Sample Questions Level II

Sample
Questions
for CMT
Level II
CMT Level 2 Sample Questions
The MTA is pleased to make available to all candidates, at no additional cost, new CMT Level II
sample questions. These sample questions cover material that’s detailed in the CMT Level II required
readings and the purpose is to provide you, the candidate, with examples of how the questions may
appear on the CMT exam. These sample questions are recommended to be used as a study aide in
conjunction with the required reading assignments.
The actual CMT Level II exam has 150 questions which are actually scored. However, additional
questions may be included in the exam for pre-testing purposes as a part of our ongoing effort to add
questions to our test bank. Even though these sample questions cover a variety of topics, please note
that the actual weighting of exam questions may vary.
This book of sample questions is produced by:
Market Technicians Association, Inc.,

61 Broadway, Suite 514
New York, NY 10006
Please note that all material is believed to be reliable at time of publication, but not guaranteed.
The Market Technicians Association, Inc., and its officers, assumes no responsibility for errors or
omissions. This sample question booklet was prepared entirely separate from the actual exam process
to ensure the security of the actual exam questions.
Copyright © 2011 Market Technicians Association, Inc. All rights are reserved.
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1. Juliet Covey, CMT, is proud of her CMT charter and her membership in the Market Technicians
Association. Covey manages private client accounts and advertises her services on liquor glasses at a local
bar. In these advertisements, the MTA logo is prominently displayed and the statement “Keep drinking, I am
working hard managing your money” appears on the glasses. With respect to the MTA Code of Ethics,
Covey’s actions
a. are not in violation of the Code.
b. violate the standard against misleading advertising.
c. violate the standard against misuse of the MTA logo.
d. violate the standard with respect to maintaining the highest standards of professional
competence, integrity and judgment.
2. Dan Montier, a CMT Level 1 candidate, created a proprietary trading model that relies on daily last hour
volume of a stock. The exact details of the model weren’t disclosed to clients, but the general
formulation of the model was disclosed along with simulated results of trading as if the model had been
in effect for the past 5 years. The model produced profitable simulated results and Montier was able to
attract several clients. His assistant discovered an error in the coding of the model and when the error
was corrected the simulated results were not nearly as profitable. Montier corrected the coding of the
model, but decided against informing his clients of the error. With respect to the MTA Code of Ethics,
Montier’s actions are
a. not in violation, as the error only affected simulated results.
b. not in violation, as he is only a Level 1 candidate and is not bound by the Code.
c. in violation as presenting simulated results of a model are prohibited by the Code.
d. in violation as the statements made about the simulated results were inaccurate and misleading.
3. Philipe Cartier, a CMT Level 2 candidate, is an expert in seasonal effects in equity markets. In a television
interview, Cartier says that “In the US, small capitalization stocks have a tendency to show abnormal
strength in January. Since we are approaching year-end, investors might want to consider increasing
their exposure to small capitalization equities.” With respect to the MTA code of Ethics, Cartier’s actions
are
a. not in violation of the Code.
b. not in violation as he is only a Level 2 candidate and is not bound by the Code.
c. in violation as the analysis of seasonal effects is not reasonable in the field of technical analysis.
d. in violation as the statement is inaccurate as larger capitalization stocks generally perform better
in January.
4. Hans Zimmerman, a CMT Level 1 candidate, was debating another analyst on a radio program. Based
upon his analysis that the Cycle Beverage Company was in the process of completing a head and
shoulders pattern, Zimmerman was bearish on the outlook of the stock. Another analyst, Carlton Wingo,
made a bullish case for Cycle Beverage based upon the analysis of several technical oscillators.
Zimmerman said, “I respectfully disagree with Mr. Wingo. At this time, I think the pattern forming
overrides the reading of the oscillators.” With respect to the MTA Code of Ethics, Zimmerman’s actions
are
b. in violation of the Code in terms of disparaging the work of another analyst.
c. not in violation as he is only a level 1 candidate and is not bound by the Code.
d. not in violation of the Code because the statement was not in published form.
Page 5
5. Franklin Brown, CMT, is golfing with the CEO of Diamond Forest Company. The CEO tells Brown, “I will
not be able to play golf next week because I will be traveling to investigate Southern Forest Company.
We are considering a hostile takeover of Southern Forest and I need to gather more information.” Two
weeks later, Brown decides to buy the Southern Forest Company for his client accounts, but not for his
personal account. Four weeks later, Diamond Forest engages in a hostile takeover and the Southern
Forest stock rises by 30%. With respect to the MTA Code of Ethics, Brown’s actions
a. violate the Code with respect to acting on the basis of inside information.
b. are in violation of the Code because Brown’s actions benefited his clients.
c. are not in violation of the Code because he did not invest in his personal account.
d. are in violation of the Code because he waited two weeks before investing based on the
information.
6. Xanjong Xu, CMT, left Welch Securities to join Charles Securities. He brought to Charles a listing of client
contact information and a proprietary trading model that he helped develop while he was employed at
Welch. With respect to the MTA Code of Ethics, Xu’s actions are
b. in violation both with respect to the client contact information and with respect to the trading
model.
c. in violation of the Code with respect to the trading model, but not in violation with respect to the
client contact information.
d. in violation of the Code with respect to the client contact information, but not in violation with
respect to the trading model.
7. Enrique Perrago, CMT, is an analyst for a large investment management firm. Perrago issued a research
report with an initial buy recommendation on Graham Airlines. The report includes an analysis using
some very new and controversial methods of technical analysis, along with complete documentation as
to the procedure and rationale. Ten minutes after emailing the report to his clients, Perrago buys
Graham stock for his mother’s account. With respect to the MTA Code of Ethics, Perrago’s actions are
b. in violation of the Code with respect to the methodology, but not the security purchase.
c. in violation of the Code with respect to the security purchase, but not the methodology.
d. in violation of the Code with respect to both the methodology and the security purchase.
8. Dylan Toscano, CMT, works for Shrader Securities and is writing a research report. Toscano uses a
section of a report issued by his former assistant, Terrence Wingo, CMT. Wingo recently left Shrader to
start his own firm. Toscano does not provide attribution to Wingo in the report, as it was issued by his
direct report and is property of Shrader Securities. Toscano also uses a quote without attribution from
Tyler Pinto, an analyst with a competing firm. With respect to the MTA Code of Ethics, Toscano’s actions
are
b. in violation with respect to both Wingo and Pinto’s work.
c. in violation with respect to Wingo’s work, but are not in violation with respect to Pinto’s work.
d. in violation with respect to Pinto’s work, but are not in violation with respect to Wingo’s work.
9. Manuel Luscher, CMT, is meeting with a potential client. Luscher tells the potential client that “My
biggest client, Tom Cardazo, is a good friend of yours and has been very happy with his compound annual
return of over 10%.” Luscher also tells the potential client that “I will make sure that your transactions
are completed before trading for my family’s accounts.” With respect to the MTA Code of Ethics,
Luscher’s actions are
b. in violation of the Code with respect to both disclosing client information and the priority of
transactions.
c. in violation of the Code with respect to disclosing client information, but not with respect to the
priority of transactions.
d. in violation of the Code with respect to the priority of transactions, but not with respect to
disclosing client information.
10. Tami Al-Hari, CMT, in meeting with a client states that “since I have earned the prestigious CMT charter,
you can expect my stock selections and analysis will be superior to my competitors who have not earned
the designation.” With respect to the MTA Code of Ethics, Al-Hari’s actions are
b. in violation of the Code as the statement is inaccurate and misleading.
c. in violation as Members and Affiliates cannot make any promises when soliciting clients.
11. Which of the following would BEST improve the profitability of a trend-based trading system?
a. Introduce additional trend periods
b. Utilize support and resistance lines
c. Utilize candlestick charts instead of bar charts
d. Increase the delay in taking action after a trade signal is given
12. Which of the following would NOT be true in designing a trading system utilizing bands?
a. Buy when prices penetrate the upper band
b. Sell when price breaks below the lower band
c. Cover shorts when prices reverse and go below the center of the band
d. Close out longs when prices reverse and go below the center of the band
13. In trend-based trading systems, what is the major determinant of trading activity (i.e., how often buy or
sell signals are generated)?
a. Use of a scaling factor
b. Selection of trend speed
c. Smoothing technique used
14. A trend-based trading system where the trend is the average of a pre-determined number of previous
days closing prices is known as
a. an N-day breakout system.
b. a Point and Figure system.
c. a linear regression slope system.
d. a simple moving average system.
15. A trend-based trading system where the trend is the weighting of the recent closing prices by a
smoothing constant is known as
c. a simple moving average system.
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d. an exponential smoothing system.
16. A trend based trading system where the trend is the slope of a straight line found using a least squares
regression is known as
c. a linear regression slope system.
17. A trend based trading system where signals occur when the current price reaches a new high or low is
known as
a. a swing breakout system.
c. an N-day breakout system.
18. Technicians refer to the speed of price movement as

