CMT Exam Level 3 Free Practice Questions & Answers
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Question 1 of 30
1. Question
In the trading rectangle what is the accurate method of calculating the target using the rectangle formation?
Correct
By adding the height of the rectangle formation to the breakout size, one goal can be determined. According to Bulkowski, in rectangles, the upward target is reached or exceeded 91 percent –93 percent of the time, and in downward breakouts, 65 percent –77 percent of the time is reached or exceeded.
Incorrect
By adding the height of the rectangle formation to the breakout size, one goal can be determined. According to Bulkowski, in rectangles, the upward target is reached or exceeded 91 percent –93 percent of the time, and in downward breakouts, 65 percent –77 percent of the time is reached or exceeded.

Question 2 of 30
2. Question
Which of the following is not a condition for the formation of the triple top triple bottom pattern?
Correct
The top and bottom triple formation is just a triangle, with three touches to the support or resistance line. Therefore it is more precise than the rectangle and less general. That peak in the top should be on the same level and have roughly the same shape. The middle point could be down marginally from the other two.
Incorrect
The top and bottom triple formation is just a triangle, with three touches to the support or resistance line. Therefore it is more precise than the rectangle and less general. That peak in the top should be on the same level and have roughly the same shape. The middle point could be down marginally from the other two.

Question 3 of 30
3. Question
What is the name of the pattern that is formed by a general pattern that has nonparallel boundary lines such that when extended into the future they cross each other?
Correct
The design of the rectangles is bounded by parallel lines. When the same general pattern has nonparallel boundary lines, so that the structure becomes a triangle pattern when extended into the future they cross each other. Triangles may be the product of a lower bound upwardsloping or an upward bound downward.
Incorrect
The design of the rectangles is bounded by parallel lines. When the same general pattern has nonparallel boundary lines, so that the structure becomes a triangle pattern when extended into the future they cross each other. Triangles may be the product of a lower bound upwardsloping or an upward bound downward.

Question 4 of 30
4. Question
When studying the formation of the standard triangles what is the name given to the point where the two lines pass and cross over each other?
Correct
The point at which the two lines pass and cross over each other is called the apex or cradle in these triangles, and the distance between the first high point of reversal and the first low point of reversal inside the triangle is called the base.
Incorrect
The point at which the two lines pass and cross over each other is called the apex or cradle in these triangles, and the distance between the first high point of reversal and the first low point of reversal inside the triangle is called the base.

Question 5 of 30
5. Question
Which of the following is the correct description of a descending triangle keeping in min the standard triangle pattern analysis?
Correct
Unless the lower bound is a horizontal support section, and the upper one is a slanting downward trend line, it is called a downward triangle. If the lower trend line is rising, and the upper bound is a region of horizontal resistance, it is called a triangle ascending.
Incorrect
Unless the lower bound is a horizontal support section, and the upper one is a slanting downward trend line, it is called a downward triangle. If the lower trend line is rising, and the upper bound is a region of horizontal resistance, it is called a triangle ascending.

Question 6 of 30
6. Question
Which of the following pattern is formed when we combine a broadening pattern with a triangle, usually a symmetrical triangle keeping in mind the pattern analysis of a standard triangle?
Correct
If both the upper and lower bound slant in the same direction and converge, it is called a wedge, and when the two lines diverge regardless of slope, a reverse triangle is called an extending pattern. When we combine an extending pattern with a triangle, normally a symmetrical triangle, we get what is known as a diamond pattern
Incorrect
If both the upper and lower bound slant in the same direction and converge, it is called a wedge, and when the two lines diverge regardless of slope, a reverse triangle is called an extending pattern. When we combine an extending pattern with a triangle, normally a symmetrical triangle, we get what is known as a diamond pattern

Question 7 of 30
7. Question
When talking about trends which of the following is the best trend regarding the index of the trend?
Correct
If one index bursts out upwards but there are no other indexes, the indexes are said to be divergent; in other words, they do not work together. However, a legitimate, strong trend should have all the indexes acting in concert.
Incorrect
If one index bursts out upwards but there are no other indexes, the indexes are said to be divergent; in other words, they do not work together. However, a legitimate, strong trend should have all the indexes acting in concert.

