CMT Level 2 - Sample Exam
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1. The MTA Code of Ethics applies to:
a. Members only
b. Affiliates only
c. CMT candidates
d. All of the above: The MTA Code of Ethics applies to:
d. All of the above
2. An MTA Member or Affiliate using the MTA mailing list to
send _____________ would not be in
violation of the Code of Ethics:
a. Research reports
b. A free membership to a club
c. Charting discount coupons
d. CMT Newsletter: An MTA Member or Affiliate using the
MTA mailing list to send ____________would not be in
violation of the Code of Ethics:
d. CMT Newslette
3. Which of the following would not be a violation of the Code
of Ethics in a published research report or
statement?
a. Estimates which are subject to change
b. Inaccurate information
c. Statements inconsistent with the accumulated knowledge
of technical analysis
d. Statements which disparage the work of other analysts:
Which of the following would NOT be a violation of the code
of ethics in a published research report or
statement?
a. Estimates which are subject to change
4. What is the position of the MTA Code of Ethics as it pertains
to trading on inside information?
a. Under no circumstances is insider trading allowed
b. The Code of Ethics takes no position on insider trading
c. Insider trading which violates the laws/regulations of any
governmental or regulatory agency is
prohibited
d. Inside information may be disseminated but not acted
upon: What is the position of the MTA Code of Ethics as it
pertains to trading on inside information?
c. Insider trading which violates the laws/regulations of any
governmental or regulatory agency is
prohibited
5. What is the MTA's position with respect to knowledge of
client and employer information:
a. Only knowledge of current clients and employers must
be kept in confidence
b. The MTA Code of Ethics does not apply to confidentiality
of unlawful client or employer activity
c. The MTA Code of Ethics is silent on client and employer
confidentiality so members must refer
to laws/rules promulgated by regulatory authorities
d. All information pertaining to any lawful activity of past
or present clients or employers must be
kept in confidence: What is the MTA's position with respect to
knowledge of client and employer information:
d. All information pertaining to any lawful activity of past or
present clients or employers must be kept in
confidence
6. According to the MTA Code of Ethics, what prohibitions
MUST be adhered to after making a buy or sell
recommendation?
a. Allow adequate time for clients to act on
recommendations before the analyst acts on the
recommendation
b. Analysts must give clients and their employer adequate
time to trade, but the analyst's family
members are under no such restriction
c. Analysts may effect trades for their own account even if
their employer has not had time to act
on their recommendation
d. Insider trading activity is the subject of SEC regulations,
therefore the MTA Code of Ethics is
silent on this issue: According to the MTA Code of Ethics,
what prohibitions MUST be adhered to after making a buy or
sell
recommendation?
a. Allow adequate time for clients to act on recommendations
before the analyst acts on the
recommendation
7. What position does the MTA take on plagiarism?
a. Analysts can never copy other analysts work
b. Other analysts work can be copied with permission in
advance
c. If the author of the original work is deceased, this work
cannot be copied since permission
cannot be obtained
d. Research reports which are not direct copies but use
substantially the same language as other
analysts work would be permissible: What position does the
MTA take on plagiarism?
b. Other analysts work can be copied with permission in
advance
8. What steps must analysts take in introducing new methods 12. Which of the following would NOT be true in designing a
of technical analysis under the MTA Code trading system utilizing bands?
of Ethics? a. Buy when prices penetrate the upper band
a. All new techniques must be fully documented even if b. Close out longs when prices reverse and go below the
proprietary methods must be disclosed to center of the band
do so c. Close out shorts when prices reverse and go below the
b. New procedures must be documented as to procedure center of the band
and rationale d. Sell when price breaks below the lower band: Which of
c. New procedures must be supported by adequate back the following would NOT be true in designing a trading
testing confirmed by at least technician system utilizing bands?
d. New methods need not be consistent with the c. Close out shorts when prices reverse and go below the
accumulated knowledge of the field of technical center of the band
analysis: What steps MUST analysts take in introducing new 13. In trend-based trading systems, what is the major
methods of technical analysis under the MTA Code of determinant of trading activity (i.e., how often buy
Ethics? or sell signals are generated)?
b. New procedures must be documented as to procedure and a. Smoothing technique used
rationale b. Distance between bands
9. Which of the following must every MTA Member and Affiliate c. Selection of trend speed
comply with? d. Use of a scaling factor: In trend-based trading systems,
a. Rules promulgated by the MTA Board of Governors what is the major determinant of trading activity (i.e., how often
b. MTA Constitution buy or
c. MTA By-laws sell signals are generated)?
d. All of the above: Which of the following MUST every MTA c. Selection of trend speed
Member and Affiliate comply with? 14. A trend-based trading system where the trend is the
d. All of the above average of a pre-determined number of previous
10. Which of the following MUST be adhered to in published or days' (n) closing prices is:
written analytical reports? a. Point and figure
a. Statements must be consistent with available evidence b. Simple moving average
b. Statements must be consistent with the accumulated c. Linear regression slope
knowledge of technical analysis d. N-day breakout: A trend-based trading system where the
c. Statements may not indefensibly disparage the work of trend is the average of a pre-determined number of previous
other analysts days' (n) closing prices is:
d. All of the above: Which of the following MUST be adhered b. Simple moving average
to in published or written analytical reports? 15. A trend-based trading system where the trend is the
d. All of the above weighting of the recent closing prices by a
11. Which of the following would BEST improve the profitability smoothing constant:
of a trend-based trading system? a. Point and figure
a. Use of additional trend periods b. Simple moving average
b. Increase the delay in taking action after a trade signal is c. Exponential smoothing
given d. N-day break: A trend-based trading system where the trend
c. Utilize support and resistance lines is the weighting of the recent closing prices by a
d. Utilize candlestick charts instead of bar charts: Which of smoothing constant:
the following would BEST improve the profitability of a trend- c. Exponential smoothing
based trading system? 16. A trend based trading system where the trend is the slope
b. Increase the delay in taking action after a trade signal is of a straight line found using a least squares
given regression:
a. Point and figure
b. Simple moving average
c. Linear regression slope
d. N-day breakout: A trend based trading system where the
trend is the slope of a straight line found using a least squares
regression:
c. Linear regression slope
17. A trend based trading system where signals occur when the 23. Which of the following is NOT true of the Relative Strength
current price reaches a new high or low: Index
a. Point and figure a. It is scaled from 0 to 100
b. Simple moving average b. It is more volatile than simple measures of momentum
c. Swing breakout c. It uses all the price values in a time period
d. N-day breakout: A trend based trading system where d. It is frequently used to determine overbought and
signals occur when the current price reaches a new high or oversold levels: Which of the following is NOT true of the
low: Relative Strength Index
c. An N-day breakout b. It is more volatile than simple measures of momentum
18. A trend based trading system where signals occur when the 24. Which of the following is the MOST likely use of an
current high or low price exceeds the oscillator in a trading system:
previous swing high or low price: a. To forecast future price levels
a. Point and figure b. As a timing tool
b. Simple moving average c. To hedge other positions
c. Swing breakout d. To determine position sizes: Which of the following is the
d. N-day breakout: A trend based trading system where MOST likely use of an oscillator in a trading system:
signals occur when the current high or low price exceeds the b. As a timing tool
previous swing high or low price: 25. What two characteristics MUST a cycle possess in order for
c. Swing breakout it to be traded rationally:
19. A trend based trading system where signals occur when the a. There must be a reason for its existence and it must have
current high or low price exceeds the regular intervals between peaks
previous high or low price: b. There must be confidence that the cycle will continue
a. Simple moving average and it must be synchronized with another
b. Point and figure cycle
c. Swing breakout c. There must be a reason for its existence and confidence
d. N-day breakou: A trend based trading system where signals that it will continue
occur when the current high or low price exceeds the d. There must be a way to forecast it and it must be
previous high or low price: synchronized with another cycle: What two characteristics
b. Point and figure MUST a cycle possess in order for it to be traded rationally:
20. Technicians refer to the speed of price movement as: c. There must be a reason for its existence and confidence that
a. Volume it will continue
b. Trend 26. Which of the following is an INCORRECT definition of cycle
c. Slope or momentum terminology?
