Free CMT Level 1 Questions and Answers — Questions and Answers
Question 1: Taking trading diamonds into consideration how do we determine the price objective?
- It is usually the distance that the entry price traveled to reach the maximum price
- It is usually the distance that the entry price traveled to reach the diamond (Correct answer)
- It is usually the distance that the exit price traveled to reach the diamond
- It is usually the distance that the exit price traveled to reach the maximum price
Correct answer: It is usually the distance that the entry price traveled to reach the diamond
Explanation: <br> The diamond formation, once properly defined, tends to have a fast-moving price run on the breakout. The price target is typically the distance traveled by the entry price to get to the gem. In general, a steep entrance is followed by a steep exit.
Question 2: Which of the following facts is not correct when talking about wedge patterns?
- Both trend lines are heading in the opposite direction (Correct answer)
- A rising wedge has both lines headed upward
- A rising wedge has a lower bound rising more quickly than the upper bound
- It is a triangle pattern
Correct answer: Both trend lines are heading in the opposite direction
Explanation: <br> A wedge pattern is a pattern of triangles with both trend lines going in the same direction. A rising wedge has both borders heading upward, the lower border moving faster than the upper border.
Question 3: Which of the following facts is used to distinguish between a rising and a falling wedge pattern?
- The upward bound falls more quickly than the lower bound (Correct answer)
- The lines cross in the future
- The nomenclature for the crossover
- The height is the same
Correct answer: The upward bound falls more quickly than the lower bound
Explanation: <br> The declining coil has both lines headed down, with the bounded upward falling faster than the lower bound. In the future, as in a standard triangle, the lines will cross, and the nomenclature for the crossover and height is identical.
Question 4: What is the outcome if a later rally within the channel fails to reach the channel line? Select the best possible outcome.
- The channel line above the trend line connecting the downward reversal points begins as a line parallel
- The last downward reversal will have a steeper slope than the underlying trend line
- The new channel line through the new upward reversal
- The last downward reversal will have a lesser slope than the underlying trend line (Correct answer)
Correct answer: The last downward reversal will have a lesser slope than the underlying trend line
Explanation: <br> When a subsequent rally inside the channel fails to hit the channel line, the current channel line will have a lower slope than the underlying trend line from the latest downward reversal and the last downward reversal, which will ultimately follow the trend line when projected into the future.
Question 5: What is the possible outcome when the downward reversal will have a lesser slope than the underlying trend line?
- It suggests that the trend line will soon be at its maximum level
- It suggests that the risks of the trend line
- It suggests that the trend line will soon be broken (Correct answer)
- It suggests that the profit of the trend line
Correct answer: It suggests that the trend line will soon be broken
Explanation: <br> The downward reversal would have a lower slope than the underlying trend line, which will ultimately follow the trend line if projected into the future. This new channel and trend line configuration is an ascending wedge. It indicates that sellers are a little more nervous than it implied before, and by default, that the trend line will soon split.
Question 6: According to Bulkowski what is the percentage of almost all declining and rising wedges to break out?
- Almost all declining wedges (92%) break out upward, and most rising wedges (69%) break out to the downside (Correct answer)
- Almost all rising wedges (92%) break upward, and most declining wedges (69%) break out to the downside
- Almost all rising wedges (92%) break out upward, and most declining wedges (69%) break out to the upward
- Almost all rising wedges (92%) break out upward, and most declining wedges (69%) break out to the downside
Correct answer: Almost all declining wedges (92%) break out upward, and most rising wedges (69%) break out to the downside
Explanation: <br> According to Bulkowski nearly all decreasing wedges (92%) break upwards, and most rising wedges (69%) break downwards.
Question 7: Which of the following is not a fact regarding the Rising Wedges? Choose the best possible answer.
- The ones that occur during a downtrend appear as very weak rallies against the trend
- They occur after an upward climax
- They occur during a long downward price trend
- They occur before an upward climax (Correct answer)
Correct answer: They occur before an upward climax
Explanation: <br> Rising wedges occur either during a lengthy downward price trend or after a climax upward. Some that take place during a downtrend tend to be very low rallies against the trend. As previously reported, they inevitably break to the downside again and start the downtrend. Declining wedges are almost the same pattern and only occur in the opposite direction under similar circumstances.
Question 8: Which of the following statements is not an outcome of a market climax regarding pattern analysis?
- At a steeper slope, the underlying trend line is changed slowly
- A steeper slope is in line with the direction of prices
- The underlying trend line is gradually adjusted at a gradual incline slope (Correct answer)
- It occurs when prices accelerate
Correct answer: The underlying trend line is gradually adjusted at a gradual incline slope
Explanation: <br> Market equilibrium occurs when prices escalate. At these times, the underlying trend line is changed slowly at a steeper slope in the direction of prices. Prices. The support reversal points occur at rates higher than the expected trend line in an upward accelerated trend and trigger the trend line to be changed to a steeper slope.
Question 9: What is the condition for an upward accelerated trend regarding pattern analysis?
- The resistance reversal points occur at levels higher than the projected trend line
- The support reversal points occur at levels lower than the projected trend line
- The resistance reversal points occur at levels lower than the projected trend line
- The support reversal points occur at levels higher than the projected trend line (Correct answer)
Correct answer: The support reversal points occur at levels higher than the projected trend line
Explanation: <br> The support reversal points occur at rates higher than the expected trend line in an upward accelerated trend, and cause the trend line to be changed to a steeper slope.
Question 10: When talking about Volume Statistics which of the following is not considered as a fact of Volume Statistics?
- It is helpful for price analysis (Correct answer)
- It is usually different in every security
- It is a measure of liquidity in a security
- All of the above statements
Correct answer: It is helpful for price analysis
Explanation: <br> Volume measures and signals are commonly extracted from a shift in volume rather than from volume itself. Volume can be a measure of liquidity in security by itself, but it is not useful for price analysis. In every protection, the volume is normally different.
Question 11: Which of the following is true regarding the price change that occurs due to high ad low-volume trends?
- On high volume tends to occur in the direction of the trend, and price change on low volume tends to occur on corrective price moves (Correct answer)
- On low volume tends to occur in the direction of the trend, and price change on high volume tends to occur on corrective price moves
- On high volume tends to occur in the opposite direction of the trend, and price change on low volume tends to occur on corrective price moves
- On high volume tends to occur in the parallel direction of the trend, and price change on low volume tends to occur on non-corrective price moves
Correct answer: On high volume tends to occur in the direction of the trend, and price change on low volume tends to occur on corrective price moves
Explanation: <br> At high volume price shifts tend to occur in the direction of a trend, and price shifts at small volumes continue to occur in the wake of corrective market movements.
Free CMT Level 1 Questions and Answers
Taking trading diamonds into consideration how do we determine the price objective?