Question 8 of 30
8. Question
What is the pattern called if there is a high on day 4 and another on day 20 should appear in both the price and the oscillator? If the price high on day 20 is higher than the high on day 4 but the oscillator high on day 20 is not higher than on day 4?
Correct
For both price and oscillator, a high on day 4 and another on day 20 will appear. When on day 20 the price high is higher than on day 4 but on day 20 the oscillator high is not higher than on day 4, then the trend is called negative divergence.
Incorrect
For both price and oscillator, a high on day 4 and another on day 20 will appear. When on day 20 the price high is higher than on day 4 but on day 20 the oscillator high is not higher than on day 4, then the trend is called negative divergence.

Question 9 of 30
9. Question
Which of the following is not considered an aspect of Cycle Analysis?
Correct
There are several other aspects of cycle analysis of which the technical analysis needs to be aware. Below are the names of these aspects:
(a) Accuracy
(b) Harmonics
(c) InversionsIncorrect
There are several other aspects of cycle analysis of which the technical analysis needs to be aware. Below are the names of these aspects:
(a) Accuracy
(b) Harmonics
(c) Inversions 
Question 10 of 30
10. Question
Using the concepts learned during Cycles, which of the following is considered to bee the correct description of a right translation?
Correct
A right translation in a cycle is when the peak is beyond the halfway point, and a left translation is when the cycle peak occurs before the halfway point.
Incorrect
A right translation in a cycle is when the peak is beyond the halfway point, and a left translation is when the cycle peak occurs before the halfway point.

Question 11 of 30
11. Question
In trading which of the following is the most important aspect of any price change in a market?
Correct
As in trading, the trend is the most critical aspect of any price change and the greatest determinant of whether the investor will benefit from the investment. Bucking the investment trend is just as risky as it is in business.
Incorrect
As in trading, the trend is the most critical aspect of any price change and the greatest determinant of whether the investor will benefit from the investment. Bucking the investment trend is just as risky as it is in business.

Question 12 of 30
12. Question
Which of the following is the technical method that is used to determine markets’ relative attractiveness when using the concepts of selection and decision making?
Correct
The mathematical approach used for evaluating the relative attractiveness of the markets is called ratio analysis. It compares various markets to one another in order to see which performs most favorably. When a market that matches the investor’s objectives has been chosen, further comparisons are made with components of that market, such as by industry category, capitalization, or price.
Incorrect
The mathematical approach used for evaluating the relative attractiveness of the markets is called ratio analysis. It compares various markets to one another in order to see which performs most favorably. When a market that matches the investor’s objectives has been chosen, further comparisons are made with components of that market, such as by industry category, capitalization, or price.

Question 13 of 30
13. Question
Which of the following is not an example of the item that is not considered in the filed of soft assets regarding the trading markets?
Correct
Hard assets are solid commodities such as gold and silver; these assets traditionally are considered an inflation hedge. Soft assets
are financial assets, called paper assets, that primarily include stocks and bonds.Incorrect
Hard assets are solid commodities such as gold and silver; these assets traditionally are considered an inflation hedge. Soft assets
are financial assets, called paper assets, that primarily include stocks and bonds. 
Question 14 of 30
14. Question
What is the relationship that is shared between the hard asset and the soft asset of the markets?
Correct
Generally, when hard assets rise in value, soft assets decline. Inflation is usually correlated with higher interest rates or higher costs of goods. If inflation is a hazard paper assets become undesirable as savings, which decline in value as interest rates increase. Likewise, as hard asset values go down, interest rates typically go down, and soft assets go up in value.
Incorrect
Generally, when hard assets rise in value, soft assets decline. Inflation is usually correlated with higher interest rates or higher costs of goods. If inflation is a hazard paper assets become undesirable as savings, which decline in value as interest rates increase. Likewise, as hard asset values go down, interest rates typically go down, and soft assets go up in value.

Question 15 of 30
15. Question
Which of the following item is the measure of hard asset prices because of its universal appeal as an inflation hedge?
Correct
Gold is historically the indicator of prices of hard assets because of its fundamental appeal as a shield for inflation. Gold is a hard asset; fragile assets are in U.S. stocks. Remember that the stock market decreases as the gold prices increase, and vice versa. This action has contributed to the hypothesis that hard and soft asset markets mix.
Incorrect
Gold is historically the indicator of prices of hard assets because of its fundamental appeal as a shield for inflation. Gold is a hard asset; fragile assets are in U.S. stocks. Remember that the stock market decreases as the gold prices increase, and vice versa. This action has contributed to the hypothesis that hard and soft asset markets mix.

