Cmt2 Questions

Sample Questions for CMT Level II
CMT Level 2 Sample Questions
These sample questions are used to provide the candidate with examples of how the questions may appear on the CMT exam. The actual CMT exam does not have any true/false questions. These sample questions cover much of the material listed in the Body of Knowledge, while the actual exam questions may be more difficult. In addition, these sample questions cover a variety of topics; however, the actual exam weighting may vary. The actual exam consists of 160 questions of which 150 are scored items. Please note that this sample question booklet was prepared entirely separately from the actual exam to ensure the security of the actual exam questions. In some aspects, these sample questions are designed differently from the actual exam so as to better serve as a review for candidates. For example, many questions and/or answers may be longer than in the actual exam so that the questions and answers serve as a review of the material. The MTA maintains a discussion group forum for CMT candidates on its web site. Candidates are encouraged to utilize this resource and to discuss any areas of the Body of Knowledge with which they are not familiar. This book of practice exams is produced by: Market Technicians Association, Inc., 61 Broadway, Suite 514 New York, NY 10006 All material is believed to be reliable at time of publication, but not guaranteed. The Market Technicians Association, Inc., and its officers, assumes no responsibility for errors or omissions.
Copyright 2011 Market Technicians Association, Inc. All rights are reserved.
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CMT Level 2 Sample Questions Answer Sheet