a. trend.
b. volume.
c. ratio of two prices.
d. slope or momentum.
19. Which of the following is NOT a momentum indicator?

a. Trident index
b. Relative strength index
c. Difference between two moving averages
d. Difference between price and moving average
20. What is the general term for rate-of-change momentum indicators?

a. RSI
b. MACD
c. Stochastic
d. Oscillators
21. Which of the following is NOT CORRECT regarding the Relative Strength Index?
a. It is scaled from 0 to 100
b. It uses all the price values in a time period
c. It is more volatile than simple measures of momentum
d. It is frequently used to determine overbought and oversold levels
22. Which of the following is the MOST likely use of an oscillator in a trading system?
a. As a timing tool
b. To hedge other positions
c. To determine position sizes
d. To forecast future price levels
23. Which of the following is an INCORRECT definition of cycle terminology?

a. Amplitude - the height of the wave (cycle)
b. Period - the time needed to finish one wave (cycle)

c. Frequency - the number of cycles that repeat every 360°
d. Phase - a measure of separation between the top and bottom of a wave (cycle)
24. How can one identify the existence of a cycle?

a. Switch time frames
b. Remove price trend
c. Use only period extremes
25. How would a technician utilize a support line which has been broken?
a. The support line now becomes a resistance line.
b. The break in the support line would be a buy signal.
c. A broken support line no longer has a valid technical interpretation.
26. A method to improve a trading system utilizing band penetrations as trading signals, which is giving too
many unprofitable trade signals, is to utilize
a. stop loss orders
b. a shorter time horizon
c. a wider range of price movement
d. a narrower range of price movement
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27. Which of the following is NOT a valid technical method for determining bar chart price upside targets?
a. Width of the pattern added to the breakout price
b. Depth of the channel added to the breakout price
c. Deepest part of a triangle added to the breakout price
d. Height of the head in a head and shoulders pattern added to the neckline penetration
28. Which of the following is the BEST volume indicator for analysis of futures trading?
a. Total volume
b. Open interest
c. Contract volume
29. Which of the following is NOT a proper interpretation of volume and trend in the futures markets?
a. Volume rising and open interest rising equals trend reversal
b. Volume falling and open interest rising equals slow accumulation
c. Volume rising and open interest falling equals position liquidation
d. Volume falling and open interest falling equals consolidation phase
30. Which of the following is a generally accepted notion regarding the use of futures volume and open
interest?
a. Open interest increases during a trending period
b. Volume and open interest decrease during an accumulation phase
c. Falling prices and declining volume/open interest indicate a pending change of direction
31. Speculative stocks typically put on their best performance in which of the following markets?
a. During the entire bull market
b. In the final stages of a bull market
c. In the early stages of a bull market
32. Which of the following statement is correct regarding the McClellan Oscillator?
a. It is a breadth momentum oscillator
b. It is the sum of two exponential moving averages
c. It is used for longer-range trading compared to the McClellan Summation Index which is more
useful for short term trading
33. Which of the following is NOT a valid volume interpretation technique?

