How This Works
The IG knowledge test contains 10 multiple choice questions and you need to answer at least 8 correctly to pass. You have 3 attempts. The questions test your understanding of spread betting and leveraged trading concepts.
For each question: read the scenario carefully, select your answer, then click Check My Answer to see if you're right and — crucially — understand exactly why. The working is shown step by step so you can handle any variation of numbers IG uses in the real test.
Watch out for "All of the above" options — IG uses these regularly. Always read every option before selecting.
The Scenario
The DAX has a sell price of 18,400 and a buy price of 18,402. You open a long (buy) position at £10 per point. The price rises by 10 points to a sell price of 18,410 and a buy price of 18,412. You close your position.
What is your profit?
When going long (buy), you open at the buy price and close at the sell price. The spread is IG's cost — it always works against you on entry.
Why the others are wrong: £100 ignores the spread (10 pts × £10). £110 and £120 use incorrect price combinations. The key: always buy at the higher price, sell at the lower price — the 2-point spread costs you on entry.
Golden rule: Long = open at buy price, close at sell price. Short = open at sell price, close at buy price. The spread always reduces your profit or increases your loss.
The Scenario
Vodafone shares are trading at a sell price of 95p and a buy price of 97p. You are considering opening a long (buy) spread bet at £50 per point with a guaranteed stop at 75, instead of buying £1,000 worth of physical Vodafone shares.
Why would the spread bet be a riskier trade than purchasing £1,000 worth of physical shares?
All three statements are true — so the answer is All of the above. Here's why:
Leverage means a small price movement creates a large profit or loss. Physical shares require the price to fall to zero before you lose your full investment. A leveraged spread bet can wipe out the equivalent amount with just a small adverse move.
Key concept: Leverage magnifies both profits AND losses. This is why the TEF formula uses just 0.3% risk per trade — to control exactly this risk mathematically.
About the Spread
The spread is the difference between the buy price and the sell price on any market. It represents the cost of your trade and varies between markets and at different times of day.
Which of the following factors can affect the size of the spread on a market?
All three factors affect the spread — so the answer is All of the above.
Liquidity refers to how easily a market can be traded. Highly liquid markets like the DAX or FTSE 100 have tight spreads. Less liquid markets like small-cap stocks have wider spreads.
Volatility increases risk for the provider, so they widen the spread to compensate — particularly around major news events.
Out of hours trading is offered by IG when the underlying market is closed. With fewer participants, spreads are wider to reflect the additional risk.
Practical tip: This is why the TEF formula trades during market hours on liquid instruments like the DAX — tighter spreads mean lower trading costs and better R:R on every trade.
The Scenario
You have an open long position on the FTSE 100. The market begins moving towards your guaranteed stop. Your account balance is running low, but you want to move your guaranteed stop further away to reduce the chance of it being triggered.
What might you need to do before moving your guaranteed stop further away?
The correct answer is A — deposit more funds. Moving a guaranteed stop further away increases your potential loss if the stop is triggered, which means IG requires more margin to cover that increased risk.
B is wrong — you don't need to inform IG in advance. You simply make the change on the platform if you have sufficient funds.
C is wrong — IG does not require any market analysis or justification to move a stop.
D is wrong — waiting for the stop to trigger before moving it defeats the entire purpose of a stop loss.
Remember: You also need to maintain more than 50% equity versus deposit on your account. If your balance is too low, the system won't allow the move until you top up.
The Scenario
You open a long (buy) position on the DAX at 18,500 and set a guaranteed stop 100 points below your opening level at 18,400. You decide you have set your stop too far away from the opening price and want to move it closer to limit your potential loss.
Can you move your guaranteed stop closer to the current market price?
The correct answer is B — Yes, but only when markets are open. You can move a guaranteed stop in either direction — closer or further away — but only while the market is open.
A is wrong — you cannot move it out of hours. The market must be open.
C is wrong — moving a guaranteed stop does not remove the guarantee. It remains guaranteed at its new level.
D is wrong — guaranteed stops can be edited. They are flexible as long as the market is open.