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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 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 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 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 5. What is the MTAs 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 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 analysts 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
CMT Level 2 Sample Questions d. Insider trading activity is the subject of SEC regulations, therefore the MTA Code of Ethics is silent on this issue 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 8. What steps must analysts take in introducing new methods of technical analysis under the MTA Code of Ethics? a. All new techniques must be fully documented even if proprietary methods must be disclosed to do so b. New procedures must be documented as to procedure and rationale c. New procedures must be supported by adequate back testing confirmed by at least technician d. New methods need not be consistent with the accumulated knowledge of the field of technical analysis 9. Which of the following must every MTA Member and Affiliate comply with? a. Rules promulgated by the MTA Board of Governors b. MTA Constitution c. MTA By-laws d. All of the above 10. Which of the following MUST be adhered to in published or written analytical reports? a. Statements must be consistent with available evidence b. Statements must be consistent with the accumulated knowledge of technical analysis c. Statements may not indefensibly disparage the work of other analysts d. All of the above 11. Which of the following would BEST improve the profitability of a trend-based trading system? a. Use of additional trend periods b. Increase the delay in taking action after a trade signal is given c. Utilize support and resistance lines d. Utilize candlestick charts instead of bar charts 12. Which of the following would NOT be true in designing a trading system utilizing bands? a. Buy when prices penetrate the upper band b. Close out longs when prices reverse and go below the center of the band c. Close out shorts when prices reverse and go below the center of the band d. Sell when price breaks below the lower band
Page 7 13. In trend-based trading systems, what is the major determinant of trading activity (i.e., how often buy or sell signals are generated)? a. Smoothing technique used b. Distance between bands c. Selection of trend speed d. Use of a scaling factor 14. A trend-based trading system where the trend is the average of a pre-determined number of previous days (n) closing prices is: a. Point and figure b. Simple moving average c. Linear regression slope d. N-day breakout 15. A trend-based trading system where the trend is the weighting of the recent closing prices by a smoothing constant: a. Point and figure b. Simple moving average c. Exponential smoothing d. N-day break 16. A trend based trading system where the trend is the slope of a straight line found using a least squares regression: a. Point and figure b. Simple moving average c. Linear regression slope d. N-day breakout 17. A trend based trading system where signals occur when the current price reaches a new high or low: a. Point and figure b. Simple moving average c. Swing breakout d. N-day breakout 18. A trend based trading system where signals occur when the current high or low price exceeds the previous swing high or low price: a. Point and figure b. Simple moving average c. Swing breakout d. N-day breakout 19. A trend based trading system where signals occur when the current high or low price exceeds the previous high or low price: a. Simple moving average b. Point and figure c. Swing breakout d. N-day breakout
CMT Level 2 Sample Questions 20. Technicians refer to the speed of price movement as: a. Volume b. Trend c. Slope or momentum d. Ratio of two prices 21. Which of the following is NOT a momentum indicator: a. Relative strength b. Difference between price and moving average c. Difference between two moving averages d. Trident index 22. What is the general term for rate-of-change momentum indicators: a. RSI b. Stochastic c. Oscillators d. MACD 23. Which of the following is NOT true of the Relative Strength Index a. It is scaled from 0 to 100 b. It is more volatile than simple measures of momentum c. It uses all the price values in a time period d. It is frequently used to determine overbought and oversold levels 24. Which of the following is the MOST likely use of an oscillator in a trading system: a. To forecast future price levels b. As a timing tool c. To hedge other positions d. To determine position sizes 25. What two characteristics MUST a cycle possess in order for it to be traded rationally: a. There must be a reason for its existence and it must have regular intervals between peaks b. There must be confidence that the cycle will continue and it must be synchronized with another cycle c. There must be a reason for its existence and confidence that it will continue d. There must be a way to forecast it and it must be synchronized with another cycle 26. Which of the following is an INCORRECT definition of cycle terminology? a. Amplitude - the height of the wave (cycle) b. Period - the time needed to finish one wave (cycle) c. Frequency - the number of cycles that repeat every 360 d. Phase - a measure of separation between the top and bottom of a wave (cycle) 27. How can one identify the existence of a cycle? a. Remove price trend b. Switch time frames c. Use only period extremes
Page 9 d. None of the above 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 29. Which of the following is a continuation pattern: a. Head and shoulders b. Wedge c. Broadening top d. V-bottom 30. Which of the following is MOST often a reversal pattern: a. Head and shoulders b. Wedge c. Triangle d. Pennant 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 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 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 34. Which market tends to have the GREATEST amount of volatility? a. Bonds b. Currencies c. Eurodollars d. Equities
CMT Level 2 Sample Questions 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 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 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 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 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 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 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 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
P a g e 11 c. Relative strength of lagging groups begins to improve d. Leading groups make new lows and accelerate to the downside 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 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 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 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 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 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 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
