CMT Exam Level 2 Free Practice Questions & Answers Set 2

When the lower trend line is rising, and the upper bound is a region of horizontal resistance, it is called a triangle ascending. When the upper limit decreases and the lower bound increases, it is called a symmetrical triangle. When both the upper and lower bound slant and converge in the same direction, this is called a wedge.

When both the upper and lower bound slant and converge in the same direction, it is called a wedge, and when the two lines diverge irrespective of the slope, a reverse triangle, it is called an expanding pattern. We get what is called a diamond pattern when we combine an expanding pattern with a triangle, normally a symmetrical triangle.

If the two lines diverge irrespective of the slope, the reverse triangle is called the extending pattern. When we combine an expanding pattern with a triangle, typically a symmetrical triangle, we get what’s called a pattern of diamonds.

Upward breakouts on discrepancies add to results considerably and are certainly something to watch for. Gaps tend to have no impact at breaks downwards.

It does not mean that a pullback or throwback should be ignored, but rather performance standards should be lower than if there had been no pullback or throwback. Gap breakouts do not tend to impact results on the upside, but on the downside do offer a few extra percentage points.

The initial target for these trends is determined by applying the base distance to the price where the breakout occurred — the vertical distance between the original upper and lower reverse point values.

The positive deviation occurs when the price hits a new low unconfirmed by a new low in the oscillator at a sequence of price highs. Numerous divergences will occur in a very strong pattern and, of course, if the oscillator is bounded, it will occur more frequently as there is no space for the oscillator to keep producing new highs or lowers.

As with divergences, technicians have used reversals since the first use of oscillators, but Andrew Cardwell recently popularized them. A reversal varies from a difference in that price instead of the oscillator, leads the transition.

A negative reversal happens when the oscillator hits a new high above that of day 4 on day 20 but the price does not. Positive reversal is the same as negative at low bars only.

Crossovers arise when the oscillator reaches either a certain point or a separate oscillator. One amount that is always significant is the mean value, usually either zero or one that bisects the range of the travels of the oscillator.

Hard assets say analyzes would focus on those investments concerned about the price of hard assets. These may be investments in futures or spot markets strong assets themselves, but the category also includes coal, oil, or forest stock Companies that produce products.

When the tide turns in the opposite direction and soft assets seem more promising, the focus should be put on Commodity consumers, not manufacturers, consumer products, interest-rate issues, bonds, and the stocks, or currencies of the nations buying them.

A variety of market cycles lie within the longer secular economic pattern. Such business cycles are variable in length but typically about four to five years on average.

The dollar is significant in that it is the selling currency for many of the raw materials in the world such as oil, gold, and other precious metals. It makes those goods cheap in foreign currencies but costly in dollar terms when the dollar declines. Therefore, in the United States, there is a leading inverse relationship between the US dollar and the prices of raw materials.

One major caveat is that the signals come from the averages, not from the raw. Specific statistics are also to be used as backups. It is likely that all the markets will fall sometime in the future. The investor may find the “best” market in that case but still, lose money — maybe not as quickly as in other markets, but still lose. For this reason, one must never underestimate the absolute importance of the markets.

Many designers of the systems claim that the simpler the system, the better. A device may get clogged with a large number of conditions and statistically lose degrees of freedom, requiring more data and more signals to determine its purpose.

Specificity is much easier to use and test compared with generality. You will need to consider the system ‘s reasoning, and make sure it fits your trading or investing style. Second, you’ll need to decide which markets to focus on.

One problem that is often encountered when performing multiple regressions is what is called multicollinearity. This happens when the correlation is reasonably strong between two or more of the independent variables.

With inferential statistics, we attempt to use observed data to infer things about general characteristics of the observed data or additional observation characteristics. We often test whether a given hypothesis is true or wrong.

Of all probability distributions, the most well-known is the normal distribution, also known as the Gaussian distribution. Because of its bell shape, it’s also known as the bell curve. It takes only two parameters — the mean and standard deviation.

At harvest time you are worried about the market price of wheat. If the price isn’t as high as you expected due to a bumper wheat harvest, your income will suffer.

In this forward contract, you will agree to sell a particular quantity of wheat to ABC at a specific future date and at a price that you now fixed. This reduces your risk and the risk of ABC, you know what to expect as far as your income and ABC locks in its input quality.

If an investor then buys a futures contract, he holds little more but an obligation to take delivery of the product underlying the contract on the day of delivery. Since the contract is not a specific proprietary title, it is never executed until the day of delivery. It’s traded back and forth between buyers and sellers, close to how you play musical chairs, except the music stops on the day of delivery.

Financial futures contracts differ from commodity futures contracts in that they settle on the day of delivery with cash based on the underlying securities or index closing prices.

Eliminating the noise makes the map more convenient for traders or investors who are interested in more time and action. On the other hand, if a pattern appears to be forming in the longer-term map, the size of the box can be reduced to provide more information near the likely longer-term directional transition.

In a point-and-figure map, the other component is the sum of the reversal. We could retain the one-point box scale but only report a reversal to the next column when the three boxes reversed the size. This also reduces the noise in price action and prolongs the duration during which price action is reported.

Owing to the unlikely occurrence of all previous significant troughs at the same price point, a region called a zone is created between the highest and lowest horizontal line. This specification describes the real region of assistance or resistance.

When a horizontal line is by itself with no other adjacent horizontal lines, it is typically an individual level of support or resistance. Unless accompanied by extraordinary volume, such levels usually don’t have the same strength in the future as a combination of horizontal lines within a zone.

Prices should continue to halt in these areas in the future, albeit sometimes at a single point. Prices often go into the zone but don’t break out of the zone ‘s outer horizontal line. If they break that level, we have what is referred to as a “breakout” which has significant consequences. A price break under the support zone means buyers are satiated at that point.