Q4 - Trading Quiz - 3

Which statement below about leverage is not true?

• Leverage allows you to invest with small amount of money.

• With leverage, you can take control large sum of money with just small amount of capital.

• Leverage provides the ability to have higher trading power by borrowing from other investor in the market.

• Leverage provies the ability to trade large sum of money that is borrowed from the broker itself.

The relationship in between leverage and margin can be derived as follows:

Leverage = 1 / Margin Requirement

or

Margin Requirement = 1 / Leverage

Based on the formula above, what is the relationship between both leverage and margin?

• Inverse relationship

• Linear relationship

• Parabolic relationship

• Exponential relationship

Garret was looking through the product specification for FBX broker.

He noticed that not all products has the same leverage due to different margin requirements.

The margin requirement for these products are as follows:

GBPUSD - 2%

CHFJPY - 5%

EURAUD - 10%

Based on the margin requirement above, what is the leverage for each products?

• GBPUSD - 1:50

  CHFJPY - 1:20

  EURAUD - 1:10

• GBPUSD - 1:5

  CHFJPY - 1:2

  EURAUD - 1:1

• GBPUSD - 1:500

  CHFJPY - 1:200

  EURAUD - 1:100

• GBPUSD - 1:5

  CHFJPY - 1:20

  EURAUD - 1:100

Manisha noticed that the difference of bid and ask for several major products is lower than usual across all brokers.

What is the best explanation to explain such scenario?

• High liquidity translates to high demand. Thus, brokers will have to keep the differences low for high demand products in order to avoid losing competitive edge.

• The difference between bid and ask is lower due to high volatility in the market. It encourages people to trade more during such scenario.

• Low difference between bid and ask for major products are possibly due to collusion in between several major brokers in order to monopolize the forex market.

• Bid and ask is determined by a centralized system that governs the entire forex market. The changes will be based on policies that were introduced throughout each week.

Hanif has 2,000 USD which he decides to be used for investment.

He has surveyed several brokers in the market and the following is their offered leverage:

ZFX - 1:2000

XM - 1:1000

Pepperstone - 1:200

Based on the information above, what is his trading power for each broker?

• ZFX - 4,000,000 USD

  XM - 2,000,000 USD

  Pepperstone - 400,000 USD

• ZFX - 400,000 USD

  XM - 200,000 USD

  Pepperstone - 40,000 USD

• ZFX - 4,000,000 USD

  XM - 2,000,000 USD

  Pepperstone - 40,000 USD

• ZFX - 4,000,000 USD

  XM - 200,000 USD

  Pepperstone - 400,000 USD

Tabish opened several orders throughout the week. In order to assess his account condition, he listed out current account snapshot as below:

Equity: 1,000USD

Orders:

EURUSD - Required margin: 200USD

GBPUSD - Required margin: 250USD

AUDUSD - Required margin: 150USD

Based on the information above, what is his free margin?

• 400USD

• 166USD

• 600USD

• -400USD

Kush has been trading forex for the past few months based on market news.

His current account condition are as follows:

Equity - 800USD

USDJPY - Required margin: 150USD

EURUSD - Required margin: 200USD

USDTRY - Required margin: 800USD

Based on his broker's website, the margin call level is at 70% while Stop Out level is at 30%.

From his account condition above, what is his margin level and which scenario will be triggered?

• Margin level - 69.5%

  Margin call will be triggered.

• Margin level - 144%

  None of the scenario will be triggered.

• Margin level - 69.5%

  None will be triggered.

• Margin level - 144%

  Margin call will be triggered.

Which statement below with regards to rolling spot forex (CFD) is incorrect?

• Trading is done via centralized exchange.

• Involves trading the "contract" only.

• Requires a broker to "connect" you into the market.

• Does not require the underlying asset to trade.

Pikaa was trading on several major pairs for the week in anticipation of Federal Reserve policy results to be released.

Due to insider news with regards to the event above, the financial market experienced high volatility.

Below is her current account condition:

Equity: 800USD

Used margin: 2,000USD

If her broker sets margin call and stop out level at 90% and 50% respectively, what is her current margin level and what scenario will be triggered?

• Margin level - 40%

  All her orders will be closed automatically.

• Margin level - 40%

  No scenario will be triggered.

• Margin level - 250%

  A notification will be sent to her, urging for additional deposit into her account.

• Margin level - 250%

  No scenario will be triggered.

Which statement below best describes a stop out scenario?

• Ignoring margin call notification, which leads to automatic closure of all orders.

• A level to be triggered when the margin level goes higher.

• Notification will be sent to the trader, alerting the need to deposit additional funds.

• The level whereby it indicates the amount of funds available to open new positions.