a. Remove low volume periods
b. Construct volume moving averages
c. Remove volume associated with large price moves
34. Which of the following is the calculation for price objective using the HORIZONTAL count method for a 3
box reversal Point and Figure chart? (Note: X is the multiplication symbol in this question)
a. Price level of the lowest box (for up counts) X (number of boxes in the reversal columns X
reversal size)
b. Price level of the lowest box (for up counts) + (number of boxes in the reversal columns X
reversal size)
c. Price level of the lowest box (for up counts) of the base X (number of columns of the base X
reversal size)
d. Price level of the lowest box (for up counts) of the base + (number of columns of the base X
reversal size)
35. Which of the following is the calculation for price objective using the VERTICAL Point and Figure count
method? (Note: X is the multiplication symbol in this question)
a. Price level of the lowest box (for up counts) X (number of boxes in the reversal column X reversal
size)
b. Price level of the lowest box (for up counts) + (number of boxes in the reversal column X reversal
size)
c. Price level of the lowest box (for up counts) of the base X (number of column of the base X
reversal size)
d. Price level of the lowest box (for up counts) of the base + (number of column of the base X
reversal size)
36. Which of the following BEST describes equity market performance during the presidential election cycle?
a. below average year during first year of president’s term, strongest returns during the pre-
election year or in the election year
b. strongest year during first year of president’s term, worst returns during the pre-election year
and slightly negative returns in election years
c. above average year during first year of president’s term, negative returns during the pre-election
year and its strongest returns in election years
d. below average year during first year of president’s term, strongest returns in the second year and
reasonably strong returns during the pre-election and election years
37. Which of the following is TRUE regarding contrary opinion as a technical analysis technique?
a. Contrarians trade against the consensus even when it is within a normal range
b. As long as players still have money to invest their optimism will drive prices higher
c. Contrary opinion is more useful in deciding when to exit positions than as a timing tool
d. Contrary opinion should be used as the sole decision source in entering into new trading position
38. Which of the following is true of W.D. Gann’s trading techniques?

a. His work is valid for equities but does not apply to commodities.
b. Gann’s work is an advanced interpretation of point and figure charts.
c. Gann used 10%, 20%, 30% and 40% as his key resistance and retracement levels.
d. Specific geometric patterns and angles have unique characteristics for the prediction of price
turning points.
39. The Sharpe Ratio is defined as (expected return

a. plus the risk free interest rate) divided by the standard deviation of returns.
b. times the risk free interest rate) divided by the standard deviation of returns.
c. minus the risk free interest rate) divided by the standard deviation of returns.
d. divided by the risk free interest rate) divided by the standard deviation of returns.
40. The Efficient Frontier concept in modern portfolio theory

a. is unrelated to the risk free rate.
b. is a 45 degree line plotting possible risk versus return.
c. is a plot of the highest possible returns obtainable over a series of risk levels.
d. centers on the premise that systemic risks in the financial markets can be diversified away.
P a g e 11
41. The chi square test can be

a. substituted for the Sharpe Ratio.
b. used to compare risk to expected returns.
c. used to compare actual returns to expected returns.
42. What would be the minimum price objective for a head and shoulders pattern with a neckline at 63, top
of the first shoulder at 72, top of the head at 96 and top of the second shoulder at 78?
a. 30
b. 33
c. 39
d. 55
43. What is the measuring formula for double top bar chart pattern?
a. Subtract the distance from the lowest peak from the low of the reaction
b. Subtract the distance from the highest peak from the low of the reaction
c. Subtract the distance from the average of the two peaks from the low of the reaction
44. What is the measuring objective for a symmetrical triangle bar chart formation?
a. The base distance added to the breakout point
b. The width of the triangle added to the breakout point
c. The range of the move preceding the triangle added to the breakout point
45. What is the measuring objective for flags and pennants on bar charts?
a. The distance from the beginning of the sharp trend to the first reversal and adding it to the
breakout price
b. Half the distance from the beginning of the sharp trend to the first reversal and adding it to the
breakout price
c. The distance from the beginning of the sharp trend to the first reversal and adding it to the low
price in the formation
d. Half the distance from the beginning of the sharp trend to the first reversal and adding it to the
low price in the formation
46. During emotional times, flow of funds signals

a. suggest the duration of the next downleg in the market cycle.
b. appear to work exceptionally well because of the market’s flight to safety.
c. appear to work poorly because price seems to divorce itself from economics.
d. function no differently than at any other time in the market cycle because of shortcomings in the
measurement procedures.
47. Which of the following is a CORRECT interpretation of volume?

a. In an uptrend price normally precedes volume
b. In an uptrend volume normally precedes price
c. In a downtrend volume should increase on up days
d. In an uptrend volume should increase on down days
48. Which of the following is a CORRECT interpretation of open interest?

a. Rising open interest in an uptrend is bearish
b. Rising open interest in a downtrend is bullish

c. Declining open interest in an uptrend is bearish
d. Declining open interest in a downtrend is bearish
49. Which of the following is an INCORRECT interpretation of the put-call ratio?

a. A very high ratio indicates an oversold market
b. A low ratio is considered a warning of an overbought market
c. When options traders are bullish, call volume exceeds put volume
d. When call volume exceeds put volume, this has bullish future implications for the market
50. The proper use of long-term charts versus short-term price charts is that
a. daily price charts allow for a thorough trend analysis.
b. long-term charts allow for a better assessment of the price trend.
c. daily price charts allow for a better assessment of the price trend.
51. With respect to moving averages, changes in price trend are identified by
a. utilizing a triple-cross method.
b. a shorter-term moving average crossing a longer-term moving average.
c. price crossing its moving average, not by a reversal in the moving average.
52. Which of the following statements regarding moving average crossovers is CORRECT?
a. Once a moving average system is optimized, it should be used for trading all markets
b. It is considered bearish when a short term moving average crosses above a longer term moving
average
c. In a triple crossover trading system buying is signaled when the shortest term moving average
crosses over both of the other moving averages
d. The first crossover in a triple crossover system during an upside reversal is when the shortest-
term moving average crosses above one of the other two averages
53. Which of the following is TRUE regarding moving averages?

