CMT Exam Level 2 Free Practice Questions & Answers
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Question 1 of 30
1. Question
Which of the following is not a disadvantage of the patterns that are formed by Broadening formations?
Correct
For a variety of reasons, expansion shapes are the least useful forms. First, they occur relatively rarely and are often hard to identify. Second, and more importantly, they are hard to make the most of. Because with time the boundary trend lines separate, the breakout
Lines pass away from each other all the time.Incorrect
For a variety of reasons, expansion shapes are the least useful forms. First, they occur relatively rarely and are often hard to identify. Second, and more importantly, they are hard to make the most of. Because with time the boundary trend lines separate, the breakout
Lines pass away from each other all the time. 
Question 2 of 30
2. Question
If the upper breakout level is getting higher and higher along the upper trend line which of the following statement is not predicted correctly about this trend?
Correct
This means the upper breakout level is getting higher and higher along the upper trend line in an upward breaking broadening pattern. By going higher and higher, it not only uses up much of any possible gain after a breakdown, but it also moves further away from any practical degree of protective stoppage, increasing the risk.
Incorrect
This means the upper breakout level is getting higher and higher along the upper trend line in an upward breaking broadening pattern. By going higher and higher, it not only uses up much of any possible gain after a breakdown, but it also moves further away from any practical degree of protective stoppage, increasing the risk.

Question 3 of 30
3. Question
According to the raw performance statistics which of the following statements predicts the correct when the performance of a broadening pattern at its best and its failure rate?
Correct
Raw performance statistics show that the performance of an expanding pattern is at best average and that its failure rate is above average. However, one of the most efficient patterns using an expanding pattern is when it is incorporated into a diamond top with a symmetric triangle.
Incorrect
Raw performance statistics show that the performance of an expanding pattern is at best average and that its failure rate is above average. However, one of the most efficient patterns using an expanding pattern is when it is incorporated into a diamond top with a symmetric triangle.

Question 4 of 30
4. Question
Which of the following statement is not true about the Diamond Top with regards to pattern analysis?
Correct
Diamond is one of the less common, but still lucrative patterns. It consists of a mixture of an increasing pattern and a symmetrical triangle, which typically occurs at the top of a very sharp price increase. It’s uncommon at bottoms of the market.
Incorrect
Diamond is one of the less common, but still lucrative patterns. It consists of a mixture of an increasing pattern and a symmetrical triangle, which typically occurs at the top of a very sharp price increase. It’s uncommon at bottoms of the market.

Question 5 of 30
5. Question
Which of the following perfectly describes the pattern of a standard broadening formation with regards to pattern analysis?
Correct
The upper trend line slopes upwards in a typical expansion structure and must, therefore, have two peaksthe the latter higher than the former. Likewise, there must be two troughs in the lower trend line — the latter lower than the former one — and each line must be created at the same time as the other.
Incorrect
The upper trend line slopes upwards in a typical expansion structure and must, therefore, have two peaksthe the latter higher than the former. Likewise, there must be two troughs in the lower trend line — the latter lower than the former one — and each line must be created at the same time as the other.

Question 6 of 30
6. Question
Which of the following is the best combination which results in respect to the volume and pullback in Diamond Top pattern?
Correct
The best combination is when a downward breakout happens on an underaverage amount of breakout with no pullback. The failure rate is fairly small at 4%10%. To some degree, these low numbers correlate with risk.
Incorrect
The best combination is when a downward breakout happens on an underaverage amount of breakout with no pullback. The failure rate is fairly small at 4%10%. To some degree, these low numbers correlate with risk.

Question 7 of 30
7. Question
Which of the following methods is not used to portray the volume of trade?
Correct
Volume is the number of shares or contracts exchanged in any stock market over a given timeframe, usually a day, but maybe one stock to months or years. Analysts display volume on a price chart in many ways, for instance, Bar/candle, Equivolume, and PointandFigure.
Incorrect
Volume is the number of shares or contracts exchanged in any stock market over a given timeframe, usually a day, but maybe one stock to months or years. Analysts display volume on a price chart in many ways, for instance, Bar/candle, Equivolume, and PointandFigure.