CMT Level 2 Sample Questions c. Take small consistent profits, but allow large, windfall profitable positions to run 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) 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) 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 presidents 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 presidents 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 presidents 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 presidents term, posts its strongest returns in the second year and reasonably strong returns during the pre-election and election years 53. Which of the following pieces of information is NOT contained in the CFTCs 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 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
P a g e 13 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 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 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 58. Which of the following is true of W.D. Ganns 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. Ganns work is an advanced interpretation of point and figure charts 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 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 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 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
CMT Level 2 Sample Questions b. Compares risk to expected returns c. Compares actual returns to expected returns d. Signals moving average crossovers 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 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 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 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 67. Which of the following is considered a continuation pattern? a. Head and shoulders b. Inverse head and shoulders c. Triangle d. Double top 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 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 70. Which of the following are true of the concepts of divergence and confirmation in technical analysis
P a g e 15 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 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 markets 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. 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 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 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 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 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 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
CMT Level 2 Sample Questions d. Daily price 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 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 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 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 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 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 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
P a g e 17 c. To pinpoint the crossing of two moving averages d. All of the above 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)) 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 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 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 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 above 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
CMT Level 2 Sample Questions 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 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 93. Which of the following is a true statement according to 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 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 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 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 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 97. Which of the following is NOT a basic principle of cycles? a. Summation b. Synchronicity c. Harmonicity d. Alternation
P a g e 19 98. 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 99. 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 100. Which of the following is true of Wilders 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 101. What of the following could be utilized in a computerized trading system to improve the performance of Wilders Parabolic System? a. Trend lines b. Stops c. Directional movement index d. Average divergence index 102. 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 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 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 105. Central tendency is: a. Statistical jargon for the typical outcome
CMT Level 2 Sample Questions b. The midpoint of a trading range c. A popular Elliott Wave guideline d. A common pitfall of novice traders 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 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 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 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 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 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 Figure 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
P a g e 21 d. Suggest a failure in the longer term pattern 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 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 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 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 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 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 off 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 days real body, the greater predictive power c. It is the opposite of the dark cloud cover d. It is preceded by a market uptrend
CMT Level 2 Sample Questions 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 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 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 123. Why doesnt 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 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 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 signal 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 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
P a g e 23 d. The tops of both real bodies must be the same 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 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 successive candles open inside the real body of the prior day the pattern has greater 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 sessions real body c. It is composed of three white candles with successively higher closes d. Each candle should have a long upper shadow 131. Which of the following is NOT true of the three mountains and three rivers chart patterns? a. They are longer-term tops and bottom patterns, respectively b. The three mountains pattern is also known as a triple top or Buddha top c. The three rivers patterns is also known as a triple bottom or inverted Buddha bottom d. The color of the real bodies is of utmost importance to its significance 132. Which of the following is true of the window pattern? a. It is a reversal pattern b. It occurs when the real bodies of two consecutive candles do not overlap c. It occurs when the shadows of two consecutive candles do not overlap d. One should buy on dips after a falling window 133. Which of the following is NOT true of the rising and falling three methods patterns? a. They are continuation patterns b. It starts with a long candle is followed by three short candles of the opposite color c. The final day is another long candle of the opposite color of the three preceding small candles d. The pattern consists of a single candle 134. Which of the following is true of the separating lines pattern? a. The top of the upper shadow of one candle is at the same price as the bottom of the lower shadow of the other candle b. The opening price of the second candle equals the opening price of the first candle c. The two candles have the same color d. It is a reversal pattern