Note: Moving further away requires sufficient margin in your account. Moving closer has no margin constraint — you're reducing your risk, so IG is happy. The 1% premium is only charged if the stop is actually triggered, not when you move it.
About Position Closure
IG may close your open positions under certain circumstances — either automatically or at their discretion. It is your responsibility to monitor your account and understand when this can happen.
In which of these situations might IG close your open positions?
All three situations can result in your positions being closed — so the answer is All of the above.
Guaranteed stop triggered: Your position closes automatically at your chosen stop level — this is the guaranteed stop working as intended.
Equity below 50% of deposit: This is a margin call scenario. If your account equity falls below 50% of the margin required, IG may close positions to protect both you and them from further losses. This is why monitoring your account is essential.
Position expiry: Some spread bet positions have an expiry date. When the expiry is reached, the position closes automatically at the prevailing market price.
Important: It is always YOUR responsibility to monitor your positions and margin levels. IG closing your position at an unfavourable time is not a substitute for proper risk management.
About Spread Betting
Spread betting is a leveraged product. This means you only need to deposit a percentage of the total trade value as margin, giving you exposure to a much larger position than your deposit alone.
Spread betting gives you:
The correct answer is A — access to both magnified profits and losses. Leverage works in both directions — it is never one-sided.
B is wrong — spread betting gives no shareholder rights whatsoever. You do not own the underlying shares.
C is a trap answer — the most dangerous kind. Spread betting does NOT give greater profit potential with lower loss potential. The losses are just as magnified as the profits. Anyone who believes otherwise will be in serious trouble.
D is wrong — you never own any physical asset when spread betting. You are speculating on price movement only.
This is why risk management is everything. The TEF formula's 0.3% risk per trade exists precisely because leverage magnifies losses just as powerfully as profits. Control the downside and the upside takes care of itself.
About Market Exposure
When you spread bet, only a percentage of the total trade value is required as a deposit (margin). This is fundamentally different from buying physical assets where you pay the full market value upfront.
Spread betting allows you to:
The correct answer is A — greater market exposure with your initial outlay. This is the definition of leverage.
B is the exact opposite of the truth — spread betting gives MORE exposure, not less, for the same initial outlay.
C is wrong — spread betting never confers asset ownership of any kind.
D is wrong — attending shareholder meetings is impossible through spread betting. You have no connection to the company's shareholder register.
The analogy: Think of leverage like a mortgage. You put down 10% and control 100% of the asset's price movement. The difference is that with spread betting, if the market moves against you, losses accumulate just as fast as gains — with no physical asset to fall back on.
The Scenario
The GBP/USD has a sell price of 12,799 and a buy price of 12,800. You decide to open a long (buy) position at £10 per point, setting a guaranteed stop with a 1 point premium at 12,750. The next day the market reopens at 12,700.
How much would you lose on this position in total?
The guaranteed stop always closes your position at your chosen level — regardless of where the market gaps to. Then add the premium cost.
The market gapping to 12,700 is irrelevant — the guaranteed stop means you were closed at 12,750 regardless. Without it, your loss would have been 100 points × £10 = £1,000. The guaranteed stop saved you £490 (minus the £10 premium).
Key: The 1 point premium is charged when the guaranteed stop is triggered — not when you place or move it. Always add the premium cost to your stop loss distance when calculating your total potential loss.
The Scenario
You have £10,000 in your account and you buy Lloyds Banking Group shares which have a buy price of 54p. You open a long (buy) position at £10 per point, setting a guaranteed stop at 44p. The market reopens the following day at 24p. Ignoring the stop premium — how much money has your guaranteed stop protected you from losing?
How much has the guaranteed stop protected you from losing?
The saving is the difference between what you would have lost without a stop versus what you actually lost with the guaranteed stop.
A — £100 is the actual loss you took with the guaranteed stop — not the saving.
B — £300 is the total loss you would have suffered with no stop at all — not the saving.
D — £500 exceeds the total possible loss, so cannot be correct.
The pattern: "How much protected from losing" = loss without stop MINUS loss with stop. Never confuse this with "how much did you lose" (which is just the stop distance × stake).
Practice Complete! 🎉
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