Solved—The Answers to Plus500’s Trading Knowledge Assessment
Published February 28, 2022.
For traders searching for a new trading platform that offers a broad array of assets, perhaps Plus500 has been on your radar for a while.
But what about regulations?
This is a common concern for investors who stray from the big banks and well-known investment arenas. Well, for Plus500, you do not need to be too concerned since it is a highly regulated global fintech and trading services firm.
Since its launch in 2008, the company has gathered authorization and regulatory oversight by a wide range of organizations and institutions:
- Cyprus Securities and Exchange Commission (CySEC)
- Australian Securities and Investments Commission (ASIC)
- Israel Securities Authority (ISA)
- Seychelles Financial Services Authority (FSA)
- Monetary Authority of Singapore (MAS)
Remember, if you are in a European country, most nations in the region will fall under CySEC regulation.
Knowledge Questions—Plus500CY regulation
1. When you make a deposit of AU$1,000 and the instrument leverage is 1:100, what is the maximum leveraged amount you can trade with?
- AU$100,000 - correct answer
Because you put down $1,000 and the leverage ratio is 1:100, you can only trade with $100,000.
2. You have set a stop loss on your position. If the market moves rapidly and gaps through the price you have set, what will happen?
If your share price gaps lower and starts the trading session at $25, your stop-loss order will be converted into a market order. Your position will then be closed at the next available price, which is applied even if the security is trading way below your stop-loss level.
Knowledge Questions—Plus500AU regulation
Important now: your answers to the following questions will determine your eligibility to trade with Plus500.
1. In order to avoid account balance falling below minimum margin requirements, who is responsible for adding funds to your account?
- I am responsible - correct answer
- My bank
Although your trading platform might trigger a margin call, it is ultimately your responsibility to add money to your account when the balance slides below the minimum margin amount.
2. Where there is unexpected news in the market, it will be more likely the market will
- Become more volatile - correct answer
- Remain unchanged
- Shut down
If there is one thing that financial markets do not like, it is uncertainty, be it a geopolitical fallout or a central bank instituting a policy out of left field.
3. What is a spread?
- The difference between the bid price and ask price - correct answer
- When a company publishes its yearly reports
- Holding positions for long time periods
Whether you are trading stocks or forex, the spread is the difference between the two prices (bid and ask). The ask price will exceed the bid price for an asset in the market.
4. You have set a ‘Guaranteed Stop’ on your position with a guaranteed stop level. What will happen if the market gaps through the price you have set?
- My position is guaranteed to be closed at my guaranteed stop level - correct answer
- A stop loss cannot close my position
- My position is not guaranteed to be closed at my guaranteed stop loss
Like a stop-loss, a guaranteed stop is a kind of stop-loss that makes sure your position is always closed at your pre-selected price.
5. When you buy a share CFDs (Contract for Difference)
- You are entitled to the difference between the open rate and close rate but you do not own the underlying asset - correct answer
- You own stocks directly in you name exactly as if you purchase shares from a stock broker
- You have the same voting rights as a regular share holder
With Contracts for Difference (CFD) trading, you are trading based on the movement of the price. You will not take delivery of the asset you are buying and selling on the open market.
6. If you take a short CFD position
- You expect the price of instrument to fall - correct answer
- You expect the price of instrument to rise
- You always have less risk than a long position
A common strategy in the financial markets is by speculating that the price of a security, be it stocks or commodities, will fall. This is known as short-selling, or shorting.
7. The higher the leverage:
- The size of transaction I will be able to be open will be larger - correct answer
- Price changes have a greater impact on profit loss
- Smaller fluctuations may cause faster automatic closing of the transaction
- All answers are correct
Leverage trading is a popular speculative investment tool since you can initiate greater positions than the capital you have deposited when you open an account on Plus500. In fact, you only need to invest a small percentage of your position with a sizable leverage ratio.
Now that you have improved your investment knowledge with Plus500 questions, you can begin your investment journey today, whether it is adopting CFD gold trading or traditional index investing. As long as you take a slow-and-steady approach as you familiarize yourself with Wall Street or London, you can enjoy the fruits of the stock market.