a. Moving averages usually provide more valid trade signals than oscillators
b. Oscillators usually provide more valid trade signals than moving averages
c. Moving averages are more likely to provide the most valid trade signals in trending markets
54. In trending markets, oscillators will

a. regularly migrate between extreme levels.
b. remain in one half of their trading range for long periods.
c. give accurate breakout signals from the standard overbought and oversold levels.
55. The stochastic oscillator was created utilizing which basic observation?
a. As prices decline, the trading range tends to narrow
b. Existing oscillators were limited to a range of 0 to 100
c. Prices tend to be closer to the upper end of the trading range during an uptrend
56. Which of the following is a characteristic of the MACD indicator?

a. MACD is useful in trending markets as it is unbounded
b. MACD crossover rules are different than other crossover rules
c. When the slower MACD line is above the faster line, the MACD histogram will be above zero
P a g e 13
57. Which of the following is a CORRECT Point and Figure chart pattern interpretation?
a. Downside breakout of a bearish triangle generates a sell signal
b. Upside breakout above an ascending triple top generates a sell signal
c. Upside breakout above a bullish resistance line generates a sell signal
d. Downside breakout below a bearish support line generates a buy signal
58. Which of the following are valid Point and Figure chart trading tactics?
a. Stop losses should be placed below the last column of Os in an uptrend
b. Simple trade signals can be used for new commitments whereas complex signals are needed for
liquidation purposes
c. Long positions are closed when they fall below the trendline and short positions are closed when
they rise above the trendline
59. A breakout
a. is usually a false signal.
b. needs no confirmation.
c. occurs most often when price passes through a prior support or resistance level.
60. Which of the following BEST describes the guideline of alternation?

a. Expect a difference in the next expression of a similar wave
b. Fibonacci retracements alternate between 38.2% and 61.8%
c. The longest impulse waves alternate between wave 3 and wave 5
61. Which of the following is a TRUE statement according to Elliott Wave Theory?
a. Corrections take place in five wave patterns
b. The two types of simple corrective processes are zigzags and flats
c. A trend divides into three waves in the direction of the next longer trend
d. A complete bull market cycle is made up of eight waves, three waves up followed by five waves
down
62. According to Elliott Wave Theory

a. in the stock market, wave 5 is the most common to extend.
b. triangles are usually second waves preceding a longer third wave.
c. the Pythagorean theorem is the mathematical basis for Elliott Wave Theory.
d. waves can be expanded into longer waves and subdivided into shorter waves.
63. According to Elliott Wave Theory

a. market action is governed by the Golden Ratio.
b. the number of waves follows the Pythagorean theorem.
c. corrections do not fall below the top of the prior fourth wave.
d. the rule of alternation states that up waves follow down waves.
64. Which of the following is CORRECT according to Elliott Wave Theory?

a. Wave four should never enter the price territory of wave one
b. The theory is composed of time, ratios and wave forms, in that order of importance
c. The theory was originally applied to individual stocks and does not work as well for indices
d. The theory works best in commodity markets traded primarily by professional traders such
agricultural futures
65. Which of the following places cycles from shortest to longest in duration?
a. Presidential, seasonal, Kondratieff
b. Kondratieff, presidential, seasonal
c. Seasonal, presidential, Kondratieff
66. Which months generally have the best returns for stocks?
a. March, April and May
b. June, July and August
c. January, February and March
d. October, November and January
67. The Wilder Parabolic Time/Price System

a. works best in trading range markets.
b. increases the number of days in the calculation whenever price reaches a new high.
c. decreases the number of days in the calculation whenever price reaches a new high.
68. Which of the following is combined with Wilder’s Parabolic Price/Time System to produce the Directional
Parabolic System?
a. Stops
b. Trendlines
c. Average divergence index
d. Directional movement index
69. A general rule for risk control in trading is

a. the total amount risked on any single trade should not exceed 5% of equity.
b. at least 50% of total equity should be dedicated to the market group with the strongest trend.
c. the majority of capital should be committed to the strongest market since it is rare that more
than two or more markets will experience a major move simultaneously.
70. Central tendency is

a. another term for the average.
b. the midpoint of a trading range.
c. Another term for mean regression.
71. Which of the following is a CORRECT guideline in pyramiding trade positions?

a. Taking profits on winning positions
b. Adding to losing positions as a form of dollar cost averaging
c. Placing stops at the breakeven level as position size increases
d. Entering the smallest positions first and increasing the size of subsequent entries
72. Which of the following is the CORRECT inter-market relationship?

a. Bond prices generally move inversely to equity prices
b. Financial stocks generally trend inversely to bond prices
c. The U.S. dollar generally moves inversely to commodity prices
d. Bonds prices generally trend in the same direction as commodity prices
P a g e 15
73. Which of the following is a valid approach in using technical analysis to make investment decisions
among stock market sectors?
a. Relative strength analysis allows for identification of the strongest and weakest sectors
b. Sectors whose relative strength lines are just turning up after a downtrend should be sold
c. Charting tools such as trendlines and moving averages should not be employed with relative
strength lines
74. In 3-box reversal Point and Figure charts double

a. tops can be a continuation pattern.
b. bottoms can be a continuation pattern.
c. bottoms and double tops can be continuation patterns.
75. In Point and Figure theory, triple tops and triple bottoms, when breached
a. will lead to a stronger price move.
b. lead to smaller continuation patterns.
c. frequently lead to a consolidation phase.
76. The CORRECT interpretation of the candlestick umbrella pattern is they