Question 8 of 30
8. Question
When using the Bar/Candle method to portray volume what is the relationship defined between price and volume using this method?
Correct
The most popular volume representation is a vertical bar at the bottom of the price chart which represents the total volume amount for that time. This approach is simple and does not take for granted any direct connection between price and volume. It just shows the details.
Incorrect
The most popular volume representation is a vertical bar at the bottom of the price chart which represents the total volume amount for that time. This approach is simple and does not take for granted any direct connection between price and volume. It just shows the details.

Question 9 of 30
9. Question
If 300 shares traded at a certain price which of the following conclusions cant be drawn from this given situation?
Correct
If 300 shares were traded at a given price, the traders would record three shares bars to the price. A large number of bars at a given price showed that most operations took place at that level. From this chart, traders could determine the price at which the equalization of supply and demand, and thus the support and resistance zones.
Incorrect
If 300 shares were traded at a given price, the traders would record three shares bars to the price. A large number of bars at a given price showed that most operations took place at that level. From this chart, traders could determine the price at which the equalization of supply and demand, and thus the support and resistance zones.

Question 10 of 30
10. Question
Using the PointandFigure method what is the standard method used to portray the volume on the chart?
Correct
The traditional approach is to add up the volume that occurred while each box was in operation and to represent it on the table. From this, the analyst can visualize quickly where volume occurred in the formation. Using the process, the individual analyst must decide if the information is helpful.
Incorrect
The traditional approach is to add up the volume that occurred while each box was in operation and to represent it on the table. From this, the analyst can visualize quickly where volume occurred in the formation. Using the process, the individual analyst must decide if the information is helpful.

Question 11 of 30
11. Question
Which of the following the correct description of the law of percentages in the field of decision making and selection?
Correct
With a relative gain of 20 percent, a relative loss of 20 percent may be made back, but an absolute loss of 20 percent requires only a 25 percent gain to split. This is called the “law of percentages.” It implies that all total losses will be held to a minimum when investing.
Incorrect
With a relative gain of 20 percent, a relative loss of 20 percent may be made back, but an absolute loss of 20 percent requires only a 25 percent gain to split. This is called the “law of percentages.” It implies that all total losses will be held to a minimum when investing.

Question 12 of 30
12. Question
What percentage of return should be earned if you have $100 in the capital and sustain a 20% loss to return to the breakeven level of $100?
Correct
You’re left with $80 if you have $100 in money and incur a loss of 20 percent. You must earn an $80 return of 25 percent to return to the $100 breakeven level. Of each specific amount of damage, the percentage sum to be won to split is also determined using the formula
% gain necessary = % loss ÷ (1–% loss).Incorrect
You’re left with $80 if you have $100 in money and incur a loss of 20 percent. You must earn an $80 return of 25 percent to return to the $100 breakeven level. Of each specific amount of damage, the percentage sum to be won to split is also determined using the formula
% gain necessary = % loss ÷ (1–% loss). 
Question 13 of 30
13. Question
Which of the following statement states the correct percentage of the percentage gain on a loss of 50 percent?
Correct
A loss of 50 percent requires a gain of 100 percent to break even. Before reaching such an extreme that is unlikely to be recovered, the investor is better off cutting losses considering the difficulty of investing for a 100 percent gain.
Incorrect
A loss of 50 percent requires a gain of 100 percent to break even. Before reaching such an extreme that is unlikely to be recovered, the investor is better off cutting losses considering the difficulty of investing for a 100 percent gain.

Question 14 of 30
14. Question
Which of the following is not a characteristic of a normal distribution? Choose the best possible answer.
Correct
There are three important characteristics of the normal distribution:
• Bellshaped, with a point in the middle. The mean, median, and mode are all at the peak
• Middle is symmetrical
• It asymptotically crosses the horizontal axis at the left and right tails of the bell curve. This extends in all ways, indefinitelyIncorrect
There are three important characteristics of the normal distribution:
• Bellshaped, with a point in the middle. The mean, median, and mode are all at the peak
• Middle is symmetrical
• It asymptotically crosses the horizontal axis at the left and right tails of the bell curve. This extends in all ways, indefinitely 
Question 15 of 30
15. Question
If we increase the sample size what effect does it have on the approximation/outcome of the statistical tests?
Correct
As the sample size increases it will improve the approximation. The central limit theorem has significant consequences for a wide range of statistical studies.
Incorrect
As the sample size increases it will improve the approximation. The central limit theorem has significant consequences for a wide range of statistical studies.

