Forex Trading Test 4 — Questions and Answers
Question 1: Which of these is roughly where signal ones meet?
- Average line
- Kijun line (Correct answer)
- Sen line
- Tenkan San line
Correct answer: Kijun line
The Kijun-sen, or Base Line, is a component of the Ichimoku Kinko Hyo indicator, representing the mid-point of the highest high and lowest low over the past 26 periods. It acts as a significant support/resistance level and a trend confirmation line. Price action or other Ichimoku lines, such as the Tenkan-sen, often interact with the Kijun-sen to generate trading signals, making it a key 'signal one' meeting point.
Question 2: Who was the Ichimoku trading system's creator?
- Roma Kuli
- Talis Jarket
- Kyo Basita
- Goichi Hosoda (Correct answer)
Correct answer: Goichi Hosoda
The Ichimoku Kinko Hyo, commonly known as Ichimoku, is a comprehensive technical analysis indicator developed by Japanese journalist Goichi Hosoda. He published this system under the pseudonym 'Ichimoku Sanjin' in the late 1960s. The Ichimoku system provides multiple data points to help traders assess price momentum, support and resistance levels, and potential trend reversals.
Question 3: What indicator is utilized to determine market trends?
- Stochastic pattern
- Relative strength index
- Moving average convergence and divergence
- Moving average (Correct answer)
Correct answer: Moving average
Moving Averages are widely used technical indicators that smooth out price data over a specified period by creating a constantly updated average price. By observing the direction and slope of a moving average, traders can easily identify the prevailing trend of a market. For instance, an upward-sloping moving average indicates an uptrend, while a downward-sloping one suggests a downtrend.
Question 4: Which one of these is not a forex trader?
- Brokers
- Central banks
- Institutional investors
- Commercial banks (Correct answer)
Correct answer: Commercial banks
Commercial banks are major participants in the forex market, primarily facilitating foreign exchange transactions for their clients and managing their own currency exposures. While they engage in large volumes of currency exchange, their core business encompasses a wide range of banking services beyond speculative trading. Unlike dedicated brokers, institutional investors focused on trading, or central banks managing national currency, commercial banks' role is often seen as providing liquidity and services rather than solely being 'forex traders' in a speculative sense.
Question 5: Which of these is not a particular trait of the foreign exchange market?
- Sleep-wake cycle of operation (Correct answer)
- Variety of influencing factors
- Continuous operation
- Geographical dispersion
Correct answer: Sleep-wake cycle of operation
The foreign exchange market is known for its continuous, 24-hour operation during weekdays, as trading shifts across major financial centers globally. This means there isn't a distinct 'sleep-wake cycle' where the entire market closes down for a significant period. Instead, it's characterized by continuous activity, geographical dispersion, and a variety of influencing factors that keep it active around the clock.
Question 6: Which of the following technical analysis terms is peculiar?
- Gremlin pattern (Correct answer)
- Moving average
- Overbought
- Oversold
Correct answer: Gremlin pattern
'Gremlin pattern' is not a recognized or standard term in technical analysis within forex trading. Terms like Moving Average, Overbought, and Oversold are common and well-defined indicators or conditions used by traders to analyze market behavior. The inclusion of 'Gremlin pattern' makes it the peculiar or non-standard term among the options.
Question 7: When did Singapore first overtake Japan in the market?
- May 2014
- January 2011
- June 2010
- April 2013 (Correct answer)
Correct answer: April 2013
According to the Bank for International Settlements (BIS) Triennial Central Bank Survey of Foreign Exchange and OTC Derivatives Markets, Singapore's share of global forex turnover surpassed Japan's in April 2013. This marked a significant shift in the regional hierarchy of forex trading centers, with Singapore emerging as a leading hub in Asia for foreign exchange activity.
Question 8: How long is each trading session?
- 18 hours
- 9 hours (Correct answer)
- 12 hours
- 24 hours
Correct answer: 9 hours
While the forex market operates 24 hours a day, it is divided into major trading sessions corresponding to the opening and closing hours of key financial centers. Each of these primary sessions, such as the London, New York, or Tokyo session, typically lasts for approximately 9 hours. Traders often focus on these specific sessions due to higher liquidity and volatility.
Question 9: Which of these would be considered currency market "hawks"?
- Traders
- Government body (Correct answer)
- Financial institutions
- Brokers
Correct answer: Government body
In the context of financial markets, 'hawks' typically refer to policymakers, often within a central bank or government body, who advocate for tighter monetary policy, such as higher interest rates, to combat inflation. This stance is generally seen as supportive of a stronger currency. Traders, financial institutions, and brokers are market participants, but 'hawks' describe a policy inclination, usually associated with central banks or government economic policy.
Question 10: What global location is the most significant for trading foreign exchange in 2018?
- United Kingdom (Correct answer)
- Italy
- United States
- Singapore
Correct answer: United Kingdom
The United Kingdom, particularly London, has consistently been the largest global center for foreign exchange trading. According to the Bank for International Settlements (BIS) Triennial Survey, London maintained its dominant position in 2018, accounting for a significant portion of daily global forex turnover, far surpassing other major financial hubs like the United States or Singapore.
Question 11: Which of these is unusual in terms of forex trading?
- Leverage
- Binary options (Correct answer)
- Lot size
- Margins
Correct answer: Binary options
While leverage, lot size, and margins are fundamental and common concepts in standard forex spot trading, binary options represent a distinct and often controversial financial product. Binary options are a type of exotic option where the payout is a fixed amount or nothing, based on a simple 'yes' or 'no' proposition about the price movement. They are generally considered a separate and often higher-risk form of speculation compared to traditional forex trading.
Forex Trading Test 4
Which of these is roughly where signal ones meet?