How to Trade — Execution & Platforms
Level 1 — Recognition
Time limit: 20 minutes
Total marks: 30
Section A — Multiple Choice (1 mark each)
Choose the single best answer.
Q1. A market order guarantees:
- (a) A specific price but not execution
- (b) Execution but not a specific price
- (c) Both price and execution
- (d) Neither price nor execution
Q2. A trader wants to buy only if the price drops to ₹95 or lower. The correct order type is a:
- (a) Buy market order
- (b) Buy limit order at ₹95
- (c) Buy stop order at ₹95
- (d) Sell limit order at ₹95
Q3. The bid-ask spread represents:
- (a) The broker's commission
- (b) The difference between the highest buy price and lowest sell price
- (c) The daily price range of a stock
- (d) The margin required to trade
Q4. Under SEBI's peak margin rules, intraday leverage for equity has been:
- (a) Increased significantly
- (b) Reduced, requiring higher upfront margin
- (c) Completely removed
- (d) Left unchanged
Q5. In position sizing, if you risk ₹2,000 per trade and your stop-loss is ₹10 per share below entry, the number of shares to buy is:
- (a) 20
- (b) 100
- (c) 200
- (d) 2,000
Q6. Hotkeys in a trading platform are primarily used to:
- (a) Increase leverage automatically
- (b) Execute orders faster with keyboard shortcuts
- (c) Reduce brokerage fees
- (d) Guarantee better fill prices
Q7. A margin call typically occurs when:
- (a) You place too many orders
- (b) Account equity falls below the required maintenance margin
- (c) The market closes
- (d) Your limit order gets filled
Q8. If a broker offers 5x leverage, a margin of ₹20,000 allows a position worth:
- (a) ₹4,000
- (b) ₹20,000
- (c) ₹1,00,000
- (d) ₹25,000
Q9. Auto square-off by a broker means:
- (a) The broker doubles your position
- (b) Open positions are force-closed (e.g., near market close or on margin shortfall)
- (c) Your profits are automatically booked daily
- (d) Charts are reset to default
Q10. Slippage is best described as:
- (a) A charting indicator
- (b) The difference between expected and actual execution price
- (c) The broker's login delay
- (d) A type of limit order
Section B — Matching (1 mark each, Q11 = 5 marks total)
Q11. Match each term (Column A) to its correct description (Column B).
| Column A | Column B | |
|---|---|---|
| (i) Alert/Notification | (P) Force-closing positions when margin is insufficient | |
| (ii) Watchlist | (Q) A trigger that informs you when price/condition is met | |
| (iii) Leverage | (R) A grouped list of instruments monitored together | |
| (iv) Square-off | (S) Borrowed capital to control a larger position | |
| (v) Limit order | (T) Order executed only at a specified price or better |
(Write answers as i–?, ii–?, etc.)
Section C — True / False with justification (2 marks each: 1 for T/F, 1 for reason)
Q12. A limit order may not get filled at all if the price never reaches the specified level.
Q13. Higher leverage reduces your risk of loss.
Q14. A wider bid-ask spread increases the cost of entering and exiting a trade.
Q15. Setting price alerts allows a trader to manage multiple positions without staring at the screen continuously.
Q16. Under SEBI peak margin rules, brokers can offer unlimited intraday leverage.
Q17. Proper charting platform setup (timeframes, indicators, layouts) has no effect on execution decisions.
Q18. A market order is generally preferred over a limit order when immediate execution is more important than getting an exact price.
END OF PAPER
Answer keyMark scheme & solutions
Section A (10 marks)
Q1 — (b) Execution but not a specific price. Market orders prioritise speed of fill; the price is whatever is available. (1)
Q2 — (b) Buy limit at ₹95. A buy limit executes at the limit price or lower, so it triggers only at ₹95 or below. (1)
Q3 — (b) Difference between highest bid and lowest ask. This is the definition of the spread. (1)
Q4 — (b) Reduced, requiring higher upfront margin. Peak margin norms lowered intraday leverage and enforced upfront collection. (1)
Q5 — (c) 200. Shares = Risk ÷ per-share risk = 2000 ÷ 10 = 200. (1)
Q6 — (b) Execute orders faster with keyboard shortcuts. (1)
Q7 — (b) Equity falls below maintenance margin. (1)
Q8 — (c) ₹1,00,000. Position = margin × leverage = 20,000 × 5 = 1,00,000. (1)
Q9 — (b) Positions force-closed near close or on margin shortfall. (1)
Q10 — (b) Difference between expected and actual execution price. (1)
Section B (5 marks)
Q11:
- i – Q (alert = trigger that informs when condition met)
- ii – R (watchlist = grouped monitored instruments)
- iii – S (leverage = borrowed capital)
- iv – P (square-off = force-close on margin shortfall)
- v – T (limit order = executes at specified price or better)
1 mark per correct match. (5)
Section C (14 marks)
Q12 — True (1). If the market price never touches the limit level, the order remains unexecuted; limit orders trade price certainty for execution uncertainty (1).
Q13 — False (1). Leverage magnifies both gains AND losses; it increases risk, not reduces it (1).
Q14 — True (1). You buy near the ask and sell near the bid; a wider spread means paying more to enter and receiving less to exit, raising round-trip cost (1).
Q15 — True (1). Alerts notify on price/condition triggers, freeing the trader from constant monitoring and enabling oversight of many positions (1).
Q16 — False (1). Peak margin rules cap intraday leverage and mandate upfront margin collection; leverage is limited, not unlimited (1).
Q17 — False (1). A clear chart setup improves reading of price/indicators and directly informs entry/exit timing and execution quality (1).
Q18 — True (1). When speed of fill matters more than exact price, a market order ensures immediate execution while a limit order may miss the move (1).
[
{"claim":"Q5 position size = 2000/10 = 200 shares","code":"result = (2000/10 == 200)"},
{"claim":"Q8 position value = margin 20000 * leverage 5 = 100000","code":"result = (20000*5 == 100000)"},
{"claim":"Round-trip cost from spread: buy at ask 100.05 sell at bid 99.95 costs 0.10 per share","code":"ask=100.05; bid=99.95; result = (ask-bid == 0.10)"}
]