Question 16 of 30
16. Question
Which of the following is not a rule used in the statistical analysis done using a normal distribution?
Correct
There are two ruleofthumb values which are useful for memorizing the normal distribution. Next, nearly twothirds of the findings must fall within one standard deviation of the mean (be it above or below). Second, around 95 percent of the findings would be within two standard deviations from the mean.
Incorrect
There are two ruleofthumb values which are useful for memorizing the normal distribution. Next, nearly twothirds of the findings must fall within one standard deviation of the mean (be it above or below). Second, around 95 percent of the findings would be within two standard deviations from the mean.

Question 17 of 30
17. Question
Can stock prices be normally distributed and are stock returns normally distributed?
Correct
No, you can not have negative prices and every number is possible with any normal distribution, both positive and negative, even though some values are highly improbable as outcomes. Yes, because we can’t get a return lower than – 100%, but we can get a return greater than 100%.
Incorrect
No, you can not have negative prices and every number is possible with any normal distribution, both positive and negative, even though some values are highly improbable as outcomes. Yes, because we can’t get a return lower than – 100%, but we can get a return greater than 100%.

Question 18 of 30
18. Question
What is the specific name given to the normal distribution for having special characteristics?
Correct
Due to what’s called the central limit theorem, the normal distribution also has special importance. When we take repeated samples from a population, measure each sample’s mean, and then map the sample means distribution, they will approximate a normal distribution.
Incorrect
Due to what’s called the central limit theorem, the normal distribution also has special importance. When we take repeated samples from a population, measure each sample’s mean, and then map the sample means distribution, they will approximate a normal distribution.

Question 19 of 30
19. Question
Which of the following is not an example of initial decision taken into consideration in the field of system testing?
Correct
Some of the following things are taken into consideration during the initial stage of system testing:
• The first decision that must be made is that of trading philosophy and premises
• You must decide on which markets to focus
• You must establish the time horizon for the system
• You must have a risk control plan
• Establish a time routineIncorrect
Some of the following things are taken into consideration during the initial stage of system testing:
• The first decision that must be made is that of trading philosophy and premises
• You must decide on which markets to focus
• You must establish the time horizon for the system
• You must have a risk control plan
• Establish a time routine 
Question 20 of 30
20. Question
Which of the following is not a method used by Technical analysts to determine trading systems?
Correct
Professional analysts use a variety of different forms of trading systems. Although there are numerous systems, they can be divided into four main categories: following trends, countertrend pattern recognition, and exogenous signals systems.
Incorrect
Professional analysts use a variety of different forms of trading systems. Although there are numerous systems, they can be divided into four main categories: following trends, countertrend pattern recognition, and exogenous signals systems.

Question 21 of 30
21. Question
In some pointandfigure charts, what is the actual representation of the new price recorded on the chart?
Correct
In some pointandfigure charts, the first letter or the number of the month is plotted instead of the X or O when a new price is first recorded for a new month.
Incorrect
In some pointandfigure charts, the first letter or the number of the month is plotted instead of the X or O when a new price is first recorded for a new month.

Question 22 of 30
22. Question
Which of the following figures can not be plotted on a point and figure chart when we have to plot months and years together? Choose the best possible answer.
Correct
We can similarly plot years, weeks, and days, depending on how sensitive the chart may be to changes in price.
Incorrect
We can similarly plot years, weeks, and days, depending on how sensitive the chart may be to changes in price.

Question 23 of 30
23. Question
What is the reason behind time being an important aspect of pointandfigure chart analysis?
Correct
In the pointandfigure charts, the analysis time is of little importance. In many cases, it is only plotted to see how long a formation or pattern takes to form.
Incorrect
In the pointandfigure charts, the analysis time is of little importance. In many cases, it is only plotted to see how long a formation or pattern takes to form.

