Noesis
Level 1 — RecognitionTrading vs Investing & Styles

Trading vs Investing & Styles

⏱ 20 minutes25 marksprintable — key stays hidden on paper

Chapter: 4.1 Trading vs Investing & Styles Level: 1 — Recognition Time Limit: 20 minutes Total Marks: 25

Section A — Multiple Choice (1 mark each) [10 marks]

Choose the single best answer.

Q1. Which of the following best describes an investor's mindset compared to a trader's?

  • A) Focus on short-term price fluctuations
  • B) Emphasis on business fundamentals and long holding periods
  • C) Reliance on tick-by-tick charts
  • D) Aiming to close all positions before market close

Q2. A scalper typically holds a position for:

  • A) Several months to years
  • B) A few days to weeks
  • C) Seconds to minutes
  • D) One full trading session, closing at end of day

Q3. The defining rule of intraday / day trading is that:

  • A) Positions are held overnight for gap gains
  • B) All positions are opened and closed within the same trading day
  • C) Only long-term fundamentals matter
  • D) Trades last several weeks

Q4. Swing trading generally targets a holding period of:

  • A) Milliseconds
  • B) A few days to a few weeks
  • C) 5–10 years
  • D) Under one minute

Q5. Positional / trend trading primarily seeks to profit from:

  • A) Tiny intraday spreads
  • B) Sustained multi-week to multi-month directional trends
  • C) Random price noise
  • D) Closing positions within seconds

Q6. Momentum trading is based on the idea that:

  • A) Prices that are moving strongly tend to keep moving in the same direction
  • B) Prices always return to their average
  • C) Fundamentals are irrelevant only over decades
  • D) Volatility never matters

Q7. Mean-reversion trading assumes that:

  • A) A strong trend will continue forever
  • B) Prices tend to move back toward an average/fair value after deviating
  • C) Only overnight positions are profitable
  • D) News has no effect on price

Q8. Which style demands the highest time commitment and fastest reflexes at the screen?

  • A) Long-term investing
  • B) Positional trading
  • C) Scalping
  • D) Swing trading

Q9. A trader who is patient, dislikes constant screen-watching, and can tolerate multi-week holds is best suited to:

  • A) Scalping
  • B) Swing or positional trading
  • C) High-frequency arbitrage
  • D) Second-by-second day trading

Q10. Which is the most realistic annual return expectation for a disciplined retail participant?

  • A) A guaranteed 200% every year
  • B) A modest, variable return that beats a savings account but carries risk of loss
  • C) Zero risk with 50% monthly gains
  • D) Doubling capital every week indefinitely

Section B — Matching (1 mark each) [6 marks]

Q11–Q16. Match each style in Column X with its defining characteristic in Column Y. Write the letter.

Column X (Style) Column Y (Characteristic)
Q11. Scalping A. Hold days–weeks to catch a "swing" in price
Q12. Intraday B. Buy assets deviating below fair value, expecting a return to average
Q13. Swing trading C. Dozens of trades daily, tiny per-trade profit, positions in seconds–minutes
Q14. Positional trading D. No overnight risk; all trades squared off same day
Q15. Momentum trading E. Ride strong existing moves; buy strength, sell weakness
Q16. Mean-reversion F. Hold weeks–months to ride a broad trend

Section C — True/False WITH Justification (1.5 marks each: 0.5 T/F + 1 justification) [9 marks]

State True or False AND give a one-line justification.

Q17. "Scalping requires very little capital and time compared to all other styles."

Q18. "An investor and a day trader use fundamentally the same holding period."

Q19. "Momentum and mean-reversion strategies rest on opposite assumptions about price behaviour."

Q20. "Choosing a trading style should ignore your personality and risk tolerance."

Q21. "Positional trading generally requires monitoring the screen every second of the day."

Q22. "Expecting a fixed, risk-free 100% return every month is a realistic goal for beginners."

End of Paper

Answer keyMark scheme & solutions

Section A — MCQ (1 mark each)

Q1. B — Investors emphasise fundamentals and long horizons; A/C/D describe trader behaviours. (1)

Q2. C — Scalping = seconds to minutes, the shortest hold of all styles. (1)

Q3. B — "Intra-day" literally means within the day; all positions squared off same session. (1)

Q4. B — Swing trades capture short-to-medium moves over days–weeks. (1)

Q5. B — Positional/trend trading rides sustained multi-week/month trends. (1)

Q6. A — Momentum = "the trend is your friend"; strength persists. (1)

Q7. B — Mean-reversion bets on a pullback toward the average/fair value. (1)

Q8. C — Scalping is the most screen-intensive and reflex-dependent. (1)

Q9. B — Patience + tolerance for multi-week holds ⇒ swing/positional, not fast scalping. (1)

Q10. B — Realistic returns are modest, variable, and carry loss risk; A/C/D are unrealistic promises. (1)

Section B — Matching (1 mark each)

Q Answer Why
Q11 C Scalping = many tiny trades, seconds–minutes.
Q12 D Intraday = no overnight risk, squared off same day.
Q13 A Swing = days–weeks to catch a swing.
Q14 F Positional = weeks–months riding a trend.
Q15 E Momentum = buy strength, sell weakness.
Q16 B Mean-reversion = buy below fair value expecting return to average.

(6 marks; 1 each)

Section C — True/False with Justification

Q17. False (0.5) — Justification: Scalping demands the most time/attention and often needs sufficient capital plus low-cost execution to make tiny margins worthwhile. (1)

Q18. False (0.5) — Investors hold months–years; day traders close within a single day. Their horizons are opposite. (1)

Q19. True (0.5) — Momentum assumes moves persist; mean-reversion assumes moves reverse toward the mean — opposite premises. (1)

Q20. False (0.5) — Style must fit personality, patience, and risk tolerance to be sustainable. (1)

Q21. False (0.5) — Positional trading uses longer horizons and requires far less second-by-second monitoring than scalping/intraday. (1)

Q22. False (0.5) — No fixed, risk-free high return exists; returns are variable and risky. (1)

Total: 25 marks

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  {"claim":"Section B has 6 one-mark matching items totalling 6 marks","code":"secB=6*1; result = secB==6"},
  {"claim":"Section C has 6 items at 1.5 marks totalling 9 marks","code":"secC=6*Rational(3,2); result = secC==9"},
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