d. Ratio of two prices: Technicians refer to the speed of price a. Amplitude - the height of the wave (cycle)
movement as: b. Period - the time needed to finish one wave (cycle)
c. Slope or momentum c. Frequency - the number of cycles that repeat every 360°
21. Which of the following is NOT a momentum indicator: d. Phase - a measure of separation between the top and
a. Relative strength bottom of a wave (cycle): Which of the following is an
b. Difference between price and moving average INCORRECT definition of cycle terminology?
c. Difference between two moving averages d. Phase - a measure of separation between the top and
d. Trident index: Which of the following is NOT a momentum bottom of a wave (cycle)
indicator: 27. How can one identify the existence of a cycle?
d. Trident index a. Remove price trend
22. What is the general term for rate-of-change momentum b. Switch time frames
indicators: c. Use only period extremes
a. RSI d. None of the above: How can one identify the existence of a
b. Stochastic cycle?
c. Oscillators a. Remove price trend
d. MACD: What is the general term for rate-of-change
momentum indicators:
c. Oscillators
28. Which of the following is NOT true in chart interpretation:
a. A price chart is a representation of human behavior
b. The goal is to find consistent, reliable and logical
patterns
c. Chart patterns can be caused by commonly used trading
techniques
d. The behavioral aspects of prices are irrational: Which of
the following is NOT true in chart interpretation:
d. The behavioral aspects of prices are irrational
29. Which of the following is a continuation pattern:
a. Head and shoulders
b. Wedge
c. Broadening top
d. V-bottom: Which of the following is a continuation pattern:
b. Wedge
30. Which of the following is MOST often a reversal pattern:
a. Head and shoulders
b. Wedge
c. Triangle
d. Pennant: Which of the following is MOST often a reversal
pattern:
a. Head and shoulders
31. Which of the following is NOT true of chart patterns?
a. Speculators' habits have recurring impacts on markets
and knowledge of this fact can be used to
interpret chart patterns
b. Trading techniques found in trading literature may be a
cause of repeated patterns
c. A price chart is a representation of human behavior
d. Quantitative studies have shown a direct relationship
between market psychology of behavior
and chart formations: Which of the following is NOT true of
chart patterns?
c. A price chart is representation of human behavior
32. How would a technician utilize a support line which has been
broken?
a. A broken support line no longer has a valid technical
interpretation
b. The break in the support line would be a buy signal
c. The support line now becomes a resistance line
d. The break in the support line is of no technical
importance: How would a technician utilize a support line
which has been broken?
c. The support line now becomes a resistance line
33. How would one improve a trading system utilizing band
penetrations as trading signals which is giving
too many unprofitable trade signals?
a. Narrow the bands
b. Widen the bands
c. Utilize a shorter time horizon
d. Utilize stop loss orders: How would one improve a trading
system utilizing band penetrations as trading signals which is
giving
too many unprofitable trade signals?
b. Widen the bands
34. Which market tends to have the GREATEST amount of
volatility?
a. Bonds
b. Currencies
c. Eurodollars
d. Equities: Which market tends to have the GREATEST amount
of volatility?
d. Equities
35. Which of the following would be a valid trading
interpretation of top chart patterns?
a. Find a market with a long consolidating base and high
volatility
b. Liquidate positions at prior major resistance points, top
formations or the break of a major
support line
c. Sell whenever a major support level is tested but not
breached
d. Sell when there is a major price retrenchment in a bull
market: Which of the following would be a valid trading
interpretation of top chart patterns?
b. Liquidate positions at prior major resistance points, top
formations or the break of a major support line
36. Which of the following would be a valid trading
interpretation of head and shoulder chart patterns?
a. Sell when the right shoulder penetrates the neckline
b. Buy when the head forms a higher high
c. Buy on the first rally after the neckline is penetrated
d. Buy when the right part of the head is forming: Which of
the following would be a valid trading interpretation of head
and shoulder chart patterns?
a. Sell when the right shoulder penetrates the neckline
37. Which of the following is NOT a valid technical method for
determining price targets?
a. Discounted value of expected future cash flows
b. Height of the head in a head and shoulders pattern
c. Channel width
d. Measure of triangle base from breakout: Which of the
following is NOT a valid technical method for determining
price targets?
a. Discounted value of expected future cash flows
38. Which of the following is the BEST volume indicator for
analysis of futures trading?
a. Open interest
b. Contract volume
c. Total volume
d. Breadth: Which of the following is the BEST volume
indicator for analysis of futures trading?
c. Total volume
39. Which of the following is NOT a proper interpretation of
volume and trend in the futures markets?
a. Volume rising and open interest rising = trend reversal
b. Volume rising and open interest falling = position
liquidation
c. Volume falling and open interest rising = slow
accumulation
d. Volume falling and open interest falling = congestion
phase: Which of the following is NOT a proper interpretation
of volume and trend in the futures markets?
a. Volume rising and open interest rising = trend reversal
40. Which of the following are true of futures volume and open
interest?
a. Open interest increases during a trending period
b. Volume may decline but open interest builds during an
accumulation phase
c. Rising prices and declining volume/open interest indicate
a pending change of direction
d. All of the above: Which of the following are true of futures
volume and open interest?
d. All of the above
41. Which of the following is typically a period of heavier
volume?
a. First day of the week
b. Day before a holiday
c. Triple witching days
d. Summer days: Which of the following is typically a period
of heavier volume?
c. Triple witching days (although the books indicate that
answer, the correct answer in quadruple witching
days therefore either would be accepted)
42. Which of the following is most likely to occur when the
overall market is deeply oversold and on the
verge of reversing?
a. Lagging groups fail to confirm new lows
b. Leading groups fail to confirm new lows
c. Relative strength of lagging groups begins to improve
d. Leading groups make new lows and accelerate to the
downside: Which of the following is most likely to occur when
the overall market is deeply oversold and on the
verge of reversing?
b. Leading groups fail to confirm new lows
43. Speculative stocks put on their best performance in which
of the following markets?
a. During the whole bull market
b. At the early stages of a bull market.
c. Near the final stages of a bull market.
d. Both in the beginning and at the end of a bull market:
Speculative stocks put on their best performance in which of
the following markets?
c. Near the final stages of a bull market
44. Which of the following describes the McClellan Oscillator?
a. On days when prices close higher, it is assumed that all
volume is represented by sellers
b. It is a breadth momentum oscillator
c. It is the sum of two exponential moving averages
d. It is used for longer-range trading compared to the
McClellan Summation Index which is more
useful for short term trading: Which of the following
describes the McClellan Oscillator?
b. It is a breadth momentum oscillator
45. Which of the following is NOT a valid volume interpretation
technique?
a. Remove volume associated with large price moves
b. Remove low volume periods
c. Utilize statistical techniques to predict prices based on
volume
d. Construct volume moving averages: Which of the
following is NOT a valid volume interpretation technique?
a. Remove volume associated with large price moves
46. Protective stops that are placed too far away can result in
which of the following factors?
a. Small frequent elections
b. Large losses
c. Too many trades
d. Unwanted liquidation: Protective stops that are placed too
far away can result in which of the following factors?
b. Large losses
47. Which of the following applies to the interpretation of point
and figure charts in analyzing futures
prices?
a. Pattern analysis is more complex than for stocks
b. Futures prices offer a greater variety of chart formations
than stocks
c. Only the most basic techniques are generally used such
as a one box breakout
d. Incorporating open interest data into a point and figure
chart makes this type of chart more
useful for futures: Which of the following applies to the
interpretation of point and figure charts in analyzing futures
prices?
c. Only the most basic techniques are generally used such as a
one box breakout
48. Which of the following is the short-term trading cycle that
tends to influence most commodity
markets?
a. 10-day
b. 12-day
c. 19-day
d. 28-day: Which of the following is the short-term trading
cycle that tends to influence most commodity markets?
d. 28-day
49. Which of the following point and figure trading techniques
limits risk compared to more basic trading
rules?
a. Buy or sell as soon as a new column is created on the
chart
b. Close out your trade on the second reversal back in the
direction of the original signal
c. Take small consistent profits, but allow large, windfall
profitable positions to run
d. Buy or sell on pullbacks after initial trade signal: Which of
the following point and figure trading techniques limits risk
compared to more basic trading
rules?
d. Buy or sell on pullbacks after initial trade signal
50. Which of the following is the calculation for price objective
using the horizontal count method?