Question 24 of 30
24. Question
Which of the following is the reason behind choosing a logarithmic scale? Select the best possible answer.
Correct
When long periods of trading activity are plotted, as in bar charts, distortion arises from the fact that most charts are plotted on an arithmetical scale. Action on low prices doesn’t look as active as action on high prices. Logarithmic scale shifts the plot to include an increase in percentage rather than an absolute change in size.
Incorrect
When long periods of trading activity are plotted, as in bar charts, distortion arises from the fact that most charts are plotted on an arithmetical scale. Action on low prices doesn’t look as active as action on high prices. Logarithmic scale shifts the plot to include an increase in percentage rather than an absolute change in size.

Question 25 of 30
25. Question
Which of the following is the correct method to plot a percentage change in pointandfigure charts?
Correct
The prices are converted into their logarithmic equivalent and plotted as a logarithmic number to account for the percentage change in pointandfigure charts. This makes it difficult to analyze immediately unless a logarithmic equivalent table is immediately available because most analysts can not translate the logarithmic number into the actual price
In the eyes.Incorrect
The prices are converted into their logarithmic equivalent and plotted as a logarithmic number to account for the percentage change in pointandfigure charts. This makes it difficult to analyze immediately unless a logarithmic equivalent table is immediately available because most analysts can not translate the logarithmic number into the actual price
In the eyes. 
Question 26 of 30
26. Question
Which of the following scale is used to plot data for investment and trading?
Correct
Logarithmic should only be used for long stretches of price data in which significant uncertainty has meaninglessly made an arithmetic scale. The arithmetic scale is not only as useful for most investment and trading but it is also easier to read and translate to real prices.
Incorrect
Logarithmic should only be used for long stretches of price data in which significant uncertainty has meaninglessly made an arithmetic scale. The arithmetic scale is not only as useful for most investment and trading but it is also easier to read and translate to real prices.

Question 27 of 30
27. Question
Which of the following graphical representation is used to plot a single statistic?
Correct
The simplest of these methods are line charts that plot a single statistics. More overview information is provided by bar charts and the more colorful Japanese candlestick charts. Pointandfigure charts provide a very different approach to the graphing of price data; this method is used to plot sequential trading data with emphasized price trends and reversals.
Incorrect
The simplest of these methods are line charts that plot a single statistics. More overview information is provided by bar charts and the more colorful Japanese candlestick charts. Pointandfigure charts provide a very different approach to the graphing of price data; this method is used to plot sequential trading data with emphasized price trends and reversals.

Question 28 of 30
28. Question
Which of the following method is used to plot sequential trading data? Choose the best possible answer.
Correct
Pointandfigure charts provide a very different approach to price data graphing; with this method, sequential trading data is plotted with highlighted price trends and reversals.
Incorrect
Pointandfigure charts provide a very different approach to price data graphing; with this method, sequential trading data is plotted with highlighted price trends and reversals.

Question 29 of 30
29. Question
On which of the following factors will the analyst choose the scale for the trend analysis?
Correct
The frequency an analyst chooses will depend on the type of analysis being performed and the time period being explored. Analysts may choose to use an arithmetic scale where the graph’s vertical distance is always the same dollar amount, or an analyst may prefer a logarithmic scale so that the chart’s vertical distance always represents the same change in percentage.
Incorrect
The frequency an analyst chooses will depend on the type of analysis being performed and the time period being explored. Analysts may choose to use an arithmetic scale where the graph’s vertical distance is always the same dollar amount, or an analyst may prefer a logarithmic scale so that the chart’s vertical distance always represents the same change in percentage.

Question 30 of 30
30. Question
Which of the following scale is used where the vertical distance on the graph always represents the same dollar amount?
Correct
Analysts may opt to use an arithmetic scale where the graph’s vertical distance always represents the same dollar sum, or an analyst might choose a logarithmic scale so that the chart’s vertical distance always reflects the same shift in percentages.
Incorrect
Analysts may opt to use an arithmetic scale where the graph’s vertical distance always represents the same dollar sum, or an analyst might choose a logarithmic scale so that the chart’s vertical distance always reflects the same shift in percentages.
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