Algo Trading Quiz (Beginner)

Welcome to your Algo Trading Quiz for Beginners

What is algorithmic trading primarily based on?

A) Automated trading using pre-programmed instructions

B) Manual execution of trades based on news events

C) Long-term investment in undervalued stocks

What is a common goal of algorithmic trading?

A) To maximize human intervention in trading decisions

B) To execute trades at optimal prices with minimal human input

C) To focus solely on fundamental analysis

What is a "trading algorithm"?

A) A programmed set of rules to execute trades automatically

B) A manual strategy for day trading

C) A set of instructions for analyzing a company’s financial statements

What is a key benefit of algorithmic trading over manual trading?

A) Increased emotional decision-making

B) Reliance on subjective market predictions

C) Faster execution of trades

What does "backtesting" mean in algorithmic trading?

A) Executing trades in real-time to test a strategy

B) Testing a trading algorithm on historical data to evaluate performance

C) Adjusting a strategy based on future market predictions

Which of the following is a common type of algorithmic trading strategy?

A) Arbitrage to exploit price differences across markets

B) Value investing based on intrinsic value

C) Long-term buy-and-hold investing

What is a "market order" in the context of algorithmic trading?

A) An order to analyze market trends before trading

B) An order to buy or sell at a specific price in the future

C) An order to buy or sell immediately at the current market price

What does "slippage" refer to in algorithmic trading?

A) The difference between expected and actual trade execution price

B) The profit earned from a successful trade

C) The delay in coding a trading algorithm

What is a common pitfall to avoid in algorithmic trading?

A) Diversifying across multiple asset classes

B) Over-optimizing a strategy based on historical data

C) Using technical indicators to inform decisions

What is the role of an API in algorithmic trading?

A) To design the user interface for trading platforms

B) To perform fundamental analysis of companies

C) To connect trading algorithms to market data and brokerage accounts

What is a "stop-loss order" in algorithmic trading?

A) An order to sell a stock automatically to limit losses

B) An order to buy a stock when it reaches a target price

C) An order to pause trading during high volatility