(Note: X is the multiplication symbol in this question)
a. Price level of the lowest box (for up counts) + (number of
boxes in the reversal columns X
reversal size)
b. Price level of the lowest box (for up counts) X number of
boxes in the reversal columns X reversal
size
c. Price level of the lowest box (for up counts) of the base
X number of columns of the base X
reversal size
d. Price level of the lowest box (for up counts) of the base
+ (number of columns of the base X
reversal size): Which of the following is the calculation for
price objective using the horizontal count method? (Note: X
is the multiplication symbol in this question)
d. Price level of the lowest box (for up counts) of the base +
(number of columns of the base X reversal size)
51. Which of the following is the calculation for price objective
using the vertical count method? (Note: X
is the multiplication symbol in this question)
a. Price level of the lowest box (for up counts) + (number of
boxes in the reversal columns X
reversal size)
b. Price level of the lowest box (for up counts) X number of
boxes in the reversal columns X reversal
size
c. Price level of the lowest box (for up counts) of the base
X number of columns of the base X
reversal size
d. Price level of the lowest box (for up counts) of the base
+ (number of columns of the base X
reversal size): Which of the following is the calculation for
price objective using the vertical count method? (Note: X is
the multiplication symbol in this question)
a. Price level of the lowest box (for up counts) + (number of
boxes in the reversal columns X reversal size)
52. Which of the following BEST describes equity market
performance during the presidential election
cycle:
a. Market has its strongest year during first year of
president's term, posts its worst returns during
the pre-election year and slightly negative returns in
election years
b. Market has an above average year during first year of
president's term, posts negative returns
during the pre-election year and its strongest returns in
election years
c. Market has a below average year during first year of
president's term, posts its strongest returns
during the pre-election year or in the election year
d. Market has a below average year during first year of
president's term, posts its strongest returns
in the second year and reasonably strong returns during
the pre-election and election years: Which of the following
BEST describes equity market performance during the
presidential election cycle:
c. Market has a below average year during first year of
president's term, posts its strongest returns during
the pre-election year or in the election year
53. Which of the following pieces of information is NOT
contained in the CFTC's Commitment of Traders
report?
a. Positions of hedgers and speculators
b. Historical open interest of each contract
c. Current open interest of each contract
d. Reportable and non-reportable positions: Which of the
following pieces of information is NOT contained in the
CFTC's Commitment of Traders
report?
b. Historical open interest of each contract
54. Which of the following is true of contrary opinion as a
technical analysis technique?
a. Contrary opinion can be used as the sole decision source
in entering into new trading positions
b. Contrarians trade against the consensus even when it is
within a normal range
c. Contrary opinion is more useful in deciding when to exit
positions than as a timing tool
d. Once all long positions have been set, there is
diminishing influence by the bulls: Which of the following is
true of contrary opinion as a technical analysis technique?
d. Once all long positions have been set, there is diminishing
influence by the bulls
55. Which of the following are valid interpretations of the put-
call ratio?
a. It is the major sentiment index used for options trading
b. It is used as a contrary indicator
c. Extreme levels are trading signals
d. All of the above: Which of the following are valid
interpretations of the put-call ratio?
d. All of the above
56. When a market exceeds the high of the previous 4 weeks,
cycle logic indicates that which of the
following cycles has bottomed and turned up?
a. Seasonal
b. Long-term
c. Short-term
d. Intermediate-term: When a market exceeds the high of the
previous 4 weeks, cycle logic indicates that which of the
following cycles has bottomed and turned up?
b. Long-term
57. Which of the following is NOT a valid trading rule using
Elliott Wave Theory?
a. Identify a main trend
b. Determine the current status of the main trend by
locating the major peaks and bottoms
c. Look for five wave corrections and three wave sub-trends
or extensions
d. Draw trendlines to determine direction: Which of the
following is NOT a valid trading rule using Elliott Wave
Theory?
c. Look for five wave corrections and three wave sub-trends or
extensions
58. Which of the following is true of W.D. Gann's trading
techniques?
a. His work is valid for equities but does not apply to
commodities
b. When price meets time, a change is imminent
c. Gann used 10%, 20%, 30% and 40% as his key resistance
and retracement levels
d. Gann's work is an advanced interpretation of point and
figure charts: Which of the following is true of W.D. Gann's
trading techniques?
b. When price meets time, a change is imminent
59. The Sharpe Ratio is defined as?
a. (expected return plus the risk free interest rate) divided
by the standard deviation of returns
b. (expected return minus the risk free interest rate) divided
by the standard deviation of returns
c. (expected return divided by the risk free interest rate)
divided by the standard deviation of
returns
d. (expected return times the risk free interest rate) divided
by the standard deviation of returns: The Sharpe Ratio is
defined as?
b. (expected return minus the risk free interest rate) divided by
the standard deviation of returns
60. Which of the following is true of the Efficient Frontier
concept in modern portfolio theory?
a. It centers on the premise that systemic risks in the
financial markets can be diversified away.
b. It is a 45 degree line plotting possible risk versus return
c. It is a plot of the highest possible returns obtainable over
a series of risk levels
d. It is unrelated to the risk free rate: Which of the following
is true of the Efficient Frontier concept in modern portfolio
theory?
c. It is a plot of the highest possible returns obtainable over a
series of risk levels
61. Which of the following is a diversification technique in
trading?
a. Trade multiple securities in markets with high correlation
b. Stick to a single trading system
c. Balance risk across multiple markets and trading systems
d. All of the above: Which of the following is a diversification
technique in trading?
c. Balance risk across multiple markets and trading systems
62. Which of the following is true for the use of the chi square
test?
a. Used as the main confirmation test in Dow Theory
b. Compares risk to expected returns
c. Compares actual returns to expected returns
d. Signals moving average crossovers: Which of the
following is true for the use of the chi square test?
c. Compares actual returns to expected returns
63. Which of the following is an important point in interpreting
chart patterns?
a. Chart pattern interpretation is based solely on the
current pattern and ignores the prior trend
b. Chart patterns should be interpreted separately from
trendline analysis
c. Longer-term patterns are more valid than shorter
patterns
d. Topping patterns usually have smaller price ranges and
take longer to build: Which of the following is an important
point in interpreting chart patterns?
c. Longer-term patterns are more valid than shorter patterns
64. What would be the price objective for a head and shoulders
pattern with a neckline at 63, top of the
first shoulder at 72, top of the head at 96 and top of the
second shoulder at 78?
a. 10
b. 96
c. 48
d. 30: What would be the price objective for a head and
shoulders pattern with a neckline at 63, top of the first
shoulder at 72, top of the head at 96 and top of the second
shoulder at 78?
d. 30
65. What is the measuring objective for double top chart
pattern?
a. The distance between the two chart tops
b. The distance between the price level at the first top and
the second top
c. The price change of the move prior to entering the
double top pattern
d. The height of the pattern from the breakdown point:
What is the measuring objective for double top chart pattern?
d. The height of the pattern from the breakdown point
66. What is the importance of time in interpreting the saucer
and peak patterns?
a. Longer time periods increase the signaling importance of
saucers but not of peaks
b. Saucer bottoms are more valid when they form over a
short time period
c. Long time periods between market peaks and troughs
reduce the potential for a market reversal
d. Longer formation time periods increase the signaling
importance of both saucers and peaks: What is the
importance of time in interpreting the saucer and peak
patterns?