a. are bullish after a rally.
b. are called hammers after an uptrend.
c. can be either bullish or bearish reversal patterns.
d. can be either bullish or bearish continuation patterns.
77. The candlestick hammer pattern

a. has no lower shadow.
b. comes after market rallies.
c. need not be confirmed by other indicators.
78. The candlestick hanging man pattern

a. has no lower shadow.
b. comes after a market decline.
c. requires bearish confirmation.
79. Which of the following factors would increase the predictive power of the candlestick engulfing pattern?
a. The pattern appears after a consolidation pattern
b. There is heavy volume on the second day of the engulfing pattern
c. The first day has a very long real body and the second day has a very short real body
80. Which of the following factors would increase the predictive power of the candlestick dark cloud cover
pattern?
a. The dark cloud cover occurs in the middle of a trading range
b. Heavy volume at the opening of the second day indicates a buying climax
c. During a downtrend, a white real body with shaven head and bottom is followed by a black body
also with a shaven head and bottom
81. Which of the following is an INCORRECT interpretation of the candlestick piercing pattern?
a. It is a bullish reversal pattern
b. It is a bearish reversal pattern

c. The smaller the penetration into the price levels of the prior day’s real body, the greater the
predictive power
82. Which of the following is a reversal pattern in candlestick charting?

a. Windows
b. Three black crows
c. Rising three methods
d. Gapping side-by-side white lines
83. Which of the following is CORRECT regarding the ideal morning star candlestick pattern?
a. It contains two candles
b. The candles are all the same color
c. The real bodies of the second and third candles overlap
d. The real bodies of the second and third candles fail to overlap
84. Which of the following factors increases the likelihood of the evening star candlestick formation being a
reversal pattern?
a. The real bodies of the candles in the pattern overlap
b. The last candle barely closes into the body of the first candle
c. There is light volume on the first candle of the pattern and heavy volume on the last candle of
the pattern
85. Which of the following is CORRECT regarding the shooting star candlestick pattern?
a. The color of the real body is important
b. It is more bearish than the engulfing pattern
c. It is more bearish than the evening star pattern
d. The lack of a rising window makes the pattern more bearish
86. Which of the following is CORRECT regarding the inverted hammer candlestick pattern?
a. It is a continuation pattern
b. The pattern requires confirmation
c. It comes at the end of a market downtrend
87. Which of the following is CORRECT regarding the harami candlestick pattern?
a. It contains a spinning top
b. The real body must be black
c. It is a continuation pattern
88. In tweezers tops candlestick patterns, the two candles must have
a. shaven tops.
b. the same high price.
c. the same color real bodies.
89. Which of the following is NOT CORRECT regarding the belt-hold candlestick pattern?
a. The pattern consists of one candle
b. A short belt-hold line has more significance than a long belt-hold line
P a g e 17
c. The bearish belt-hold is a long black candle that opens on the high and moves lower through the
trading session
d. The term belt-hold refers to a sumo wrestling maneuver where a wrestler pushes his opponent
while holding onto his belt
90. Which of the following is CORRECT regarding the three black crows candlestick pattern?
a. It is continuation pattern
b. The three candles should close at or near their lows
c. The three black candles do not have to be on consecutive trading periods
d. When successive candles open inside the real body of the prior day the pattern has greater
significance
91. Which is NOT CORRECT regarding the three advancing white soldiers candlestick pattern?
a. It is a gradual and steady rise
b. Each real body opens within or near the prior session’s real body
c. It is composed of three white candles with successively higher closes
d. If the second or third candle show signs of weakening the pattern is called a stalled pattern
92. Which of the following is NOT CORRECT regarding the three mountains and three rivers candlestick chart
patterns?
a. They are short-term continuation patterns
b. The three mountains pattern is also known as a Buddha top
c. The three rivers pattern is also known as an inverted Buddha
d. The three rivers pattern is also known as an inverted Buddha
93. Which of the following is CORRECT regarding the window candlestick pattern?
a. It is a reversal pattern
b. One should buy on dips after a falling window
c. It occurs when the shadows of two consecutive candles do not overlap
d. It occurs when the real bodies of two consecutive candles do not overlap
94. Which of the following is NOT CORRECT regarding the rising and falling three methods candlestick
patterns?
a. They are continuation patterns
b. Each pattern consists of three candles
c. The final day is another long candle of the opposite color of the preceding small candles
95. Which of the following is CORRECT regarding the separating lines candlestick pattern?
a. It is a reversal pattern
b. The two candles have the same color
c. The opening price of the second candle equals the opening price of the first candle
d. The top of the upper shadow of one candle is at the same price as the bottom of the lower
shadow of the other candle
96. Which of the following candlestick formations is NOT a continuation pattern?

a. Windows
b. Tweezers
c. Separating lines
d. Rising three methods
97. Which of the following candlestick formations is a continuation pattern?

a. Doji
b. Hammer
c. Windows
d. Tweezers
98. Standard deviation is

a. the square root of the variance.
b. the covariance of two securities.
c. a descriptive statistic which defines the central tendency.
d. an inferential statistic which measures symmetry around the mean.
99. The two common ways that a greed-driven investor can suffer losses, even when his longer-term forecast
is correct, are from
a. indexes and currencies.
b. indexes and pyramiding.
c. leveraging and currencies.
d. leveraging and pyramiding.
100. The CORRECT order of the Industrial Life Cycle is Innovation,

a. Maturity, Consolidation, Decay.
b. Consolidation, Decay, Maturity.
c. Consolidation, Maturity, Decay.
d. Maturity, Decay, Consolidation.
101. Why is it important to ignore opinions and focus on facts in market analysis?
a. Unexpected news does not get factored into the market
b. General news reflects slowly unfolding economic and financial trends not yet discounted by the
markets
c. Stock market news is more important than general news in determining the future direction of
the markets
102. Which of the following generally best characterizes the Theory of Contrary Opinion?
a. The majority are always wrong
b. Always trade against the prevailing trend
c. The future can be extrapolated based on present trends
d. When everyone thinks alike everyone is likely to be wrong
103. To calculate moving averages for a Point and Figure chart, first
a. re-draw the chart as a 1X1 chart.
b. convert the chart to a conventional line chart.
c. make a decision as to how many columns to average.
d. find the longest column, and count the number of filled boxes.
104. A morning star candlestick pattern is typically a

a. top reversal pattern consisting of three candles.
P a g e 19
b. bottom reversal pattern consisting of three candles.

