CPT Trading Strategies & Market Timing 3

Question 1

The 'triple witching' event, which occurs four times per year, refers to the simultaneous expiration of:

Accepted Answer

Stock options, stock index futures, and stock index options

Answer

Triple witching is the simultaneous expiration of stock options, stock index futures, and stock index options on the third Friday of March, June, September, and December.

Question 2

A trader employing a 'momentum ignition' detection strategy would look for which combination of signals to identify potentially manipulated short-term moves?

Accepted Answer

Very high volume spike on a tiny price move followed by reversal

Answer

Momentum ignition often shows a sharp volume spike with a small price move followed by quick reversal, suggesting an attempt to trigger stop orders rather than genuine demand.

Question 3

In the context of sector rotation strategy, which sectors are traditionally considered 'early cycle' and tend to outperform as the economy exits a recession?

Accepted Answer

Financials, consumer discretionary, and industrials

Answer

Financials, consumer discretionary, and industrials are classic early-cycle outperformers because they benefit directly from credit expansion and rising consumer spending at the start of a recovery.

Question 4

A 'dead cat bounce' in technical analysis refers to:

Accepted Answer

A brief, temporary recovery in a declining asset before the downtrend resumes

Answer

A dead cat bounce is a short-lived price recovery in a downtrend that fails to signal a true reversal and is followed by continued decline.

Question 5

When a trader applies a 'trailing stop' strategy on a long position, the stop level:

Accepted Answer

Moves upward as the price rises but does not move down if price falls

Answer

A trailing stop rises with price to lock in profits but remains in place if price falls, triggering an exit only when price drops back to the stop level.

(CPT) Certified Pro Trader Practice Test

(CPT) Certified Pro Trader Practice Test

CPT Trading Strategies & Market Timing 3