Stage 1
51 questions
What do you check first with a broker?
Whether it's listed in a regulator's public register, and which legal entity you're actually contracting with.
How does protection differ between securities and cash?
Securities are segregated assets and protected from insolvency. Cash is a deposit and covered by deposit insurance up to a limit.
What's a reliable warning sign?
Being contacted by someone pushing you to deposit or promising returns.
Why isn't a zero order fee automatically cheap?
Because the cost then usually sits in the spread or in payments from the execution venue.
Which type of cost matters most for long-term investors?
Recurring costs like account fees, since they act on the entire, growing holding.
Why does the cost of an account transfer matter?
Because it determines how freely you can switch providers later.
What happens to your stocks if your broker becomes insolvent?
They're your property, get carved out, and transferred. They aren't part of the bankruptcy estate.
What does investor compensation protect against?
Shortfalls from irregularities in custody, with much lower coverage than deposit insurance.
Why is the situation different at crypto exchanges?
Without segregated custody, there's often only a contractual claim, which becomes an ordinary claim in an insolvency.
Why should you answer the experience questions honestly?
Because they trigger a regulatory safeguard that locks out or flags risky products.
Where can you have money paid out to?
Usually only to a stored reference account in your own name.
What's the most important tax difference with foreign accounts?
Usually no automatic tax withholding, so the reporting obligation falls entirely on you.
What do you own with a crypto-backed note?
A debt security with issuer risk, not coins, even though coins are deposited as backing.
Why does a reserve audit alone tell you little?
Because it only shows existing holdings, not the liabilities standing against them.
What's the practical rule of thumb?
Leave only small amounts on the platform, hold larger amounts yourself.
What does a wallet actually hold?
The private keys. The balances themselves sit on the blockchain.
Why is backing up the seed phrase enough to cover every address?
Because modern wallets are hierarchically deterministic and derive every key from that one value.
When are you allowed to type in your seed phrase?
Only when restoring it into your own wallet. Any other request is an attempted scam.
What do you own when your coins sit on an exchange?
Usually a contractual claim against the company, not the coins themselves.
What does an interest offer on deposited coins imply?
That the holdings are being put to further use. Without that, there's no yield to generate.
What risk do you take on with self-custody?
Counterparty risk gets traded for the risk of your own mistakes, like losing a key or falling for phishing.
What does market depth in the order book show?
Cumulative volume at each price level, as a snapshot. Orders can be pulled at any time.
Why is the unrealized result misleading?
Because it keeps changing and only becomes a real result once you sell.
Is the displayed price your execution price?
Not necessarily. Depending on the venue and provider, the displayed and executed price can differ.
What does a limit order guarantee, and what doesn't it?
It guarantees a maximum price, but not that it executes at all.
Why can a market order execute worse than displayed?
Because with insufficient depth, it gets filled against worse price levels.
What's the downside of a stop-limit order?
In a fast-falling market, it can go unfilled entirely, offering no protection at all.
What happens with an overnight price gap?
The stop executes at the next available price, which can be considerably worse.
What follows from a wider stop distance?
A proportionally smaller position, to keep risk the same.
Why are round numbers a bad choice for a stop level?
Because stop orders cluster there, and brief overshoots catch them.
What do you lose by buying and immediately selling?
The spread, even if the price hasn't moved.
When do spreads widen?
During high volatility, low trading activity, and around news events.
How is effective trading cost measured?
As the gap between the execution price and the midpoint of the buy and sell price when the order was submitted.
Which type of cost matters more in the long run?
Ongoing costs, since they act every year on the entire, growing balance.
Why is the cost ratio alone incomplete?
Because trading costs inside the fund and tax effects aren't included.
Where do foreign-currency markups apply?
On purchase and sale, as well as on every distribution paid in a foreign currency.
Does currency risk disappear if an ETF is listed in euros?
No. What matters is the economic exposure of the underlying companies, not the listing currency.
What does currency hedging roughly cost?
Roughly the interest-rate gap between the currencies involved, continuously.
Why is the trade-off different for bonds than for stocks?
Because currency swings there can easily swamp the comparatively small underlying return.
Why is the opening phase unfavorable for an order?
Because volatility and spreads are highest there, as overnight information gets processed.
What happens when the home market of the underlying assets is closed?
Fair value gets derived from correlated instruments, which widens spreads and deviations.
What's the downside of continuous trading?
There's no opening auction to pool liquidity. Adjustments happen in thin periods and become jumpy.
Does a savings plan generate a higher return than a lump-sum investment?
Not on average. The lump sum is invested longer. The savings plan reduces the spread of outcomes instead.
Where does the savings plan's real value lie?
It removes recurring decision points, and with them, the opening for procyclical behavior.
What don't you learn in a demo account?
How you react to real losses. Loss aversion is tied to actual changes in your wealth.
Why are demo results too optimistic?
Because slippage, partial fills, and market impact usually aren't modeled.
What is paper trading well suited for?
Practicing process, rules, and keeping a journal.
Why a limit order slightly above the current price?
It combines a high likelihood of execution with a ceiling on the price.
What's the main problem with small orders?
Fixed costs make up a large percentage of the order value.
How do you check execution quality?
By comparing the execution price against a reference price at the moment of execution, across several orders.