Question 16 of 30
16. Question
In the area of System Testing and Management what the name was given to the amount of money lost, or potentially lost?
Correct
Drawdown is called the amount of money lost, or possibly lost. It’s known as the amount by which an account’s equity declines from a high. In other words, a drawdown is how much investors would lose if they were invested at their peak value in an account.
Incorrect
Drawdown is called the amount of money lost, or possibly lost. It’s known as the amount by which an account’s equity declines from a high. In other words, a drawdown is how much investors would lose if they were invested at their peak value in an account.

Question 17 of 30
17. Question
In system testing what effect will a minor loss have on an offset of the system being used? Select the best possible option.
Correct
A benefit is not equal to a loss. A small loss often calls for a bigger benefit to counter it. In quantifiable systems, the aim is to mitigate the potential loss.
Incorrect
A benefit is not equal to a loss. A small loss often calls for a bigger benefit to counter it. In quantifiable systems, the aim is to mitigate the potential loss.

Question 18 of 30
18. Question
The performance of a system depends on multiple factors, which of the following is not considered as a dependent factor of the performance of a system in its initial state?
Correct
System efficiency may rely more on filters, modifications, and the strategies for entry and exit than the system itself. It doesn’t mean any old approach is going to succeed. Pick one that is familiar, comfortable, sensible, and has a decent record; then concentrate on the process.
Incorrect
System efficiency may rely more on filters, modifications, and the strategies for entry and exit than the system itself. It doesn’t mean any old approach is going to succeed. Pick one that is familiar, comfortable, sensible, and has a decent record; then concentrate on the process.

Question 19 of 30
19. Question
Considering Relationships Between Variables, which are the method that is used to measure the variation with one variable and when there is two variable?
Correct
Things continue to get more complicated as we might suspect. We had a measure of variance with one variable, called variance. The variant of variance between two variances is covariance. It is measured similarly to the variance.
Incorrect
Things continue to get more complicated as we might suspect. We had a measure of variance with one variable, called variance. The variant of variance between two variances is covariance. It is measured similarly to the variance.

Question 20 of 30
20. Question
When viewing regression what is the name given to the variable that is being explained?
Correct
The variable being discussed in regression is called the dependent variable. The illustrating variable is called the independent variable, or explanatory variable. We may expand the regression concept to more than one variable, independent. That is called regression multiple.
Incorrect
The variable being discussed in regression is called the dependent variable. The illustrating variable is called the independent variable, or explanatory variable. We may expand the regression concept to more than one variable, independent. That is called regression multiple.

Question 21 of 30
21. Question
In candlestick charts what are the thin vertical bars called and what do the thin vertical bars represent?
Correct
The thin vertical bars are called the shadows, which reflect the price extremes of the trading session. The upper shadow is called the shadow above the real body; the shadow underneath the real body is called the lower shadow.
Incorrect
The thin vertical bars are called the shadows, which reflect the price extremes of the trading session. The upper shadow is called the shadow above the real body; the shadow underneath the real body is called the lower shadow.

Question 22 of 30
22. Question
Using the concepts learnt during the construction of the candlestick charts what is the outcome for the given situation below:
If the opening price of the stock equals the low price for the trading session:Correct
Individual candlesticks can potentially take on an assortment of interesting sizes. If the stock’s opening price equals the low trading session price, there will be no lower shadow on that day. Equally, if the protection closes for the day at its high level, there will be no upper shadow.
Incorrect
Individual candlesticks can potentially take on an assortment of interesting sizes. If the stock’s opening price equals the low trading session price, there will be no lower shadow on that day. Equally, if the protection closes for the day at its high level, there will be no upper shadow.

Question 23 of 30
23. Question
What type of scales should be used to plot the prices to represent it graphically?
Correct
In general, price units are plotted on the stock chart’s vertical axis. The analyst shall decide the scale to be used, or the difference between certain price units. Two types of scales are commonly used: an integer scale, and a semilogarithmic scale.
Incorrect
In general, price units are plotted on the stock chart’s vertical axis. The analyst shall decide the scale to be used, or the difference between certain price units. Two types of scales are commonly used: an integer scale, and a semilogarithmic scale.