d. Longer formation time periods increase the signaling
importance of both saucers and peaks
67. Which of the following is considered a continuation pattern?
a. Head and shoulders
b. Inverse head and shoulders
c. Triangle
d. Double top: Which of the following is considered a
continuation pattern?
c. Triangle
68. What is the measuring objective for a symmetrical triangle
formation?
a. A trendline from the top of the pattern parallel to the
lower trendline
b. The height of the base of the triangle
c. Both a. and b. are valid techniques
d. Neither a. nor b. is a valid technique: What is the
measuring objective for a symmetrical triangle formation?
c. Both a. and b. are valid techniques
69. What is the measuring objective for flags and pennants?
a. There is a different measuring objective for each
b. Flags fly at half mast and pennants are considered
reversal patterns
c. The move after the pattern will be equal to the move
before the pattern
d. Half the distance of the preceding move from breakout
to the flag or pennant: What is the measuring objective for
flags and pennants?
c. The move after the pattern will be equal to the move before
the pattern
70. Which of the following are true of the concepts of
divergence and confirmation in technical analysis
a. They are opposite concepts
b. Confirmation has a valid technical interpretation but in
the case of divergence, no valid
conclusion can be drawn
c. Confirmation indicates a likely change in trend since all
technical indicators are in agreement
d. Divergence indicates continuation in trend since
different technical indicators do not agree: Which of the
following are true of the concepts of divergence and
confirmation in technical analysis
a. They are opposite concepts
71. According to Kirkpatrick and Dahlquist, during emotional
times, flow of funds signals:
a. Appear to work poorly because price seems to divorce
itself from economics.
b. Appear to work exceptionally well because of the
market's flight to safety.
c. Function no differently than at any other time in the
market cycle because of shortcomings in the
measurement procedures.
d. Suggests the duration of the next downleg in the market
cycle: According to Kirkpatrick and Dahlquist, during
emotional times, flow of funds signals:
a. Appear to work poorly because price seems to divorce
itself from economics
72. Which of the following is a CORRECT interpretation of
volume?
a. In an uptrend, volume should increase on down days
b. In a downtrend, volume should increase on up days
c. Price precedes volume
d. Volume precedes price: Which of the following is a
CORRECT interpretation of volume?
d. Volume precedes price
73. Which of the following is a CORRECT interpretation of open
interest?
a. Rising open interest in an uptrend is bearish
b. Declining open interest in an uptrend is bearish
c. Rising open interest in a downtrend is bullish
d. Declining open interest in a downtrend is bearish: Which
of the following is a CORRECT interpretation of open interest?
b. Declining open interest in an uptrend is bearish
74. Which of the following is an INCORRECT interpretation of
the put-call ratio?
a. When options traders are bullish, call volume exceeds put
volume
b. A very high ratio indicates an oversold market
c. A low ratio is considered a warning of an overbought
market
d. When call volume exceeds put volume, this has bullish
future implications for the market: Which of the following is
an INCORRECT interpretation of the put-call ratio?
d. When call volume exceeds put volume, this has bullish
future implications for the market
75. Which of the following is true of volume and open interest?
a. Volume is not used in futures, only open interest
b. Contract volume and total open interest are used in
bonds
c. Declining volume and open interest suggest the trend
will continue
d. Increasing volume and open interest suggest the trend
will continue: Which of the following is true of volume and
open interest?
d. Increasing volume and open interest suggest the trend will
continue
76. Which of the following is true of volume and open interest?
a. Volume precedes price
b. On-balance volume is not as accurate measure of volume
as basic volume column charts
c. Within an uptrend, a sudden leveling off or decline in
open interest often signals that the current
trend will accelerate
d. Decreases in volume and open interest help confirm the
resolution of price patterns: Which of the following is true of
volume and open interest?
a. Volume precedes price
77. What is the proper use of long-term charts versus daily
price charts?
a. Long-term charts are more useful for making trading
decisions
b. Daily price charts allow for a thorough trend analysis
c. Long-term charts allow for a better assessment of the
price trend
d. Daily price charts allow for a better assessment of the
price trend: What is the proper use of long-term charts versus
daily price charts?
c. Long-term charts allow for a better assessment of the price
trend
78. What method could one utilize to analyze the long-term
trends of futures prices, despite the fact that
each contract is ONLY traded for several months?
a. Candlestick charts
b. Point and figure charts
c. Equivolume charts
d. Continuation charts: What method could one utilize to
analyze the long-term trends of futures prices, despite the fact
that
each contract is only traded for several months?
d. Continuation charts
79. Which of the following is true of moving average
construction?
a. In the exponential moving average more weight is given
to volume on higher volume days
b. The simple moving average is the geometric mean of
previous prices
c. The linear weighted average addresses the problem of
including only the price action covered by
the length of the average itself
d. A shorter term moving average more closely tracks price
action: Which of the following is true of moving average
construction?
d. A shorter term moving average more closely tracks price
action
80. . Which of the following is true of moving average
crossovers?
a. It is considered bearish when a short term moving
average crosses above a longer term moving
average
b. In a triple crossover trading system buying is signaled
when the shortest term moving average
crosses over one of the other moving averages
c. The first crossover in a triple crossover system during an
upside reversal is when the shortestterm
moving average crosses above one of the other two
averages
d. Once a moving average system is optimized, it can be
used for trading all markets: Which of the following is true of
moving average crossovers?
c. The first crossover in a triple crossover system during an
upside reversal is when the shortest-term
moving average crosses above one of the other two averages
81. Which of the following is true of Bollinger Bands?
a. The bands are based on the moving averages of prices
b. The bands are based on moving averages of prices plus
or minus a standard deviation factor
c. When price equals the upper band it is considered bullish
d. When prices are above the upper band they are
considered to be in oversold territory: Which of the
following is true of Bollinger Bands?
b. The bands are based on moving averages of prices plus or
minus a standard deviation factor
82. Which of the following is true of moving averages?
a. Moving averages provide the most valid trade signals in
sideways markets
b. Moving averages provide the most valid trade signals in
trending markets
c. Moving averages always provide more valid trade signals
than oscillators
d. Oscillators always provide more valid trade signals than
moving averages: Which of the following is true of moving
averages?
b. Moving averages provide the most valid trade signals in
trending markets
83. Which of the following is a CORRECT usage of oscillators in
technical analysis?
a. Oscillators are least useful when they reach an extreme
reading near the upper or lower ends of
their boundaries
b. Divergences between price and oscillators are important
confirmation signals
c. When an oscillator crosses the zero line, it provides an
important trading signal in the direction of
the trend
d. All of the above: Which of the following is a CORRECT
usage of oscillators in technical analysis?
c. When an oscillator crosses the zero line, it provides an
important trading signal in the direction of the
trend
84. Which of the following is a CORRECT usage of an oscillator
constructed using two moving averages?
a. To help identify long-term variations from the short-term
trend
b. To spot confirmations between technical indicators
c. To pinpoint the crossing of two moving averages
d. All of the above: Which of the following is a CORRECT
usage of an oscillator constructed using two moving
averages?
c. To pinpoint the crossing of two moving averages
85. Which of the following is the formula for calculating RSI?
a. RSI = 100 - (100/(1 X RS))
b. RSI = 100 - (100/(100 + RS))
c. RSI = 100 - (100/(1 + RS))
d. RSI = 100 + (100/(1 + RS)): Which of the following is the
formula for calculating RSI?
c. RSI = 100 - (100/(1 + RS))
86. The stochastic oscillator was created utilizing which basic
observation?
a. As prices decline, the trading range tends to narrow
b. Changes in volume precedes price movements
c. Existing oscillators were limited to a range of 0 to 100
d. As prices increase, prices tend to be closer to the upper
end of the trading range: The stochastic oscillator was
created utilizing which basic observation?
d. As prices increase, prices tend to be closer to the upper
end of the trading range
87. Which of the following is a proper technical usage of MACD
indicators?
