Welcome to the Investing101 Chapter 5 exam. There will be 10 questions covering topics discussed in the previous chapter. How can you identify market tops?Noticing market liquidation (stock selling) for 1-3 weeksTracking stock activity for 4-5 days and spotting a market downturnPaying attention to the volume and average of the Dow 30, NASDAQ Composite, and S&P 500All of the aboveHow should you view your stock purchases?You need stocks in retirement, so be patientStocks award those that remain loyalStocks are a business, so sell without remorse and move onStocks are for fun, so enjoy yourselfWhat actions will help you stick to your exit strategy?Letting someone else make the decisions for youInitiating Stop-Loss OrdersNot selling stocks - ever - like Warren Buffett doesPlaying Devil's Advocate when making decisionsWhat are some considerations that should dictate your exit strategy?How long do you plan to own the securityThe level of risk you are comfortable handlingYour target exit price pointYour target exit price pointWhat are Trailing Stop Orders?An order that falls behind the actions on the stock marketAn order that sets a distance between the market price and a stop orderAn immediate order to sell a securityAn order that comes with a set of conditionsIf you make a profit on a stock trade, this means that:Someone else took a lossThe stock exchange lost moneyYour stock broker shares your profitYou must immediately pay taxes on the profitWhat does it take to recoup your losses on a losing stock?A smaller percentage gainA percentage gain larger than the lossA percentage gain about even to your lossThere is no percentage gain that will make up for your lossWhat is the best course of action when faced with two stocks, one gaining value, the other losing value?Sell the losing stock and hold onto the winning stockSell them both if you have a net profitBuy more of the losing stock to lower your average costSell the winning stock, take the profit, and wait for the losing stock to regain its valueWhat is the point of an exit strategy?Nothing. Who needs one anyway?It's a way to get out of investments before they kill your portfolioIt's a way to exit the market game and ensure you've wonIt's a way to deal with the chaos of the marketWhen is it advisable to disregard the "ride your winners, dump your losers" strategy?When you've got a really good feelingWhen the stock is in a hot sectorWhen you feel the stock market is at a top (sell!) or the stock is a value investment (buy!)When selling or buying a particular stock unbalances your portfolioTime is Up! Read These NextPublic Portfolios7-14 Bollinger Bands3-05 Buying on Margin Comments are closed.