CMT Level 2 Sample Questions 135. Which of the following is NOT continuation pattern? a. Rising three methods b. Separating lines c. Tweezers d. Windows 136. Which of the following is a continuation pattern? a. Umbrella b. Hammer c. Doji d. Windows 137. Which is NOT a measure of central tendency: a. Mean b. Median c. Mode d. Variance 138. Which of the following is the MOST important thing to keep in mind in attempting to find a perfect indicator? a. Indicators do not take into account trading costs b. Indicators optimized for the past often do not work in the present c. Indicators are frequently so complex to create as to be of little use in making trading decision d. Indicators usually give conflicting trading advice 139. What is the main impediment to making objective trading decisions? a. Lack of complete information b. Failing to consider trading costs c. Conflict between technical and fundamental models d. Emotional considerations cloud judgment 140. Standard deviation is: a. A descriptive statistic which defines the central tendency b. The square root of the variance c. The covariance of two securities d. An inferential statistic which measures symmetry around the mean 141. What are three common ways that a greed-driven investor can suffer losses, even when his longerterm market forecast is CORRECT? a. Options, indexes and pyramiding b. Options, indexes and currencies c. Options, leveraging and pyramiding d. Options, leveraging and currencies 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
P a g e 25 d. Innovation, Maturity, Decay and Consolidation 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 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 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 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 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 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 149. From a contrarians 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
CMT Level 2 Sample Questions 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 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. 152. A morning star pattern is typically: a. A very small pattern consisting of two candles that is infrequently seen b. A continuation consisting of at least five candles c. A bottom reversal pattern consisting of three candles d. A top reversal pattern consisting of three candles
153. An evening doji star: a.
Has a doji in the last position b. Has a doji in the middle position c. Is completely comprised of dojis d. Is completed by dojis leading out of the pattern
154. Abandoned baby patterns: a. appear upon completion of star patterns b. appear nowhere in star patterns, only in box ranges c. ideally has a doji as second real bottom d. can only be formed over long periods of time 155. Counterattack lines are formed when: a. a doji breaks a moving average b. a dumpling top fails with an abandoned baby pattern c. when opposite colored candles have the same close d. When same-colored candles have the same close 156. In a point and figure chart, what are the typical box sizes for a stock trading between 20 and 100, between 100 and 200, and then above 200? a. 1, 2, 3 b. 1, 2, 4 c. , 1, 2 d. 1, 3, 5
P a g e 27 157. What is the bearish counterpart to the Piercing Line candlestick pattern? a. 3 Black Crows b. Dark Cloud Cover c. Hanging Man d. Shooting Star followed by an Inverted Hammer 158. Prior to a market top, what would one expect to see in a VIX reading? a. Increasing VIX levels, as more investors are adding protective measures b. An overbought VIX level, given an increase in long term S&P futures contracts. c. Generally low VIX levels, as there is often complacency among traders prior to tops d. An oversold VIX level, given a decrease in long term S&P futures contracts. 159. Which of the following would provide the least help to a trader who is trying to determine where to place a stop order? a. ATR b. Parabolic SAR c. TRIN d. Pivot Point Technique 160. A Harami most closely resembles what western charting pattern? a. Inside day b. Outside day c. Gap d. Andrews Pitchfork 161. When small cap stocks have abnormal strength, this can be attributed to the: a. The January Barometer b. The January Effect c. Kondratieff K-Wave d. Hindenburg Omen 162. If a peak occurs prior to the halfway point of a cycle, this would be considered: a. Left translation b. Right translation c. Inversion d. Entropy 163. All of the following most directly measure internal market strength, EXCEPT: a. New Net Highs & New Net Lows b. Net Ticks c. Arms Index d. Consumer Confidence Index 164. Which of the following are FALSE statements when describing the Chaikin Money Flow Index? a. Gaps will not be recorded, as the index only uses the day high, day low, and closing price. b. It suffers from the drop off effect, as it uses a simple moving average. c. It measures deviations of price within two standard deviations of the range.
CMT Level 2 Sample Questions d. The index will rise above zero in an upward trend. 165. A system in which the investor must be able to withstand a long series of losses. a. Martingale Betting System b. Parabolic System c. Directional Move System d. Pyramiding 166. The Rising 3 Methods candlestick pattern is: I. Bullish II. Bearish III. Long White Body followed by a series of smaller falling candles IV. Long Black Body followed by a series of smaller rising candles a. I & III b. I & IV c. II & III d. II & IV 167. All of the following are similar technical indicators, EXCEPT: a. Williams %R b. Stochastics c. Relative Strength Index d. The Sentix Index 168. A technical analyst was at a convention in which a long-term point and figure stock chart was being discussed. He noticed that low-price action did not appear as active as high-price action on the chart. One suggestion the technical analyst could provide, to clear up this apparent distortion, would be to: a. Change the charting scale to logarithmic b. Increase the time frame on the chart c. Change the scale to arithmetic d. Add the daily opening prices to provide a more visual benchmark of price changes 169. Over a period of 4 weeks, a swing trader notices that for a particular security the ADX reading has declined from a high of 45 to a current low of 15. What tool may best help the trader isolate a trading opportunity over the next few days? a. A Simple Moving Average b. An Oscillator c. An Exponential Moving Average d. A Linear Regression Line 170. Which of the following best helps quantify the risk of a trading system? a. Maximum Cumulative Drawdown b. Maximum Favorable Excursions c. Longest Flat Time d. Length of Average Winning Trade