a. Trendline analysis can be used with MACD
b. MACD crossover rules are different than other crossover
rules
c. MACD histograms are best used to initiate new positions
contrary to the price trend
d. When the slower MACD line is above the faster line, the
MACD histogram will be above zero: Which of the following
is a proper technical usage of MACD indicators?
a. Trendline analysis can be used with MACD
88. Which of the following is a CORRECT point and figure chart
pattern interpretation?
a. Upside breakout above an ascending triple top signals
sell
b. Upside breakout above a bullish resistance line signals
sell
c. Downside breakout of a bearish triangle signals sell
d. Downside breakout below a bearish support line signals
buy: Which of the following is a CORRECT point and figure
chart pattern interpretation?
c. Downside breakout of a bearish triangle signals sell
89. Which of the following are valid point and figure chart
trading tactics?
a. Simple trade signals can be used for new commitments
whereas complex signals are needed for
liquidation purposes
b. Long positions are closed when they fall below the trend
line and short positions are closed when
they rise above the trend line
c. Stop losses should be placed below the last column of
Os in an uptrend
d. All of the ab: Which of the following are valid point and
figure chart trading tactics?
c. Stop losses should be placed below the last column of Os
in an uptrend
90. A breakout:
a. Is a minor pattern which is rarely seen and has no real
significance on either the near or long
term
b. Occurs when price passes through specific levels
c. Has no significance to a trader of investor
d. Needs to be confirmed by other indicators: A breakout:
b. Occurs when price passes through specific levels
91. Which of the following are the three basic tenets of Elliott
Wave Theory, in the CORRECT order of
importance?
a. Price, momentum and volume
b. Price, pattern and volume
c. Waves, alternation and reversals
d. Pattern, ratio and time: Which of the following are the three
basic tenets of Elliott Wave Theory, in the CORRECT order of
importance?
d. Pattern, ratio and time
92. Which of the following BEST describes the rule of
alternation?
a. Downtrends follow uptrends
b. Complex patterns follow simple patterns
c. Price follows volume
d. Prices alternate in Fibonacci sequences: Which of the
following BEST describes the rule of alternation?
b. Complex patterns follow simple patterns
93. Which of the following is a true statement according to 98.
Elliott Wave Theory?
a. A complete bull market cycle is made up of eight waves,
three waves up followed by five waves
down
b. A trend divides into three waves in the direction of the
next longer trend
c. Corrections always take place in five wave patterns
d. The two types of simple corrections are zigzags and 99.
flats: Which of the following is a true statement according to
Elliott Wave Theory?
d. The two types of simple corrections are zig-zags and flats
94. Which of the following is a true statement according to
Elliott Wave Theory?
a. Triangles are usually second waves preceding a longer
third wave
b. Waves can be expanded into longer waves and 100.
subdivided into shorter waves
c. In the stock market, wave 5 is the most common to
extend
d. The Pythagorean theorem is the mathematical basis for
Elliott Wave Theory: Which of the following is a true
statement according to Elliott Wave Theory?
b. Waves can be expanded into longer waves and subdivided
101.
into shorter waves
95. Which of the following is a true statement according to
Elliott Wave Theory?
a. The number of waves follows the Pythagorean theorem
b. Ratios are used to define price objectives
c. The rule of alternation states that up waves follow down
waves
d. Bear markets do not fall below the top of the prior fourth
wave: Which of the following is a true statement according to
Elliott Wave Theory?
b. Ratios are used to define price objectives
102.
96. Which of the following is a true statement according to
Elliott Wave Theory?
a. Wave four should not overlap wave one
b. The theory is composed of time, ratios and wave forms, in
that order of importance
c. The theory was originally applied to individual stocks and
does not work as well for indices
d. The theory works best in commodity markets traded
primarily by professional traders such
agricultural futures: Which of the following is a true statement
according to Elliott Wave Theory?
a. Wave four should not overlap wave one
97. Which of the following is NOT a basic principle of cycles?
a. Summation
b. Synchronicity
c. Harmonicity
d. Alternation: Which of the following is NOT a basic
principle of cycles?
d. Alternation
Which of the following places the cycles in time length
order?
a. Lunar, presidential, seasonal, alpha/beta and Kondratieff
b. Kondratieff, presidential, alpha/beta, seasonal and lunar
c. Alpha/beta, presidential, seasonal, lunar, and Kondratieff
d. Alpha/beta, lunar, seasonal, presidential and Kondratieff:
Which of the following places the cycles in time length order?
d. Alpha/beta, lunar, seasonal, presidential and Kondratieff
Which is historically the strongest three-month period for
the U.S. equity markets?
a. January, February and March
b. March, April and May
c. June, July and August
d. October, November and December: Which is historically
the strongest three-month period for the U.S. equity markets?
d. October, November and December
Which of the following is true of Wilder's Parabolic System?
a. It is a time/price reversal system
b. It always in the market
c. It only works for trending markets
d. All of the above: Which of the following is true of Wilder's
Parabolic System?
d. All of the above
What of the following could be utilized in a computerized
trading system to improve the
performance of Wilder's Parabolic System?
a. Trend lines
b. Stops
c. Directional movement index
d. Average divergence index: What of the following could be
utilized in a computerized trading system to improve the
performance of
Well's Parabolic System?
c. Directional movement index
Which of the following is one of the advantages of
computerized trading systems?
a. Computerized trend following systems are profitable in
all types of markets
b. Computerized systems improve the interpretation of
complex trading patterns
c. Computerized trading systems remove the human
emotion element
d. All of the above: Which of the following is one of the
advantages of computerized trading systems?
c. Computerized trading systems remove the human emotion
element
103. Which of the following is one of the disadvantages of
computerized trading systems?
a. Trading decisions are less consistent
b. Most computerized systems are unprofitable in non-
trending markets
c. Profit trades are exited too early
d. Computerized systems miss many market trends: Which
of the following is one of the disadvantages of computerized
trading systems?
b. Most computerized systems are unprofitable in non-trending
markets
104. Which of the following is a general rule for trading futures?
a. Due to the fact that markets only trend 30% of the time,
100% of capital should be invested at all
times
b. The majority of capital should be committed to the
strongest market since it is rare that more
than two or more markets will experience a major move
simultaneously
c. Total amount risked on any single trade should not
exceed 5% of equity
d. At least 50% of total equity should be dedicated to the
market group with the strongest trend: Which of the
following is a general rule for trading futures?
c. Total amount risked on any single trade should not exceed
5% of equity
105. Central tendency is:
a. Statistical jargon for the typical outcome
b. The midpoint of a trading range
c. A popular Elliott Wave guideline
d. A common pitfall of novice traders: Central tendency is:
a. Statistical jargon for the typical outcome
106. Which of the following is a CORRECT guideline in
pyramiding trades positions?
a. Each successive layer should be larger than the prior
layer
b. Take profits on winning positions
c. Add to losing positions, as a form of dollar cost averaging
d. Adjust protective stops to the breakeven point: Which of
the following is a CORRECT guideline in pyramiding trades
positions?
d. Adjust protective stops to the breakeven point
107. Which of the following is a CORRECT inter-market
relationship
a. Bond prices move inversely to equities
b. Bonds prices trend in the same direction as commodities
c. The U.S. dollar moves inversely to commodities
d. Financial stocks trend inversely to bonds: Which of the
following is a CORRECT inter-market relationship
c. The U.S. dollar moves inversely to commodities
108. Which intermarket relationship may NOT hold when
commodity prices decline (i.e., during periods
of deflation)?
a. The link between the dollar and commodities
b. The link between commodities and bonds
c. Intermarket analysis is unaffected by deflation
d. The link between the equity and bond markets: Which
intermarket relationship may NOT hold when commodity
prices decline (i.e., during periods of
deflation)?
d. The link between the equity and bond markets
109. Which of the following is a valid guideline in using technical
analysis to make investment decisions
among stock market sectors?
a. Relative strength analysis allows for identification of the
strongest and weakest sectors
b. Charting tools such as trendlines and moving averages
should not be employed with relative
strength lines
c. Sectors whose relative strength lines are just turning up
after a downtrend should be sold
d. This analysis does not hold for options or mutual funds
due to the unique characteristics of these
securities: Which of the following is a valid guideline in using
technical analysis to make investment decisions
among stock market sectors?
a. Relative strength analysis allows for identification of the
strongest and weakest sector
110. Intermarket analysis can be used for which investment
decisions?
a. Decisions among asset classes
b. Decisions among equity market sectors
c. Decisions among mutual fund
d. All of the above: Intermarket analysis can be used for
which investment decisions?
d. All of the above
111. In 3-box point and figure charts,
a. A double-bottom and double top can be continuation
patterns
b. Only a double-bottom can be a continuation pattern
c. Only a double-top can be a continuation pattern
d. Neither can be continuation patterns. They do not exist
in Point and Figur: In 3-box point and figure charts,
a. double-bottom and double top can be continuation
patterns.