c. continuation pattern consisting of at least five candles.
d. very small pattern consisting of two candles that is infrequently seen.
105. An evening doji star candlestick pattern

a. has a doji in the last position.
b. has a doji in the middle position.
c. is completely comprised of dojis.
d. is completed by dojis leading out of the pattern.
106. The abandoned baby candlestick pattern

a. ideally has a doji as second candle.
b. appear upon completion of star patterns.
c. can only be formed over long periods of time.
d. do not appear in star patterns, only in box ranges.
107. The candlestick formation counterattack lines are formed when

a. a doji breaks a moving average.
b. same-colored candles have the same close.
c. opposite colored candles have the same close.
108. The bearish counterpart to the piercing candlestick pattern is the

a. hanging man.
b. dark cloud cover.
c. three black crows.
109. Prior to a market top, what would one expect to see in a VIX reading?
a. Low VIX levels
b. High VIX levels
c. Increasing VIX levels
d. Decreasing VIX levels
110. Which of the following tools would provide the least help to a trader who is trying to determine where
to place a stop order?
a. TRIN
b. Parabolic SAR
c. Average True Range
d. Pivot Point Technique
111. A harami candlestick pattern most closely resembles what “western” charting pattern?
a. Gap
b. Inside day
c. Outside day
d. Island Reversal
112. When small cap stocks have abnormal strength, this can be attributed to the
a. January Effect.
b. Kondratieff Wave.
c. Hindenburg Omen.
d. January Barometer.
113. If a peak occurs prior to the halfway point of a cycle, this would be considered
a. inversion.
b. left translation.
c. right translation.
114. The Chaikin Money Flow Index does NOT

a. rise above zero in an upward trend.
b. suffer from the “drop off” effect, as it uses a simple moving average.
c. measure deviations of price within two standard deviations of the range.
115. A system in which the investor must be able to withstand a long series of losses is known as the
a. parabolic system.
b. pyramiding system.
c. Martingale betting system.
d. directional movement system.
116. All of the following are similar technical indicators EXCEPT the
a. Stochastics.
b. Williams %R.
c. Herrick Payoff Index.
d. Relative Strength Index.
117. On a Point and Figure chart, to account for the distortion caused by low-price action not appearing as
active as high-price action, one should change the
a. scale to arithmetic.
b. scale to logarithmic.
c. box size on the chart.
118. Over a period of 4 weeks, a swing trader notices that for a particular security the ADX reading has
declined from a high of 45 to a current low of 15. What tool may best help the trader isolate a trading
opportunity over the next few days?
a. An oscillator
b. A linear regression line
c. A simple moving average
d. An exponential moving average
119. The concept that best helps quantify the risk of a trading system is the
a. longest flat time.
b. maximum favorable excursions.
c. length of average winning trade.
d. maximum cumulative drawdown.
P a g e 21
120. The indicator measures the distance between two exponential moving averages of advancing minus
declining issues is the
a. TRIN.
b. SENTIX Index.
c. McClellan Oscillator.
d. Ayres-Hughes Breadth Indicator.
121. Indicators that measure what uninformed investors are doing are referred to as
a. cycle indicators.
b. breadth indicators.
c. sentiment indicators.
d. flow of funds indicators.
122. The Efficient Market Hypothesis assumes that

a. most investors will act rationally.
b. most investors will act irrationally.
c. crowd behavior creates unsustainable bubbles.
d. current prices reflect most of the available public information.
123. A security has just broken out of its trading range to the upside. Over the course of the next 2 days it
rises an additional 5% from the point of the breakout and then returns to its prior resistance line before
continuing the uptrend. What term best describes this behavior?
a. Failure
b. Shortfall
c. Throwback
d. Premature Breakout
124. Which of the following statements regarding MACD is NOT CORRECT?

a. It is useful in a trending market
b. The signal line is also a moving average
c. The calculation uses only exponential moving averages
d. If MACD has had a positive value for more than 12 periods, it is predictive of a reversal
125. Which of the following statements is CORRECT regarding the Stochastic Oscillator?
a. It moves in the same direction as the Williams %R indicator
b. It is not as sensitive to recent price action as other indicators like Rate of Change
c. It works best in a trending market, when it confirms the direction of the primary trend
d. It examines the most recent closing price as a percentage of the price range over a window of
time
126. The chart type which integrates volume directly into the price bar is the
a. Renko chart.
b. Equivolume chart.
c. Ichimoku Cloud chart.
d. Value Weighted Average Price chart.
127. All of the following are standard patterns used with 3-box reversal Point and Figure charts EXCEPT
a. triangles.
b. fulcrums.
c. triple top or triple bottoms.
d. double top or double bottoms.
128. A method to detrend data to determine if a cycle exists is to

a. plot a linear regression line through the data midpoint.
b. apply volume weighting to both high and lows in the data.
c. divide the current prices by a moving average of those prices.
d. create an oscillator that plots a standard deviation of the period lows.
P a g e 23
CMT Level 2 Sample Questions – Answer Sheet

1. b. violate the standard against misleading advertising.
Reading Reference: MTA Code of Ethics
2. d. in violation as the statements made about the simulated results were inaccurate and misleading.
3. a. not in violation of the Code.

4. a. not in violation of the Code.