P a g e 29 171. This indicator measures the distance between two exponential moving averages of advances minus declines. a. TRIN b. McClellan Oscillator c. Ayres-Hughes Breadth Indicator d. The SENTIX Index 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 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 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 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. 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. 177. This chart type integrates volume directly into the price bar: a. Equivolume b. VWOP
CMT Level 2 Sample Questions c. Renko d. Ichimoku Cloud 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 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 midpoint
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1. 2. The MTA Code of Ethics applies to: d. All of the above An MTA Member or Affiliate using the MTA mailing list to send ____________would not be in violation of the Code of Ethics: d. CMT Newsletter 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 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 What is the MTAs 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 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 What position does the MTA take on plagiarism? b. Other analysts work can be copied with permission in advance What steps MUST analysts take in introducing new methods of technical analysis under the MTA Code of Ethics? b. New procedures must be documented as to procedure and rationale Which of the following MUST every MTA Member and Affiliate comply with? d. All of the above
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7. 8.
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10. Which of the following MUST be adhered to in published or written analytical reports? d. All of the above 11. Which of the following would BEST improve the profitability of a trend-based trading system? b. Increase the delay in taking action after a trade signal is given 12. Which of the following would NOT be true in designing a trading system utilizing bands? c. Close out shorts when prices reverse and go below the center of the band
CMT Level 2 Sample Questions 13. In trend-based trading systems, what is the major determinant of trading activity (i.e., how often buy or sell signals are generated)? c. Selection of trend speed 14. A trend-based trading system where the trend is the average of a pre-determined number of previous days (n) closing prices is: b. Simple moving average 15. A trend-based trading system where the trend is the weighting of the recent closing prices by a smoothing constant: c. Exponential smoothing 16. 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 current price reaches a new high or low: c. An N-day breakout 18. A trend based trading system where signals occur when the current high or low price exceeds the previous swing high or low price: c. Swing breakout 19. A trend based trading system where signals occur when the current high or low price exceeds the previous high or low price: b. Point and figure 20. Technicians refer to the speed of price movement as: c. Slope or momentum 21. Which of the following is NOT a momentum indicator: d. Trident index 22. What is the general term for rate-of-change momentum indicators: c. Oscillators 23. Which of the following is NOT true of the Relative Strength Index b. It is more volatile than simple measures of momentum 24. Which of the following is the MOST likely use of an oscillator in a trading system: b. As a timing tool 25. What two characteristics MUST a cycle possess in order for it to be traded rationally: c. There must be a reason for its existence and confidence that it will continue 26. Which of the following is an INCORRECT definition of cycle terminology? d. Phase - a measure of separation between the top and bottom of a wave (cycle)
P a g e 33 27. How can one identify the existence of a cycle? a. Remove price trend 28. 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: b. Wedge 30. 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? c. A price chart is representation of human behavior 32. 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? b. Widen the bands 34. 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? 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 37. 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? 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 40. 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? 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?
b. Leading groups fail to confirm new lows
43. 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? 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 46. 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? 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? d. 28-day 49. 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) 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) 52. 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 presidents 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 CFTCs 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? 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? d. All of the above
P a g e 35 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? b. Long-term 57. 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. Ganns trading techniques? b. When price meets time, a change is imminent 59. 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? 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? c. Balance risk across multiple markets and trading systems 62. 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? 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? d. 30 65. 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? d. Longer formation time periods increase the signaling importance of both saucers and peaks 67. Which of the following is considered a continuation pattern? c. Triangle 68. 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? 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 71. According to Kirkpatrick and Dahlquist, during emotional times, flow of funds signals:
CMT Level 2 Sample Questions a. Appear to work poorly because price seems to divorce itself from economics 72. 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? b. Declining open interest in an uptrend is bearish 74. 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? 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 77. 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? d. Continuation charts 79. 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? 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? 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? 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? 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? c. To pinpoint the crossing of two moving averages 85. Which of the following is the formula for calculating RSI? c. RSI = 100 - (100/(1 + RS))