112. In point and figure theory, triple-tops and triple-bottoms,
when breached:
a. Lead to smaller continuation patterns
b. Frequently leads to a consolidation phase
c. Will lead to a stronger directional move
d. Suggest a failure in the longer term pattern: In point and
figure theory, triple-tops and triple-bottoms, when breached:
c. Will lead to a stronger directional move
113. Reversals in point and figure charts:
a. Are set by convention as all point and figure charts have
the same reversals
b. Depend on the investment time horizon of the holder
c. Can change within the same chart
d. Should be less than a week: The reversal in point and
figure charts:
b. depends on the investment time horizon of the holder.
114. Which is the CORRECT interpretation of the candlestick
umbrella pattern?
a. They can be bullish or bearish depending on the market
b. They are bearish after a rally
c. They are called hammers after a downtrend
d. All of the above: Which is the CORRECT interpretation of
the candlestick umbrella pattern?
d. All of the above
115. Which is the CORRECT interpretation of the candlestick
hammer pattern?
a. A hammer always has a black real body
b. A hammer comes after market rallies
c. A hammer has no lower shadow
d. A hammer need not be confirmed by other indicators:
Which is the CORRECT interpretation of the candlestick
hammer pattern?
d. A hammer need not be confirmed by other indicators
116. Which is the CORRECT interpretation of the candlestick
hanging man pattern?
a. A hanging man always has a black real body
b. A hanging man comes after a market rally
c. A hanging man has no lower shadow
d. A hanging man need not be confirmed by other
indicators: Which is the CORRECT interpretation of the
candlestick hanging man pattern?
b. A hanging man comes after a market rally
117. Which of the following factors would increase the predictive
power of an engulfing pattern?
a. The first day has a very long real body and the second
day has a very short real body
b. The pattern appears after a consolidation pattern
c. There is heavy volume on the first day of the engulfing
pattern
d. None of the above: Which of the following factors would
increase the predictive power of an engulfing pattern?
d. None of the above
118. Which of the following factors would NOT increase the
predictive power of a dark cloud cover
pattern?
a. The dark cloud cover occurs in the middle of a trading
range
b. During a downtrend, a white real body with shaven head
and bottom followed by a black body
also with a shaven head and bottom
c. If the second day of trading opens above a resistance
level and then fails
d. Heavy volume on the second day indicates a buying
blow o: Which of the following factors would NOT increase
the predictive power of a dark cloud cover pattern?
a. The dark could cover occurs in the middle of a trading
range
119. Which of the following is an INCORRECT interpretation of
the candlestick piercing pattern?
a. It is a bullish reversal pattern
b. The greater the penetration into the price levels of the
prior day's real body, the greater
predictive power
c. It is the opposite of the dark cloud cover
d. It is preceded by a market uptrend: Which of the
following is an INCORRECT interpretation of the candlestick
piercing pattern?
d. It is preceded by a market uptrend
120. Which of the following is considered a reversal pattern in
candlestick charting?
a. Windows
b. Rising three methods
c. Hanging man
d. Falling three methods: Which of the following is
considered a reversal pattern in candlestick charting?
c. Hanging man
121. Which of the following factors would be a CORRECT
interpretation of the morning star pattern?
a. The pattern contains two candles
b. The real bodies of the first and second candles generally
overlap
c. It is considered a bullish reversal pattern
d. It is considered a bearish reversal pattern: Which of the
following factors would be a CORRECT interpretation of the
morning star pattern?
c. It is considered a bullish reversal pattern
122. Which of the following factors would increase the
predictive power of the evening star pattern?
a. If there is no overlap among the real bodies of the
candles in the pattern
b. If the last candle closes deeply into the body of the first
candle
c. If there is light volume on the first candle of the pattern
and heavy volume on the last candle of
the pattern
d. All of the above: Which of the following factors would
increase the predictive power of the evening star pattern?
d. All of the above
123. Why doesn't the doji candle have a real body?
a. The doji is an abbreviated method of drawing candles
b. The open and close are the same
c. The high and low are the same
d. Buyers are stronger than sellers: Why doesn't the doji
candle have a real body?
b. The open and close are the same
124. Which of the following is a CORRECT interpretation of the
shooting star pattern?
a. It is even more bearish than the gravestone doji candle
b. Shooting stars in charts, as in life, are omens of good
fortune
c. The color of the real body is of utmost importance to its
significance
d. It is a bearish reversal pattern: Which of the following is a
CORRECT interpretation of the shooting star pattern?
d. It is a bearish reversal pattern
125. Which of the following is an INCORRECT statement
regarding the inverted hammer pattern?
a. The color of the real body is of utmost importance to its
significance
b. It has the same form as the shooting star pattern
c. It comes at the end of a market downtrend
d. It is a bottom reversal signa: Which of the following is an
INCORRECT statement regarding the inverted hammer
pattern?
a. The color of the real body is of utmost importance to its
significance
126. Which of the following is true of the harami pattern?
a. It is the opposite of the engulfing pattern
b. It is considered a continuation pattern
c. The color of the real body is of utmost importance to its
significance
d. All of the above: Which of the following is true of the
harami pattern?
a. It is the opposite of the engulfing pattern
127. In tweezers tops patterns, which aspects of the two candles
MUST match?
a. Both candles must have shaven tops
b. Both candles must have the same high price
c. Both candles must have the same color real bodies
d. The tops of both real bodies must be the same: In
tweezers tops patterns, which aspects of the two candles must
match?
b. Both candles must have the same high price
128. Which of the following is NOT true of the belt hold candle?
a. The pattern consists of a single candle
b. The bearish belt-hold is a long black candle that opens
on the high and moves lower through the
trading session
c. A short belt-hold line has more significance than a long
belt-hold line
d. The term belt-hold refers to a sumo wrestling maneuver
where a wrestler pushes his opponent
while holding onto his belt: Which of the following is NOT
true of the belt hold candle?
c. A short belt-hold line has more significance than a long
belt-hold line
129. Which of the following is true of the three black crows'
pattern?
a. The color of the real bodies is of utmost importance to its
significance
b. It is continuation pattern
c. The three candles do not have to be on consecutive
trading periods
d. When succes: Which of the following is true of the three
black crows pattern?
a. The color of the real bodies is of utmost importance to its
significance
130. Which is NOT true of the three advancing white soldiers'
pattern?
a. It is a gradual and steady rise
b. Each real body opens within or near the prior session's
real body
c. It is composed of three white candles with successively
higher closes
d. Each candle should have a long upper shadow: Which is
NOT true of the three advancing white soldiers pattern?
d. Each candle should have a long upper shadow
131. Which of the following is NOT true of the three mountains 136. Which of the following is a continuation pattern?
and three rivers chart patterns? a. Umbrella
a. They are longer-term tops and bottom patterns, b. Hammer
respectively c. Doji
b. The three mountains pattern is also known as a triple top d. Windows: Which of the following is a continuation pattern?