5. a. violate the Code with respect to acting on the basis of inside information.
6. b. in violation both with respect to the client contact information and with respect to the trading model.
7. d. in violation of the Code with respect to both the methodology and the security purchase.
8. b. in violation with respect to both Wingo and Pinto’s work.

9. c. in violation of the Code with respect to disclosing client information, but not with respect to the priority
of transactions.
10. b. in violation as the statement is inaccurate and misleading.

11. d. Increase the delay in taking action after a trade signal is given
Reading Reference: Kaufman, 2005, p. 298.
12. c. Cover shorts when prices reverse and go below the center of the band
13. b. Selection of trend speed

14. d. a simple moving average system.

15. d. an exponential smoothing system.
16. c. a linear regression slope system.

17. b. an N-day breakout system.

Reading Reference: Kaufman, 2005, pp. 200-2.
18. d. slope or momentum.

19. a. Trident index

20. d. Oscillators
21. c. It is more volatile than simple measures of momentum

22. a. As a timing tool

Reading Reference: Pring, 2002, pp. 549-50.
23. d. Phase - a measure of separation between the top and bottom of a wave (cycle)
24. b. Remove price trend

25. a. The support line now becomes a resistance line.

Reading Reference: Kirkpatrick & Dahlquist, 2011, p. 230.
26. c. a wider range of price movement.

Reading Reference: Pring, 2002, p. 296.
27. a. Width of the pattern added to the breakout level.

28. a. Total volume

29. a. Volume rising and open interest rising equals trend reversal
30. a. Open interest increases during a trending period

31. b. In the final stages of a bull market
P a g e 25
32. a. It is a breadth momentum oscillator

Reading Reference: Kirkpatrick & Dahlquist, 2011, pp. 142-3.
33. c. Remove volume associated with large price moves

34. d. Price level of the lowest box (for up counts) of the base + (number of columns of the base X reversal size)
Reading Reference: du Plessis, 2009, p. 230.
35. b. Price level of the lowest box (for up counts) + (number of boxes in the reversal column X reversal size)
36. a. below average year during first year of president’s term, strongest returns during the pre-election year
or in the election year
37. b. As long as players still have money to invest, their optimism will drive prices higher
38. d. Specific geometric patterns and angles have unique characteristics for the prediction of price turning
points.
39. c. minus the risk free interest rate) divided by the standard deviation of returns.
40. c. is a plot of the highest possible returns obtainable over a series of risk levels.
41. c. used to compare actual returns to expected returns.

42. a. 30
Calculated as follows:
Height of the formation = (top of the head – neckline) = 96 - 63 =33
Minimum price objective = (neckline – height of the formation) = 63 – 33 = 30
43. b. Subtract the distance from the highest peak from the low of the reaction
44. a. The base distance added to the breakout point

45. a. The distance from the beginning of the sharp trend to the first reversal and adding it to the breakout
price
46. c. appear to work poorly because price seems to divorce itself from economics.
47. b. In an uptrend volume normally precedes price

48. c. Declining open interest in an uptrend is bearish

49. d. When call volume exceeds put volume, this has bullish future implications for the market
50. b. long-term charts allow for a better assessment of the price trend.
51. c. price crossing its moving average, not by a reversal in direction of the moving average.
52. d. The first crossover in a triple crossover system during an upside reversal is when the shortest-term
moving average crosses above both of the other two averages
53. c. Moving averages are likely to provide more valid trade signals in trending markets
54. b. remain in one half of their range for long periods.

55. c. Prices tend to be closer to the upper end of the trading range during an uptrend
56. a. MACD is useful in trending markets as it is unbounded

57. a. Downside breakout of a bearish triangle generates a sell signal

Reading Reference: du Plessis, 2009, pp. 129-32.
58. a. Stop losses should be placed below the last column of Os in an uptrend
59. c. occurs most often when price passes through a prior support or resistance level.
60. a. Expect a difference in the next expression of a similar wave

Reading Reference: Frost & Prechter, 2010, p. 61.
P a g e 27
61. b. The two types of simple corrective processes are zig-zags and flats
Reading Reference: Frost & Prechter, 2010, pp. 40-8.
62. d. waves can be expanded into longer waves and subdivided into shorter waves.
Reading Reference: Frost & Prechter, 2010, pp. 26-7.
63. a. market action is governed by the Golden Ratio.

64. a. Wave four should never enter the price territory of wave one
65. c. Seasonal, presidential, Kondratieff

Reading Reference: Kirkpatrick & Dahlquist, 2011, pp. 164-6; 170-2; 174.
66. d. October, November and January

67. c. decreases the number of days in the calculation whenever price reaches a new high.
68. d. Directional movement index

69. a. total amount risked on any single trade should not exceed 5% of equity.
70. a. another term for the average.

71. d. Placing protective stops at the breakeven levels as size increases

72. c. The U.S. dollar generally moves inversely to commodity prices

73. a. Relative strength analysis allows for identification of the strongest and weakest sectors
74. c. bottoms and double tops can be continuation patterns.

75. a. will lead to a stronger price move.

76. c. can be either bullish or bearish reversal patterns.

Reading Reference: Nison, 2001, p. 33.
77. c. need not be confirmed by other indicators

78. c. requires bearish confirmation.

79. b. There is heavy volume on the second day of the engulfing pattern
80. b. Heavy volume at the opening of the second day indicates a buying climax
Reading Reference: Nison, 2001, pp. 49-55.
81. b. It is a bearish reversal pattern

82. b. Three black crows

83. d. The real bodies of the second and third candles fail to overlap
84. c. There is light volume on the first candle and heavy volume on the last candle of the pattern
85. d. The lack of a rising window makes the pattern more bearish
86. b. The pattern requires confirmation.

87. a. It contains a spinning top

88. b. the same high price

89. b. A short belt-hold line has more significance than a long belt-hold line
90. b. The three candles should close at or near their lows

91. d. If the second or third candle show signs of weakening it is called a stalled pattern
92. a. They are short-term continuation patterns

P a g e 29
93. c. It occurs when the shadows of two consecutive candles do not overlap
94. b. Each pattern consists of three candles

95. c. The opening price of the second candle equals the opening price of the first candle
96. b. Tweezers
97. c. Windows
98. a. the square root of the variance.

