Day Trading Technical Indicators 1

Question 1

What does the Relative Strength Index (RSI) primarily measure?

Accepted Answer

The speed and magnitude of recent price changes to evaluate overbought or oversold conditions

Answer

RSI measures the velocity of recent price movements on a scale of 0–100, signaling overbought (>70) or oversold (<30) conditions.

Question 2

When a stock's price makes a new high but the RSI fails to confirm with a new high, this is called:

Accepted Answer

Bearish divergence

Answer

Bearish divergence occurs when price reaches a new high while RSI makes a lower high, warning of potential trend reversal.

Question 3

The MACD indicator is calculated by subtracting which two exponential moving averages?

Accepted Answer

12-period EMA from 26-period EMA

Answer

MACD is the 12-period EMA minus the 26-period EMA, with a 9-period signal line plotted on top.

Question 4

In day trading, a 'MACD crossover' buy signal occurs when:

Accepted Answer

The MACD line crosses above the signal line

Answer

A bullish MACD crossover happens when the MACD line crosses above the signal line, indicating growing upward momentum.

Question 5

Bollinger Bands consist of which three components?

Accepted Answer

A simple moving average, an upper band, and a lower band set at standard deviations

Answer

Bollinger Bands use a 20-period SMA as the middle band, with upper and lower bands plotted two standard deviations away.

Day Trading Practice Test