or Buddha top d. Windows
c. The three rivers patterns is also known as a triple bottom 137. Which is NOT a measure of central tendency:
or inverted Buddha bottom a. Mean
d. The color of the real bodies is of utmost importance to its b. Median
significance: Which of the following is NOT true of the three c. Mode
mountains and three rivers chart patterns? d. Variance: Which is NOT a measure of central tendency:
d. The color of the real bodies is of utmost importance to its d. Variance
significance
138. Which of the following is the MOST important thing to keep
132. Which of the following is true of the window pattern? in mind in attempting to find a perfect
a. It is a reversal pattern indicator?
b. It occurs when the real bodies of two consecutive a. Indicators do not take into account trading costs
candles do not overlap b. Indicators optimized for the past often do not work in
c. It occurs when the shadows of two consecutive candles the present
do not overlap c. Indicators are frequently so complex to create as to be
d. One should buy on dips after a falling window: Which of of little use in making trading decision
the following is true of the window pattern? d. Indicators usually give conflicting trading advice: Which
c. It occurs when the shadows of two consecutive candles do of the following is the MOST important thing to keep in mind in
not overlap attempting to find a perfect
133. Which of the following is NOT true of the rising and falling indicator?
three methods patterns? b. Indicators optimized for the past often do not work in the
a. They are continuation patterns present
b. It starts with a long candle is followed by three short 139. What is the main impediment to making objective trading
candles of the opposite color decisions?
c. The final day is another long candle of the opposite color a. Lack of complete information
of the three preceding small candles b. Failing to consider trading costs
d. The pattern consists of a single candle: Which of the c. Conflict between technical and fundamental models
following is NOT true of the rising and falling three methods d. Emotional considerations cloud judgment: What is the
patterns? main impediment to making objective trading decisions?
d. The pattern consists of a single candle d. Emotional considerations cloud judgment
134. Which of the following is true of the separating lines 140. Standard deviation is:
pattern? a. A descriptive statistic which defines the central tendency
a. The top of the upper shadow of one candle is at the same b. The square root of the variance
price as the bottom of the lower c. The covariance of two securities
shadow of the other candle d. An inferential statistic which measures symmetry around
b. The opening price of the second candle equals the the mean: Standard deviation is:
opening price of the first candle b. The square root of the variance
c. The two candles have the same color
141. What are three common ways that a greed-driven investor
d. It is a reversal pattern: Which of the following is true of the
can suffer losses, even when his longerterm
separating lines pattern?
market forecast is CORRECT?
b. The opening price of the second candle equals the opening
a. Options, indexes and pyramiding
price of the first candle
b. Options, indexes and currencies
135. Which of the following is NOT continuation pattern? c. Options, leveraging and pyramiding
a. Rising three methods d. Options, leveraging and currencies: What are three
b. Separating lines common ways that a greed-driven investor can suffer losses,
c. Tweezers even when his longer-term
d. Windows: Which of the following is NOT continuation market forecast is CORRECT?
pattern? c. Options, leveraging and pyramiding
c. Tweezers
142. Which of the following is the CORRECT order of the
Industrial Life Cycle?
a. Innovation, Maturity, Consolidation and Decay
b. Innovation, Consolidation, Decay and Maturity
c. Innovation, Consolidation, Maturity and Decay
d. Innovation, Maturity, Decay and Consolidation: Which of
the following is the CORRECT order of the Industrial Life
Cycle?
c. Innovation, Consolidation, Maturity and Decay
143. Why is it important to ignore opinions and focus on facts in
market analysis?
a. Opinions are not generally discounted by the market
b. Stock market news is more important than general news
in determining the future direction of
the markets
c. Unexpected news does not get factored into the market
d. General news reflects slowly unfolding economic and
financial trends not yet discounted by the
markets: Why is it important to ignore opinions and focus on
facts in market analysis?
d. General news reflects slowly unfolding economic and
financial trends not yet discounted by the markets
144. Which of the following is GENERALLY true of financial
media explanations for market moves?
a. These stories uncover the true underlying drivers of the
market
b. Such stories are essentially gossip
c. Price movements are not news
d. These stories are generally the authoritative explanation
of market moves: Which of the following is GENERALLY true
of financial media explanations for market moves?
b. Such stories are essentially gossip
145. According to Charles Dow, what has been the main
downfall of Wall Street investors?
a. Independent thinking
b. Failure to stay the course
c. Pride of opinion
d. Failure to abide by classic trading rules: According to
Charles Dow, what has been the main downfall of Wall Street
investors?
c. Pride of opinion
146. What are common mistakes made by impatient traders?
a. Entering the market too soon
b. Exiting the market too soon
c. Abandoning well reasoned trading strategies due to
adversity
d. All of the above: What are common mistakes made by
impatient traders?
d. All of the above
147. Staying the course in a trading strategy GENERALLY
entails?
a. Meeting margin calls
b. Not utilizing stops
c. Not getting sidetracked by single, counter-trend news
events
d. Most valid buy signals in trading systems occur in the
opposite direction of the prevailing trend: Staying the
course in a trading strategy GENERALLY entails?
c. Not getting sidetracked by single, counter-trend news events
148. Which of the following BEST characterizes the Theory of
Contrary Opinion?
a. When virtually everyone takes the position that the
market is headed in a certain direction, there
is no one left to push the trend any further
b. Always trade against the prevailing trend
c. The future can be extrapolated based on present trends
d. Fundamental analysis is always wrong: Which of the
following BEST characterizes the Theory of Contrary Opinion?
a. When virtually everyone takes the position that the market is
headed in a certain direction, there is no
one left to push the trend any further
149. From a contrarian's perspective, which of the following
would be considered a bullish indicator?
a. A Business Week cover with a story on "The Death of
Equities"
b. The vast majority of professional financial letter writers
are bullish
c. CNBC is on the television at the local bar, and everyone
is paying attention
d. Sales of investment books are increasingly dramatically:
From a contrarian's perspective, which of the following would
be considered a bullish indicator?
a. A Business Week cover with a story on "The Death of
Equities"
150. Which of the following is one of the key rules for traders?
a. Take profits but be patient with losing positions and give
them time to rebound
b. Buy low, sell high
c. Be a contrarian and trade against the trend
d. Always meet margin calls promptly: Which of the
following is one of the key rules for traders?
b. Buy low, sell high
151. To calculate moving averages for a point-and-figure chart:
a. First, make a decision as to how many columns to
average.
b. First, re-draw the chart as a 1X1 chart,
c. First, find the longest column, and count the number of
filled boxes.
d. First, convert the chart to a conventional line chart.: To
calculate moving averages for a point-and-figure chart:
a. First, make a decision as to how many columns to average
152. A morning star pattern is typically: 158. Prior to a market top, what would one expect to see in a
a. A very small pattern consisting of two candles that is VIX reading?
infrequently seen a. Increasing VIX levels, as more investors are adding
b. A continuation consisting of at least five candles protective measures
c. A bottom reversal pattern consisting of three candles b. An overbought VIX level, given an increase in long term
d. A top reversal pattern consisting of three candles: A S&P futures contracts.
morning star pattern is typically: c. Generally low VIX levels, as there is often complacency
c. A bottom reversal pattern consisting of three candles among traders prior to tops
153. An evening doji star: d. An oversold VIX level, given a decrease in long term
a. Has a doji in the last position S&P futures contracts.: Prior to a market top, what would one
b. Has a doji in the middle position expect to see in a VIX reading?
c. Is completely comprised of dojis c. Generally low VIX levels, as there is often complacency
d. Is completed by dojis leading out of the pattern: An among traders prior to tops
evening doji star: 159. Which of the following would provide the least help to a
b. Has a doji in the middle position trader who is trying to determine where to
154. Abandoned baby patterns: place a stop order?
a. appear upon completion of star patterns a. ATR
b. appear nowhere in star patterns, only in box ranges b. Parabolic SAR
c. ideally has a doji as second real bottom c. TRIN
d. can only be formed over long periods of time: d. Pivot Point Technique: Which of the following would
Abandoned baby patterns provide the least help to a trader who is trying to determine
c. Ideally has a doji as second real bottom where to
place a stop order?
