CMT Level 1; Questions and Answers 100% Solved
DeMark or Williams Method Correct answer Reversal point where at a bottom there are
two bars with higher lows on each side and at a top there are two bars with lower highs on each
side.
Gann 2 Day Swing Correct answer A reversal point where a low...
CMT Level 1 ; Questions and Answers 100% Solved DeMark or Williams Method Correct answer Reversal point where at a bottom there are two bars with higher lows on each side and at a top there are two bars with lower highs on each side. Gann 2 Day Swing Correct answer A reversal point where a low or high bar is identified and if the two following trading days have higher highs than the low bar and two lower lows than the high bar than you have a support or resistance point. Donchian Breakout Correct answer Buy when the highest high over the past 4 weeks is broker and sell when the lowest low over the past 4 weeks is broken. Average True Range (ATR) Correct answer The average of the true range of each bar over some period and is a measure of volatility Breakaway Gap Correct answer Gap at the beginning of a trend reversal, usually supported by high volume. Does not fill in like a Common Gap Common Gap Correct answer Gap caused by an opening price outside of the previous bar range. Also called, Area Gap or Open Gap. Often upward breaks are filled and should be faded. Runaway Gap Correct answer Gaps that occur along a trend. Also called Continuation or Measure Gaps. Usually occur near the middle of the trend, 43% of the way on the upside and 57% on downside. Exhaustion Gap Correct answer Gap that occurs at the end of a strong trend most often on heavy volume. Should fill within a few bars and signal possible trend reversal with confirmation needed (ie another pattern such as a descending triangle) Dow Theory Hypothesis Correct answer 1. Primary Trend is inviolate 2. The market discounts everything CMT Level 1 ; Questions and Answers 100% Solved 3. Dow Theory is not infallible Primary Trend Correct answer Can last several years Bull Phase 1. Buying due to reviving of confidence from prev. bear mkt. 2. Buying due to increased corporate earnings 3. Buying due to speculation/euphoria Bear Phase 1. Selling on abandonment of hope. 2. Selling due to decreased earnings. 3. Selling in distress/throwing in the towel. Secondary Trend Correct answer Meaningful decline in a bull market or advance in a bear market that can last 3 weeks to 3 months, retracing 33% to 66% of the previous move. Dow Theory Theorems Correct answer 1. Ideal mkt. picture consists of uptrend, top, downtrend and bottom 2. Economic rationale should be used to explain mkt. action (Confirmation) 3. Prices Trend. Minor Trend Correct answer Daily movements that have little to no meaning unless a range is being formed. (Lines - trading range with highs and lows within 5%) Four types of charts Correct answer 1. Line charts 2. Bar Charts 3. Candlestick Charts 4. Point and Figure Charts CMT Level 1 ; Questions and Answers 100% Solved Outside Reversal Day Correct answer Bar where range is higher and lower than previous bars high and low and close it at high or low. Reversal pattern. Beta Correct answer Measurement of volatility of stock relative to overall market (usually S&P500) True Range (TR) Correct answer TR(today)= Max[(high -low), absl(high -prev close), absl(low -prev close)] Avg. True Range (ATR) - Wilder method Correct answer Way to measure volatility and reduces effects older data. (Exponential moving avg.) ATR(Today)= (ATR yesterday x (n -1) + ATR today)/n. first ATR is calculated by arithmetic mean Pivot Point technique Correct answer Technique using high, low and close to establish support and resistance. P(pivot pt)= (prev. high+low+close)/3 R1 = (2xP) -prev low S1 = (2xP) - prev high R2 = P + (prev high - low) S2 = P - (prev high - low) Protective Stop Correct answer Stop set at a certain level to protect existing gains or thwart further losses. Protection of capital Trailing Stop Correct answer Stop set at a certain level outside of price that protects a gain from turning into a loss
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