CMT-Level-II CMT Level II Exam Questions and Answers

In the exponential moving average more weight is given to volume on higher volume days

The simple moving average is the geometric mean of previous prices

The linear weighted average addresses the problem of including only the price action covered by the length of the average itself

A shorter term moving average more closely tracks price action

Shares are losing momentum which can be confirmed by negative divergence between price and ROC; trader should be cautious and be quick to reduce position on a violation of trendline.

Shares are making a series of higher highs and higher lows; ROC has turned negative which is confirming the price action; should use current pullback to add to position.

ROC has turned negative which is a sell signal; should initiate a short position.

Negative divergence observed between price and ROC should be ignored as prices are near life time highs.

Saliency bias

Framing bias

Sunk-cost bias

Anchoring bias

Head and shoulders

Inverse head and shoulders

Triangle

Double top

It is symmetric about the mean

The mean, median, and mode are all located at the trough

It extends infinitely in both directions

It is bell-shaped, with its peak at the center

trend-following indicator .

momentum indicator.

breadth indicator.

oscillator

This is to multiply the volume occurring when each box was in operation

This is to sum up the volume occurring when each box was in operation

This is to divide up the volume occurring by each box was in operation

It is, to sum up, the volume that occurs when every box is not in use

It is a time/price reversal system

It always in the market

It only works for trending markets

All of the above

Gaps will not be recorded, as the index only uses the day high, day low, and closing price.

It suffers from the "drop off" effect, as it uses a simple moving average.

It measures deviations of price within two standard deviations of the range.

The index will rise above zero in an upward trend

I & III

I & IV

II & III

II & IV

Identify a main trend

Determine the current status of the main trend by locating the major peaks and bottoms

Look for five wave corrections and three wave sub-trends or extensions

Draw trendlines to determine direction

Longer time periods increase the signaling importance of saucers but not of peaks

Saucer bottoms are more valid when they form over a short time period

Long time periods between market peaks and troughs reduce the potential for a market reversal

Longer formation time periods increase the signaling importance of both saucers and peaks

Use of additional trend periods

Increase the delay in taking action after a trade signal is given

Utilize support and resistance lines

Utilize candlestick charts instead of bar charts

the number of contracts traded at each price tick.

the number of contracts traded at each time interval.

the change in open interest during a particular time interval.

the number of recorded price changes during a particular time interval.

Estimates which are subject to change

Inaccurate information

Statements inconsistent with the accumulated knowledge of technical analysis

Statements which disparage the work of other analysts

TRIX

Moneyflow Index

True Strength Index

Herrick Payoff Index

Amplitude - the height of the wave (cycle)

Period - the time needed to finish one wave (cycle)

Frequency - the number of cycles that repeat every 360°

Phase - a measure of separation between the top and bottom of a wave (cycle)

Point-and-figure charts

Line charts

Japanese candlestick charts

Bar charts

bonds turn up before stocks and commodities.

stocks turn up before bonds and commodities.

commodities turn up before bonds and stocks.

all the asset classes turn up simultaneously.

Upside breakout above an ascending triple top signals sell

Upside breakout above a bullish resistance line signals sell

Downside breakout of a bearish triangle signals sell

Downside breakout below a bearish support line signals buy

First, make a decision as to how many columns to average.

First, re-draw the chart as a 1X1 chart,

First, find the longest column, and count the number of filled boxes.

First, convert the chart to a conventional line chart.

A

B

C

D

Return 30 percent to the $80 to return to the $100 break-even level

Return 25 percent to the $70 to return to the $100 break-even level

Return 30 percent to the $70 to return to the $100 break-even level

Return 25 percent to the $80 to return to the $100 break-even level

Both candles must have shaven tops

Both candles must have the same high price

Both candles must have the same color real bodies

The tops of both real bodies must be the same

extremely strong

strong

low

non-existent

Put/ call parity

Plurality index

Implied volatility

Standard deviation

Due to the fact that markets only trend 30% of the time, 100% of capital should be invested at all times

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

Total amount risked on any single trade should not exceed 5% of equity

At least 50% of total equity should be dedicated to the market group with the strongest trend

spread.

regression.

moving Average.

correlation coefficient.

the relation between a portfolio's return and market return.

the relation between a portfolio's volatility and market volatility.

how much an individual stock's return is related to the market return.

how much an individual stock's volatility is related to the market volatility.

It is the opposite of the engulfing pattern

It is considered a continuation pattern

The color of the real body is of utmost importance to its significance

All of the above

Point and figure

Simple moving average

Exponential smoothing

N-day break

Innovation, Maturity, Consolidation and Decay

Innovation, Consolidation, Decay and Maturity

Innovation, Consolidation, Maturity and Decay

Innovation, Maturity, Decay and Consolidation

Divide the current prices by a moving average of those prices

Create an oscillator that plots a standard deviation of the period lows

Apply volume weighting to both high and lows in the data

Plot a linear regression line through the data midpoin

RSI = 100 - (100/(1 X RS))

RSI = 100 - (100/(100 + RS))

RSI = 100 - (100/(1 + RS))

RSI = 100 + (100/(1 + RS))

No, you can not have negative prices and every number is possible with any normal distribution. Yes, stock returns are normally distributed

Yes, you can not afford negative prices and with any usual distribution, any number is possible. No, stock returns are normally distributed

Yes, you can not afford negative prices and with any usual distribution, any number is possible. Yes, stock returns are normally distributed

No, you can not have negative prices and every number is possible with any normal distribution. No, stock returns are normally distributed