99. d. leveraging and pyramiding.

100. c. Consolidation, Maturity, Decay.

101. b. General news reflects slowly unfolding economic and financial trends not yet discounted by the markets
102. d. When everyone thinks alike, everyone is likely to be wrong

103. c. make a decision as to how many columns to average.

104. b. bottom reversal pattern consisting of three candles.

105. b. has a doji in the middle position.

106. a. ideally has a doji as second candle.

107. c. opposite colored candles have the same close.

108. b. dark cloud cover.

109. d. Low VIX levels

110. a. TRIN
Reading Reference: Kirkpatrick & Dahlquist, 2011, pp. 259-62; 267.
111. b. Inside day

112. a. January Effect.

113. b. left translation.

114. c. measure deviations of price within two standard deviations of the range.
115. c. The Martingale betting system.

116. c. Herrick Payoff Index.

Reading Reference: Kirkpatrick & Dahlquist, 2011, pp. 428-9; 432-40.
117. b. scale to logarithmic.

Reading Reference: du Plessis, 2009, pp. 105-6.
118. a. An oscillator
119. d. maximum cumulative drawdown.

120. c. McClellan Oscillator.

121. c. sentiment indicators.

122. a. most investors will act rationally.

123. c. Throwback
124. d. If MACD has had a positive value for more than 12 periods, it is predictive of a reversal
P a g e 31
125. d. It examines the most recent closing price as a percentage of the price range over a window of time
126. b. Equivolume chart.

127. b. fulcrums.
128. c. divide the current prices by a moving average of those prices.

Reading Reference: Kirkpatrick & Dahlquist, 2011, p.461.

Sample Questions Level II

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Sample Questions Level II

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1. __________ 29. __________ 57. __________ 85. __________ 113. __________

2. __________ 30. __________ 58. __________ 86. __________ 114. __________

3. __________ 31. __________ 59. __________ 87. __________ 115. __________

4. __________ 32. __________ 60. __________ 88. __________ 116. __________

5. __________ 33. __________ 61. __________ 89. __________ 117. __________

6. __________ 34. __________ 62. __________ 90. __________ 118. __________

7. __________ 35. __________ 63. __________ 91. __________ 119. __________

8. __________ 36. __________ 64. __________ 92. __________ 120. __________

9. __________ 37. __________ 65. __________ 93. __________ 121. __________

17. __________ 45. __________ 73. __________ 101. __________

18. __________ 46. __________ 74. __________ 102. __________

19. __________ 47. __________ 75. __________ 103. __________

20. __________ 48. __________ 76. __________ 104. __________

21. __________ 49. __________ 77. __________ 105. __________

22. __________ 50. __________ 78. __________ 106. __________

23. __________ 51. __________ 79. __________ 107. __________

24. __________ 52. __________ 80. __________ 108. __________

25. __________ 53. __________ 81. __________ 109. __________

26. __________ 54. __________ 82. __________ 110. __________

27. __________ 55. __________ 83. __________ 111. __________

28. __________ 56. __________ 84. __________ 112. __________

CMT Level 2 Sample Questions

d. an exponential smoothing system.

18. Technicians refer to the speed of price movement as

19. Which of the following is NOT a momentum indicator?

20. What is the general term for rate-of-change momentum indicators?

23. Which of the following is an INCORRECT definition of cycle terminology?

b. Period - the time needed to finish one wave (cycle)

24. How can one identify the existence of a cycle?

33. Which of the following is NOT a valid volume interpretation technique?

38. Which of the following is true of W.D. Gann’s trading techniques?

39. The Sharpe Ratio is defined as (expected return

40. The Efficient Frontier concept in modern portfolio theory

41. The chi square test can be

46. During emotional times, flow of funds signals

47. Which of the following is a CORRECT interpretation of volume?

48. Which of the following is a CORRECT interpretation of open interest?

b. Rising open interest in a downtrend is bullish

49. Which of the following is an INCORRECT interpretation of the put-call ratio?

53. Which of the following is TRUE regarding moving averages?

54. In trending markets, oscillators will

56. Which of the following is a characteristic of the MACD indicator?

60. Which of the following BEST describes the guideline of alternation?

62. According to Elliott Wave Theory

63. According to Elliott Wave Theory

64. Which of the following is CORRECT according to Elliott Wave Theory?

67. The Wilder Parabolic Time/Price System

69. A general rule for risk control in trading is

70. Central tendency is

71. Which of the following is a CORRECT guideline in pyramiding trade positions?

72. Which of the following is the CORRECT inter-market relationship?

74. In 3-box reversal Point and Figure charts double

76. The CORRECT interpretation of the candlestick umbrella pattern is they

77. The candlestick hammer pattern

78. The candlestick hanging man pattern

b. It is a bearish reversal pattern

82. Which of the following is a reversal pattern in candlestick charting?

96. Which of the following candlestick formations is NOT a continuation pattern?

d. Rising three methods

97. Which of the following candlestick formations is a continuation pattern?

1. 29. 57. 85. 113. __

2. 30. 58. 86. 114. __

3. 31. 59. 87. 115. __

4. 32. 60. 88. 116. __

5. 33. 61. 89. 117. __

6. 34. 62. 90. 118. __

7. 35. 63. 91. 119. __

8. 36. 64. 92. 120. __

9. 37. 65. 93. 121. __

17. 45. 73. 101.

18. 46. 74. 102.

19. 47. 75. 103.

20. 48. 76. 104.

21. 49. 77. 105.

22. 50. 78. 106.

23. 51. 79. 107.

24. 52. 80. 108.

25. 53. 81. 109.

26. 54. 82. 110.

27. 55. 83. 111.

28. 56. 84. 112.