P a g e 37 86. 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 88. 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? c. Stop losses should be placed below the last column of Os in an uptrend 90. 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? d. Pattern, ratio and time 92. 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 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? b. Waves can be expanded into longer waves and subdivided into shorter waves 95. Which of the following is a true statement according to Elliott Wave Theory? b. Ratios are used to define price objectives 96. 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? d. Alternation 98. Which of the following places the cycles in time length order? d. Alpha/beta, lunar, seasonal, presidential and Kondratieff 99. Which is historically the strongest three-month period for the U.S. equity markets? d. October, November and December 100. Which of the following is true of Wilders Parabolic System? d. All of the above
CMT Level 2 Sample Questions 101. What of the following could be utilized in a computerized trading system to improve the performance of Wells Parabolic System? c. Directional movement index 102. 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? b. Most computerized systems are unprofitable in non-trending markets 104. 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 106. 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 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)? 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 110. Intermarket analysis can be used for which investment decisions? d. All of the above 111. 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: c. Will lead to a stronger directional move. 113. 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? d. All of the above 115. Which is the CORRECT interpretation of the candlestick hammer pattern? d. A hammer need not be confirmed by other indicators
P a g e 39 116. 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? 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 could cover occurs in the middle of a trading range 119. 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? c. Hanging man 121. 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? d. All of the above 123. Why doesnt 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? 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 126. 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? b. Both candles must have the same high price 128. 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 130. 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 and three rivers chart patterns? d. The color of the real bodies is of utmost importance to its significance
CMT Level 2 Sample Questions 132. Which of the following is true of the window pattern? c. It occurs when the shadows of two consecutive candles do not overlap 133. Which of the following is NOT true of the rising and falling three methods patterns? d. The pattern consists of a single candle 134. Which of the following is true of the separating lines pattern? b. The opening price of the second candle equals the opening price of the first candle 135. Which of the following is NOT continuation pattern? c. Tweezers 136. Which of the following is a continuation pattern? d. Windows 137. Which is NOT a measure of central tendency: d. Variance 138. Which of the following is the MOST important thing to keep in mind in attempting to find a perfect indicator? b. Indicators optimized for the past often do not work in the present 139. What is the main impediment to making objective trading decisions? d. Emotional considerations cloud judgment 140. Standard deviation is: b. The square root of the variance 141. What are three common ways that a greed-driven investor can suffer losses, even when his longer-term market forecast is CORRECT? c. Options, leveraging and pyramiding 142. 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? 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? b. Such stories are essentially gossip 145. 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? d. All of the above
P a g e 41 147. 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 149. From a contrarians 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? 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 152. A morning star pattern is typically: c. A bottom reversal pattern consisting of three candles 153. An evening doji star: b. Has a doji in the middle position 154. Abandoned baby patterns c. Ideally has a doji as second real bottom 155. Counterattack lines are formed when: c. When opposite colored candles have the same close 156. In a point and figure chart, what are the typical box sizes for a stock trading between 20 and 100, between 100 and 200, and then above 200? b. 1, 2, 4 157. What is the bearish counterpart to the Piercing Line candlestick pattern? b. Dark Cloud Cover 158. Prior to a market top, what would one expect to see in a VIX reading? c. Generally low VIX levels, as there is often complacency among traders prior to tops 159. Which of the following would provide the least help to a trader who is trying to determine where to place a stop order? c. TRIN 160. A Harami most closely resembles what western charting pattern? a. Inside day 161. When small cap stocks have abnormal strength, this can be attributed to the: b. The January Effect
CMT Level 2 Sample Questions 162. If a peak occurs prior to the halfway point of a cycle, this would be considered: a. Left translation 163. All of the following most directly measure internal market strength, EXCEPT: d. Consumer Confidence Index 164. Which of the following are FALSE statements when describing the Chaikin Money Flow Index? c. It measures deviations of price within two standard deviations of the range. 165. A system in which the investor must be able to withstand a long series of losses. a. Martingale Betting System 166. The Rising 3 Methods candlestick pattern is: a. I & III 167. All of the following are similar technical indicators, EXCEPT: d.The Sentix Index 168. A technical analyst was at a convention in which a long-term point and figure stock chart was being discussed. He noticed that low-price action did not appear as active as high-price action on the chart. One suggestion the technical analyst could provide, to clear up this apparent distortion, would be to: a. Change the charting scale to logarithmic 169. Over a period of 4 weeks, a swing trader notices that for a particular security the ADX reading has declined from a high of 45 to a current low of 15. What tool may best help the trader isolate a trading opportunity over the next few days? b. An Oscillator 170. Which of the following best helps quantify the risk of a trading system? a. Maximum Cumulative Drawdown 171. 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 173. 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? c. Throwback 175. 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.
P a g e 43 176. 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 177. 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: 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

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Sample Questions for CMT Level II

CMT Level 2 Sample Questions

CMT Level 2 Sample Questions Answer Sheet

CMT Level 2 Sample Questions

CMT Level 2 Sample Questions Answer Sheet

CMT Level 2 Sample Questions

CMT Level 2 Sample Questions Answer Sheet

CMT Level 2 Sample Questions

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