I & III

I & IV

II & III

II & IV

Simple moving average

Point and figure

Swing breakout

N-day breakou

Indicators do not take into account trading costs

Indicators optimized for the past often do not work in the present

Indicators are frequently so complex to create as to be of little use in making trading decision

Indicators usually give conflicting trading advice

Opinions are not generally discounted by the market

Stock market news is more important than general news in determining the future direction of the markets

Unexpected news does not get factored into the market

General news reflects slowly unfolding economic and financial trends not yet discounted by the markets

Contrary opinion can be used as the sole decision source in entering into new trading positions

Contrarians trade against the consensus even when it is within a normal range

Contrary opinion is more useful in deciding when to exit positions than as a timing tool

Once all long positions have been set, there is diminishing influence by the bulls

Analysts can never copy other analysts work

Other analysts work can be copied with permission in advance

If the author of the original work is deceased, this work cannot be copied since permission cannot be obtained

Research reports which are not direct copies but use substantially the same language as other analysts work would be permissible

A

B

C

None of the above

Maximum Cumulative Drawdown

Maximum Favorable Excursions

Longest Flat Time

Length of Average Winning Trade

Volume

Trend

Slope or momentum

Ratio of two prices

All new techniques must be fully documented even if proprietary methods must be disclosed to do so

New procedures must be documented as to procedure and rationale

New procedures must be supported by adequate back testing confirmed by at least technician

New methods need not be consistent with the accumulated knowledge of the field of technical analysis

It is a bullish reversal pattern

The greater the penetration into the price levels of the prior day's real body, the greater predictive power

It is the opposite of the dark cloud cover

It is preceded by a market uptrend

Williams %R

Stochastics

Relative Strength Index

The Sentix Index

It examines the most recent closing price as a percentage of the price range over a window of time

It is not as sensitive to recent price action as other indicators like Rate of Change

It moves in the same direction as the Williams %R indicator

It works best in a trending market, when it confirms the direction of the primary trend.

Candlestick charts

Point and figure charts

Equivolume charts

Continuation charts

Meeting margin calls

Not utilizing stops

Not getting sidetracked by single, counter-trend news events

Most valid buy signals in trading systems occur in the opposite direction of the prevailing trend

A

B

C

D

(expected return plus the risk free interest rate) divided by the standard deviation of returns

(expected return minus the risk free interest rate) divided by the standard deviation of returns

(expected return divided by the risk free interest rate) divided by the standard deviation of returns

(expected return times the risk free interest rate) divided by the standard deviation of returns

MACD line

RSI

Relative strength

Advance/Decline line

Implying that he can guarantee a return.

Stating his past performance as long as it is fact.

Imputing his past performance to future performance.

Implying that he can guarantee a return based on just 2 years of performance.

may not act or cause others to act on this information.

may not act but advise others to act on this information.

may use this information to support an investment recommendation.

should inform her compliance officer that she has material nonpublic information on firms she covers.

Mean

Median

Mode

Variance

The upper trend line goes downwards and must have two peaks, the latter higher than the former

The upper trend line goes upwards and must have two peaks, the latter higher than the former

The upper trend line goes upwards and must have a single peak

The upper trend line goes upwards and must have two peaks, the latter lower than the former

To reduce errors in a system

To improve the efficiency of the system

To see how long a pattern takes to form

All of the above statements

Entering the market too soon

Exiting the market too soon

Abandoning well reasoned trading strategies due to adversity

All of the above

Simple trade signals can be used for new commitments whereas complex signals are needed for liquidation purposes

Long positions are closed when they fall below the trend line and short positions are closed when they rise above the trend line

Stop losses should be placed below the last column of Os in an uptrend

All of the ab

To help identify long-term variations from the short-term trend

To spot confirmations between technical indicators

To pinpoint the crossing of two moving averages

All of the above

Sentiment indicators

Breadth indicators

Flow of Funds indicators

Cycle indicators

a weak price trend.

a strengthening price trend.

greater fluctuations in price.

lack of conviction on the part of traders.

Oscillators are least useful when they reach an extreme reading near the upper or lower ends of their boundaries

Divergences between price and oscillators are important confirmation signals

When an oscillator crosses the zero line, it provides an important trading signal in the direction of the trend

All of the above

Smoothing technique used

Distance between bands

Selection of trend speed

Use of a scaling factor

Summation

Synchronicity

Harmonicity

Alternation

Point and figure

Simple moving average

Swing breakout

N-day breakout

The best combination is when there is an upward breakout on less than normal breakout volume with no pullback

The best mix is when there is a downward breakout on less than normal breakout rate and with few pullbacks

The best combination is when a downward breakout happens on an under-average amount of breakout with no pullback

The best combination is when there is a downward breakout at an above-average breakout rate with few pullbacks

positive

meaningful

low/negative

moderately positive

a doji breaks a moving average

a dumpling top fails with an abandoned baby pattern

when opposite colored candles have the same close

When same-colored candles have the same close

His work is valid for equities but does not apply to commodities

When price meets time, a change is imminent

Gann used 10%, 20%, 30% and 40% as his key resistance and retracement levels

Gann's work is an advanced interpretation of point and figure charts

Martingale Betting System

Parabolic System

Directional Move System

Pyramiding

Volume is not used in futures, only open interest

Contract volume and total open interest are used in bonds

Declining volume and open interest suggest the trend will continue

Increasing volume and open interest suggest the trend will continue

Piercing Line & hammer

Piercing Line & Evening Star

Bullish Engulfing & Shooting Star

Bullish Engulfing & Hanging Man

The approximated prices are plotted as a number

The prices are converted into their logarithmic equivalent and plotted as a logarithmic number

The exact prices are plotted as a number

The prices are converted into their arithmetic equivalent and plotted as an arithmetic number