155. Counterattack lines are formed when:
c. TRIN
a. a doji breaks a moving average
b. a dumpling top fails with an abandoned baby pattern 160. A Harami most closely resembles what "western" charting
c. when opposite colored candles have the same close pattern?
d. When same-colored candles have the same close: a. Inside day
Counterattack lines are formed when: b. Outside day
c. When opposite colored candles have the same close c. Gap
d. Andrew's Pitchfork: A Harami most closely resembles what
156. In a point and figure chart, what are the typical box sizes
"western" charting pattern?
for a stock trading between 20 and 100,
a. Inside day
between 100 and 200, and then above 200?
a. 1, 2, 3 161. When small cap stocks have abnormal strength, this can be
b. 1, 2, 4 attributed to the:
c. ½, 1, 2 a. The January Barometer
d. 1, 3, 5: In a point and figure chart, what are the typical box b. The January Effect
sizes for a stock trading between 20 and 100, c. Kondratieff K-Wave
between 100 and 200, and then above 200? d. Hindenburg Omen: When small cap stocks have abnormal
b. 1, 2, 4 strength, this can be attributed to the:
b. The January Effect
157. What is the bearish counterpart to the Piercing Line
candlestick pattern? 162. f a peak occurs prior to the halfway point of a cycle, this
a. 3 Black Crows would be considered:
b. Dark Cloud Cover a. Left translation
c. Hanging Man b. Right translation
d. Shooting Star followed by an Inverted Hammer: What is c. Inversion
the bearish counterpart to the Piercing Line candlestick d. Entropy: If a peak occurs prior to the halfway point of a
pattern? cycle, this would be considered:
b. Dark Cloud Cover a. Left translation
163. All of the following most directly measure internal market 168. A technical analyst was at a convention in which a long-
strength, EXCEPT: term point and figure stock chart was being
a. New Net Highs & New Net Lows discussed. He noticed that low-price action did not appear
b. Net Ticks as active as high-price action on the
c. Arms Index chart. One suggestion the technical analyst could provide,
d. Consumer Confidence Index: All of the following most to clear up this apparent distortion,
directly measure internal market strength, EXCEPT: would be to:
d. Consumer Confidence Index a. Change the charting scale to logarithmic
164. Which of the following are FALSE statements when b. Increase the time frame on the chart
describing the Chaikin Money Flow Index? c. Change the scale to arithmetic
a. Gaps will not be recorded, as the index only uses the day d. Add the daily opening prices to provide a more visual
high, day low, and closing price. benchmark of price changes: A technical analyst was at a
b. It suffers from the "drop off" effect, as it uses a simple convention in which a long-term point and figure stock chart
moving average. was being
c. It measures deviations of price within two standard discussed. He noticed that low-price action did not appear as
deviations of the range. active as high-price action on the chart.
d. The index will rise above zero in an upward trend: Which One suggestion the technical analyst could provide, to clear
of the following are FALSE statements when describing the up this apparent distortion, would be to:
Chaikin Money Flow Index? a. Change the charting scale to logarithmic
c. It measures deviations of price within two standard 169. Over a period of 4 weeks, a swing trader notices that for a
deviations of the range. particular security the ADX reading has
165. A system in which the investor must be able to withstand a declined from a high of 45 to a current low of 15. What tool
long series of losses. may best help the trader isolate a
a. Martingale Betting System trading opportunity over the next few days?
b. Parabolic System a. A Simple Moving Average
c. Directional Move System b. An Oscillator
d. Pyramiding: A system in which the investor must be able to c. An Exponential Moving Average
withstand a long series of losses. d. A Linear Regression Line: Over a period of 4 weeks, a
a. Martingale Betting System swing trader notices that for a particular security the ADX
reading has
166. The "Rising 3 Methods" candlestick pattern is:
declined from a high of 45 to a current low of 15. What tool
I. Bullish
may best help the trader isolate a trading
II. Bearish
opportunity over the next few days?
III. Long White Body followed by a series of smaller falling
b. An Oscillator
candles
IV. Long Black Body followed by a series of smaller rising 170. Which of the following best helps quantify the risk of a
candles trading system?
a. I & III a. Maximum Cumulative Drawdown
b. I & IV b. Maximum Favorable Excursions
c. II & III c. Longest Flat Time
d. II & IV: The "Rising 3 Methods" candlestick pattern is: d. Length of Average Winning Trade: Which of the following
a. I & III best helps quantify the risk of a trading system?
a. Maximum Cumulative Drawdown
167. All of the following are similar technical indicators, EXCEPT:
a. Williams %R 171. This indicator measures the distance between two
b. Stochastics exponential moving averages of advances minus
c. Relative Strength Index declines.
d. The Sentix Index: All of the following are similar technical a. TRIN
indicators, EXCEPT: b. McClellan Oscillator
d.The Sentix Index c. Ayres-Hughes Breadth Indicator
d. The SENTIX Index: This indicator measures the distance
between two exponential moving averages of advances minus
declines.
b. McClellan Oscillator
172. Most of these indicators measure what uninformed
investors are doing.
a. Sentiment indicators
b. Breadth indicators
c. Flow of Funds indicators
d. Cycle indicators: Most of these indicators measure what
uninformed investors are doing.
a. Sentiment indicators
173. The Efficient Market Hypothesis assumes that:
I. Most investors will act rationally
II. Most investors will act irrationally
III. Prices typically reflect all available information
IV. Prices typically do not reflect all available information
a. I & III
b. I & IV
c. II & III
d. II & IV: The Efficient Market Hypothesis assumes that:
a. I & III
174. A security has just broken out of its trading range to the
upside. Over the course of the next 2 days,
it rises an additional 5% from the point of the breakout. It
then returns to its prior resistance line,
before continuing the uptrend. What term best describes
this phenomenon?
a. Failure
b. Shortfall
c. Throwback
d. Premature Breakout: A security has just broken out of its
trading range to the upside. Over the course of the next 2
days, it
rises an additional 5% from the point of the breakout. It then
returns to its prior resistance line, before
continuing the uptrend. What term best describes this
phenomenon?
c. Throwback
175. Which of the following is a FALSE statement about MACD?
a. The signal line is also a moving average
b. It is most useful in a trending market
c. The calculation does not use any simple moving averages
d. If MACD has had a positive value for more than 12
periods, this is predictive of a reversal.: Which of the
following is a FALSE statement about MACD?
d. If MACD has had a positive value for more than 12 periods,
this is predictive of a reversal.
176. Which of the following is a TRUE statement about the
Stochastic Oscillator?
a. It examines the most recent closing price as a
percentage of the price range over a window of
time
b. It is not as sensitive to recent price action as other
indicators like Rate of Change
c. It moves in the same direction as the Williams %R
indicator
d. It works best in a trending market, when it confirms the
direction of the primary trend.: Which of the following is a
TRUE statement about the Stochastic Oscillator?
a. It examines the most recent closing price as a percentage of
the price range over a window of time
177. This chart type integrates volume directly into the price bar:
a. Equivolume
b. VWOP
c. Renko
d. Ichimoku Cloud: This chart type integrates volume directly
into the price bar:
a. Equivolume
178. ALL of the following are standard patterns used with 3-Box
reversal point and figure charts, EXCEPT:
a. Bullish or Bearish Triangle
b. Triple Top or Triple Bottom
c. Double Top or Double Bottom
d. Bullish or Bearish Fulcrum: ALL of the following are
standard patterns used with 3-Box reversal point and figure
charts, EXCEPT:
d. Bullish or Bearish Fulcrum
179. How might one detrend data to determine if a cycle exists?
a. Divide the current prices by a moving average of those
prices
b. Create an oscillator that plots a standard deviation of the
period lows
c. Apply volume weighting to both high and lows in the data
d. Plot a linear regression line through the data midpoin:
How might one detrend data to determine if a cycle exists?
a. Divide the current prices by a moving average of those
prices