CMT Level 1 Exams ( Updates STUDY BUNDLE
PACKAGE) The Integration of Technical Analysis |
Questions and Verified Answers| Grade A| 100%
Correct
Technical Analysis Basic Principles - ANSWERTrend is your fried
Don't lose = control risk of capital loss
Manage your money = Avoid Ruin
Charles Dow = founder
Uptrend - ANSWERPrices reach higher peaks and the troughs are also higher.
Downtrend is the opposite.
Trend - ANSWERdirectional movement of prices that remains in effect long enough
to be identified and still be profitable
Supply and Demand - ANSWERkey for pricing. Believes it is futile to analyze
components of supply and demand except through the prices it creates. Prices
determine trends and they tend to trend.
Fractal nature - ANSWERability for trends to act similarly over different periods
period of interest - ANSWERthe length of the trend
Trends Identification categories - ANSWERPrimary = years/months
Secondary (Int.) = Months/weeks
Short term = days
Intraday = hours/mins
Prices discount everything - ANSWERincludes all information
known/unknown/feelings/etc.
Technicians Assumptions - ANSWER1) Supply & demand
2) Price discounts everything
3) Prices are nonrandom
4) Humans will behave similarly to the way they have in the past
5) Believe patterns are fractal
6) Emotions are affected by earlier emotions through emotional feedback
Technical analysis excessive feedback - ANSWERprices will expand beyond
equilibrium for emotional reasons, revert to the mean, and then expand beyond the
mean in the opposite direction with investor sentiment
Primary Bull Phases - ANSWER1) Reviving confidence from primary bear market
, 2) Response to increase corporate earnings
3) Speculation becomes dominant and prices rise on hopes
Primary BEAR phases - ANSWER1) Abandonment of hopes from which stocks were
purchased
2) Selling due to decreased earnings
3) Distress selling, regardless of value
The Secondary Trend - ANSWERUsually lasting from 3 weeks to as many months,
during which intervals of price movement generally retraces from 33% to 66% of
primary price change since end of last secondary reaction
Line - ANSWER2-3 weeks of horizontal price movement in an average w/in a 5%
range. usually a sign of accumulation or distribution. Breakout above or below
suggest it will continue in same direction as breakout
concept of confirmation - ANSWERdownward movement of secondary and perhaps
primary was established when the new lows for both averages were under the low
points of the proceeding reaction.
S&P 500 and Russell 2000 - ANSWERwhen the 2 indexes confirm each other than the
primary trend is confirmed
Volume - ANSWERPrice trend and confirmation override any consideration on
volume. Important on secondary moves. Bull markets end in periods of excessive
activity and begin with light transactions
4 main chart types - ANSWER1. line
2. Bar = closing price right/ opening price left
3. Candlestick = the box "real body" & if closed higher than is white, if closed lower
than is black
4. Point and figure
Arithmetic Scale - ANSWERlinear scale, very simple and straight forward
Semi-Logarithmic scale - ANSWERvertical distance represents the same % change in
price. use when the securities price over the period investigated is over 20%
Consolidation, congestion area, rectangle formation - ANSWERusually occurs after a
larger trend has come to a temporary halt
resistance zone - ANSWERresistance levels becomes this when resistance occurs
roughly at the same price more than once. Once a breakthrough happens, previous
resistance becomes the support level
Reversals - ANSWERDemark or Williams method = determining reversal point by
using the # of bars on either side of suspected reversal point
PACKAGE) The Integration of Technical Analysis |
Questions and Verified Answers| Grade A| 100%
Correct
Technical Analysis Basic Principles - ANSWERTrend is your fried
Don't lose = control risk of capital loss
Manage your money = Avoid Ruin
Charles Dow = founder
Uptrend - ANSWERPrices reach higher peaks and the troughs are also higher.
Downtrend is the opposite.
Trend - ANSWERdirectional movement of prices that remains in effect long enough
to be identified and still be profitable
Supply and Demand - ANSWERkey for pricing. Believes it is futile to analyze
components of supply and demand except through the prices it creates. Prices
determine trends and they tend to trend.
Fractal nature - ANSWERability for trends to act similarly over different periods
period of interest - ANSWERthe length of the trend
Trends Identification categories - ANSWERPrimary = years/months
Secondary (Int.) = Months/weeks
Short term = days
Intraday = hours/mins
Prices discount everything - ANSWERincludes all information
known/unknown/feelings/etc.
Technicians Assumptions - ANSWER1) Supply & demand
2) Price discounts everything
3) Prices are nonrandom
4) Humans will behave similarly to the way they have in the past
5) Believe patterns are fractal
6) Emotions are affected by earlier emotions through emotional feedback
Technical analysis excessive feedback - ANSWERprices will expand beyond
equilibrium for emotional reasons, revert to the mean, and then expand beyond the
mean in the opposite direction with investor sentiment
Primary Bull Phases - ANSWER1) Reviving confidence from primary bear market
, 2) Response to increase corporate earnings
3) Speculation becomes dominant and prices rise on hopes
Primary BEAR phases - ANSWER1) Abandonment of hopes from which stocks were
purchased
2) Selling due to decreased earnings
3) Distress selling, regardless of value
The Secondary Trend - ANSWERUsually lasting from 3 weeks to as many months,
during which intervals of price movement generally retraces from 33% to 66% of
primary price change since end of last secondary reaction
Line - ANSWER2-3 weeks of horizontal price movement in an average w/in a 5%
range. usually a sign of accumulation or distribution. Breakout above or below
suggest it will continue in same direction as breakout
concept of confirmation - ANSWERdownward movement of secondary and perhaps
primary was established when the new lows for both averages were under the low
points of the proceeding reaction.
S&P 500 and Russell 2000 - ANSWERwhen the 2 indexes confirm each other than the
primary trend is confirmed
Volume - ANSWERPrice trend and confirmation override any consideration on
volume. Important on secondary moves. Bull markets end in periods of excessive
activity and begin with light transactions
4 main chart types - ANSWER1. line
2. Bar = closing price right/ opening price left
3. Candlestick = the box "real body" & if closed higher than is white, if closed lower
than is black
4. Point and figure
Arithmetic Scale - ANSWERlinear scale, very simple and straight forward
Semi-Logarithmic scale - ANSWERvertical distance represents the same % change in
price. use when the securities price over the period investigated is over 20%
Consolidation, congestion area, rectangle formation - ANSWERusually occurs after a
larger trend has come to a temporary halt
resistance zone - ANSWERresistance levels becomes this when resistance occurs
roughly at the same price more than once. Once a breakthrough happens, previous
resistance becomes the support level
Reversals - ANSWERDemark or Williams method = determining reversal point by
using the # of bars on either side of suspected reversal point
