loss

D

A limit order

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Question 5 of 20

What does diversification mean?

A

Putting all money in one asset

B

Spreading investments across different assets to reduce risk

C

Using multiple indicators

D

Trading multiple timeframes

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Question 6 of 20

Study this risk reward setup:

This trade shows Risk of 1 and Reward of 3 — is this a good trade to take?

A

No — reward should always equal risk

B

Yes — 1:3 risk reward is excellent

C

No — minimum RR should be 1:10

D

Yes but only if RSI confirms

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Question 7 of 20

Study this trade setup carefully:

Stop loss is placed below the swing low for a LONG trade — is this correct?

A

Yes — stop loss below swing low is correct for a LONG

B

No — stop loss should be above entry

C

No — stop loss should be at entry price

D

Yes but only for SHORT trades

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Question 8 of 20

What is the danger of high leverage?

A

It reduces profits

B

It amplifies both profits AND losses

C

It has no risk

D

It slows execution

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Question 9 of 20

What does RR of 1:3 mean?

A

Risk 3 to make 1

B

Risk 1 to make 3

C

Equal risk and reward

D

3% risk per trade

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Question 10 of 20

What is breakeven stop loss?

A

Stop loss below entry

B

Moving stop loss to entry price after trade goes in profit

C

Fixed stop loss

D

Mental stop loss

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Question 11 of 20

What is a good minimum risk to reward ratio?

A

1:0.5

B

1:1 or better

C

1:0.1

D

5:1

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Question 12 of 20

What is the 2% rule in trading?

A

Never lose more than 2% of your account on one trade

B

Always make 2% profit per trade

C

Use 2x leverage only

D

Trade only 2 times per day

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Question 13 of 20

What is the biggest mistake new traders make with risk?

A

Using stop losses

B

Risking too much per trade trying to get rich quickly

C

Trading too little

D

Using proper position sizing

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Question 14 of 20

What is position sizing?

A

The size of your trading screen

B

How much of your account you allocate to a single trade

C

The number of trades per day

D

Your leverage amount

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Question 15 of 20

What is leverage in trading?

A

A type of stop loss

B

Borrowing capital to increase position size

C

A risk management tool

D

A chart pattern

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Question 16 of 20

What is the purpose of a stop loss?

A

To guarantee profits

B

To limit the maximum loss on a trade

C

To increase position size

D

To set profit targets

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Question 17 of 20

What is a stop loss?

A

A target profit level

B

An order that automatically closes a losing trade at a set price

C

A type of leverage

D

A market order

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Question 18 of 20

Why is risk management more important than win rate?

A

It is not more important

B

A system with 40% win rate can be profitable with good RR

C

Win rate determines everything

D

Risk management only matters for beginners

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Question 19 of 20

What happens when you risk too much per trade?

A

You make more money

B

A few losing trades can destroy your account

C

Risk has no effect on account

D

You get better entries

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Question 20 of 20

What is portfolio management?

A

Buying one asset only

B

Diversifying and managing multiple positions to reduce overall risk

C

A type of chart analysis

D

Day trading strategy

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