Trading Jobs Technical Analysis for Traders 3

Question 1

What does the Stochastic Oscillator primarily measure?

Accepted Answer

Where the current closing price is relative to the high-low range over a specific period

Answer

The Stochastic Oscillator compares a security's closing price to its price range over a given period (typically 14 days), indicating overbought or oversold conditions on a 0–100 scale.

Question 2

A 'cup and handle' chart pattern is generally considered:

Accepted Answer

A bullish continuation pattern that typically leads to an upside breakout

Answer

A cup and handle is a bullish continuation pattern where the price forms a rounded bottom (cup) followed by a brief downward consolidation (handle), typically preceding an upside breakout.

Question 3

What is 'bearish divergence' in technical analysis?

Accepted Answer

When price makes higher highs while an oscillator makes lower highs

Answer

Bearish divergence occurs when price achieves higher highs but a momentum oscillator (e.g., RSI, MACD) makes lower highs, signaling weakening momentum and a potential reversal downward.

Question 4

In technical analysis, what does an RSI reading above 70 typically indicate?

Accepted Answer

The security is overbought and may be due for a pullback or reversal

Answer

An RSI above 70 indicates overbought conditions, suggesting the security has risen rapidly and may be vulnerable to a pullback or trend reversal.

Question 5

The Average True Range (ATR) is primarily used by traders to measure:

Accepted Answer

Market volatility by calculating the average range between high and low prices

Answer

ATR measures market volatility by averaging the true range (accounting for gaps) over a specified period, helping traders set appropriate stop-loss levels and gauge market conditions.

Trading Jobs Practice Test

Trading Jobs Practice Test

Trading Jobs Technical Analysis for Traders 3