Question 24 of 30
24. Question
What is the key point that makes point and figures chart different from the other charts that you have studied?
Correct
The pointandfigure chart documents price data using a methodology that is somewhat different from line, bar, and candlestick charts. Pointandfigure charts only account for price change. Volume is excluded; and while time can be annotated on the map, it is not an integral part of the graph.
Incorrect
The pointandfigure chart documents price data using a methodology that is somewhat different from line, bar, and candlestick charts. Pointandfigure charts only account for price change. Volume is excluded; and while time can be annotated on the map, it is not an integral part of the graph.

Question 25 of 30
25. Question
Keeping in mind Box Size Concepts, what happens to the amount of price history, and the chart size?
Correct
Gradually, as the size of the box increases, the price history becomes smaller and the chart is squeezed to the left, as fewer columns are needed. Eliminating the noise makes the chart more useful for traders or investors interested in longer periods and activities.
Incorrect
Gradually, as the size of the box increases, the price history becomes smaller and the chart is squeezed to the left, as fewer columns are needed. Eliminating the noise makes the chart more useful for traders or investors interested in longer periods and activities.

Question 26 of 30
26. Question
What is the primary use of derivatives in the Derivative Markets? Select the best possible solution.
Correct
The term derivative describes a financial contract, also called the underlying, that “derives” its value from some other investment vehicle. The primary use for derivatives is to hedge against the underlying risk of failure or to gamble with high leverage. Apart from the risk of loss from the hedge or decreasing value of speculation, hedging, and speculation both take on additional risks such as counterparty risk.
Incorrect
The term derivative describes a financial contract, also called the underlying, that “derives” its value from some other investment vehicle. The primary use for derivatives is to hedge against the underlying risk of failure or to gamble with high leverage. Apart from the risk of loss from the hedge or decreasing value of speculation, hedging, and speculation both take on additional risks such as counterparty risk.

Question 27 of 30
27. Question
Which of the following does not come under the factors/condiions of the futures contracts?
Correct
Futures contracts that are traded in the futures markets are contracts in which the buyer and seller agree to trade at specific terms at a specific future date. Future markets are sometimes referred to wrongly as commodity markets rather than as a practical definition from historical experience.
Incorrect
Futures contracts that are traded in the futures markets are contracts in which the buyer and seller agree to trade at specific terms at a specific future date. Future markets are sometimes referred to wrongly as commodity markets rather than as a practical definition from historical experience.

Question 28 of 30
28. Question
Given the situation where the horizontal lines bunch together, sometimes overlapping at the same price level what effect does it make to the support and the resistance lines regarding the concepts used in trend analysis?
Correct
Where those horizontal lines bundle together, a support or resistance zone sometimes overlaps at the same price level. The more horizontal lines there are inside, this zone is usually stronger. In other words, the more times the price level has stopped earlier progress or enabled earlier falls, the greater the potential resistance or support would become.
Incorrect
Where those horizontal lines bundle together, a support or resistance zone sometimes overlaps at the same price level. The more horizontal lines there are inside, this zone is usually stronger. In other words, the more times the price level has stopped earlier progress or enabled earlier falls, the greater the potential resistance or support would become.

Question 29 of 30
29. Question
Which of the following is not a method that is used to determine the reversal point?
Correct
The more significant the point of reversal, the greater is the amount of support or resistance. There are different ways of defining an important point of reversal. Following are the methods that a reversal point:
(a) DeMark or Williams Method
(b) Percentage Method
(c) Gann TwoDay Swing Method
(d) High Volume MethodIncorrect
The more significant the point of reversal, the greater is the amount of support or resistance. There are different ways of defining an important point of reversal. Following are the methods that a reversal point:
(a) DeMark or Williams Method
(b) Percentage Method
(c) Gann TwoDay Swing Method
(d) High Volume Method 
Question 30 of 30
30. Question
What are the predetermined limits are called when a percentage change in the Dow Jones Industrial Average is reached, the exchange closes down all trading for a limited time?
Correct
When set thresholds, or circuit breakers, are exceeded based on a percentage increase in the Dow Jones Industrial Average, the exchange stops all trading for a limited period of time.
Incorrect
When set thresholds, or circuit breakers, are exceeded based on a percentage increase in the Dow Jones Industrial Average, the exchange stops all trading for a limited period of time.
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