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CMT Association CMT-Level-II CMT Level II Exam Exam Practice Test

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Total 262 questions
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CMT Level II Exam Questions and Answers

Question 1

What is the general term for rate-of-change momentum indicators:

Options:

A.

RSI

B.

Stochastic

C.

Oscillators

D.

MACD

Question 2

Which of the following is considered a reversal pattern in candlestick charting?

Options:

A.

Windows

B.

Rising three methods

C.

Hanging man

D.

Falling three methods

Question 3

Which would be the MOST useful aspect of a cycle in studying the relationship between cycles of different lengths?

Options:

A.

Phase

B.

Period

C.

Amplitude

D.

None of the above

Question 4

Which of the following is MOST often a reversal pattern:

Options:

A.

Head and shoulders

B.

Wedge

C.

Triangle

D.

Pennant

Question 5

Which of the following is NOT true of the rising and falling three methods patterns?

Options:

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

Question 6

A trend-based trading system where the trend is the average of a pre-determined number of previous days' (n) closing prices is:

Options:

A.

Point and figure

B.

Simple moving average

C.

Linear regression slope

D.

N-day breakout

Question 7

Which of the following would BEST improve the profitability of a trend-based trading system?

Options:

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

Question 8

Which of the following is not a method used by Technical analysts to determine trading systems?

Options:

A.

Pattern recognition,

B.

Trend following

C.

Non-exogenous signal systems

D.

Countertrend

Question 9

What is the measuring objective for flags and pennants?

Options:

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

Question 10

An MTA Member or Affiliate using the MTA mailing list to send _____________ would not be in violation of the Code of Ethics:

Options:

A.

Research reports

B.

A free membership to a club

C.

Charting discount coupons

D.

CMT Newsletter

Question 11

Which of the following is NOT true of the three mountains and three rivers chart patterns?

Options:

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

Question 12

What is the proper use of long-term charts versus daily price charts?

Options:

A.

Long-term charts are more useful for making trading decisions

B.

Daily price charts allow for a thorough trend analysis

C.

Long-term charts allow for a better assessment of the price trend

D.

Daily price charts allow for a better assessment of the price trend

Question 13

What two characteristics MUST a cycle possess in order for it to be traded rationally:

Options:

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

Question 14

__________ is used to calculate the relative volatility of the current portfolio compared to the benchmark by calculating the annualized return less the risk-free return and then divided by beta.

Options:

A.

Sharpe ratio

B.

Calmar ratio

C.

Sortino ratio

D.

Treynor ratio

Question 15

The Sharpe Ratio is defined as?

Options:

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

Question 16

Which of the following is a CORRECT guideline in pyramiding trades positions?

Options:

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

Question 17

The _______________ tracks the degree of mass participation in rallies and decline.

Options:

A.

MACD line

B.

RSI

C.

Relative strength

D.

Advance/Decline line

Question 18

Can stock prices be normally distributed and are stock returns normally distributed?

Options:

A.

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

B.

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

C.

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

D.

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

Question 19

Which of the following is the MOST likely use of an oscillator in a trading system:

Options:

A.

To forecast future price levels

B.

As a timing tool

C.

To hedge other positions

D.

To determine position sizes

Question 20

What is the main impediment to making objective trading decisions?

Options:

A.

Lack of complete information

B.

Failing to consider trading costs

C.

Conflict between technical and fundamental models

D.

Emotional considerations cloud judgment

Question 21

Near the end of a recession:

Options:

A.

bonds turn up before stocks and commodities.

B.

stocks turn up before bonds and commodities.

C.

commodities turn up before bonds and stocks.

D.

all the asset classes turn up simultaneously.

Question 22

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

Options:

A.

I & III

B.

I & IV

C.

II & III

D.

II & IV

Question 23

What trading decision must a trader make based purely on trend line in the chart below?

Options:

A.

Hold long positions

B.

Close out long positions

C.

Close out short positions

D.

Trading decisions cannot be made by using trend lines.

Question 24

Prior to a market top, what would one expect to see in a VIX reading?

Options:

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.

Question 25

Which of the following places the cycles in time length order?

Options:

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

Question 26

A trend-based trading system where the trend is the weighting of the recent closing prices by a smoothing constant:

Options:

A.

Point and figure

B.

Simple moving average

C.

Exponential smoothing

D.

N-day break

Question 27

Which of the following is an INCORRECT definition of cycle terminology?

Options:

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)

Question 28

Which of the following would provide the least help to a trader who is trying to determine where to place a stop order?

Options:

A.

ATR

B.

Parabolic SAR

C.

TRIN

D.

Pivot Point Technique

Question 29

_______moving average uses reverse linear weights:

Options:

A.

The pivot-point

B.

The simple

C.

The weighted

D.

The exponential

Question 30

ALL of the following are standard patterns used with 3-Box reversal point and figure charts, EXCEPT:

Options:

A.

Bullish or Bearish Triangle

B.

Triple Top or Triple Bottom

C.

Double Top or Double Bottom

D.

Bullish or Bearish Fulcrum

Question 31

_____________ captures an increasing part of the profits as price moves in a favorable direction.

Options:

A.

Initial Stop

B.

Trailing stop

C.

Sell stop

D.

Standard deviation stop

Question 32

Which of the following figures can not be plotted on a point and figure chart when we have to plot months and years together? Choose the best possible answer.

Options:

A.

The year is displayed at the bottom of the column and the month is not plotted

B.

The year is displayed at the bottom of the column and the number of the month is plotted instead of the X or O

C.

The month is displayed at the bottom of the column and the year is not plotted

D.

The month is displayed at the bottom of the column and the number of the year is plotted instead of the X or O

Question 33

Which of the following points represents a valid island reversal in the chart below?

Options:

A.

A

B.

B

C.

C

D.

None of the above

Question 34

Which of the following is true of volume and open interest?

Options:

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

Question 35

Which of the following is not a disadvantage of the patterns that are formed by Broadening formations?

Options:

A.

They are hard to make the most of the profit

B.

They are often difficult to identify

C.

They are relatively common in occurrence

D.

The breakout lines are moving permanently away from each other

Question 36

Which is NOT a measure of central tendency:

Options:

A.

Mean

B.

Median

C.

Mode

D.

Variance

Question 37

Which of the following is the calculation for price objective using the vertical count method? (Note: X is the multiplication symbol in this question)

Options:

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)

Question 38

Which of the following is NOT continuation pattern?

Options:

A.

Rising three methods

B.

Separating lines

C.

Tweezers

D.

Windows

Question 39

Which of the following is not an example of initial decision taken into consideration in the field of system testing?

Options:

A.

Set the time-routine

B.

You need a Risk Management Plan

C.

You need to configure the machine time horizon

D.

Determine what markets to concentrate can be delayed initially

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