Day Trading Chart Patterns

Question 1

What is a 'breakout' in day trading?

Accepted Answer

When the price moves beyond a defined support or resistance level with increased volume

Answer

A breakout occurs when price moves through a key level (support/resistance) with conviction, often accompanied by increased volume, signaling potential trend continuation.

Question 2

What is a 'double bottom' pattern?

Accepted Answer

A bullish reversal pattern where price bounces from the same support level twice, forming a W shape

Answer

The double bottom is a bullish reversal pattern showing that the selling pressure was unable to push price below a specific level twice, suggesting buyers are stepping in.

Question 3

What is a 'gap' in stock charts?

Accepted Answer

A space between the close of one candle and the open of the next, where no trading occurred

Answer

Gaps occur when price opens significantly higher or lower than the previous close, often due to overnight news or events, creating a visible space on the chart.

Question 4

What is the VWAP (Volume Weighted Average Price)?

Accepted Answer

The average price weighted by volume throughout the trading day, used as a benchmark

Answer

VWAP calculates the average price weighted by volume, showing whether buyers or sellers have been in control. Institutions often use it as a trading benchmark.

Question 5

What does a 'doji' candlestick indicate?

Accepted Answer

Indecision in the market, where the open and close prices are nearly equal

Answer

A doji forms when the opening and closing prices are approximately equal, creating a cross or plus sign shape, indicating that neither buyers nor sellers gained control.

Day Trading Practice Test

Day Trading Practice Test

Day Trading Chart Patterns