Quick Revision Notes - (Contains additional information along with the syllabus)

Chapter 1-5
Covers history of technical analysis. Better to read the original text once or twice.
Chapter 6-9 Elder
New High – New Low Index
1. The stocks that make a new yearly high on a particular day are leaders in strength, whereas those
which make a yearly low on the same day are leaders in weakness.
2. New high/new low (NH-NL) index can be obtained from the difference between NH and NL.
3. New High – New Low indicator may be regarded as the best leading indicator.
4. When NH - NL, the difference is zero. When NH>NL, the index is positive and when NH<NL, the
index is negative.
5. It is plotted as a continuous line, with zero as a reference.
6. Three important aspects about NH-NL are- a. whether it is positive or negative b. Slope of the line
c. Divergences if any.
7. If NH-NL is below centreline for a few months, and then moves above zero, it indicates that the
bottom is in place and a bull charge may take place. One should buy at this level. Opposite is true for
selling.
8. When NH-NL rallies with the market, uptrend is confirmed and vice versa.
9. Divergence between NH-NL and the market indicates that the trend is likely to change and one
should book profit in existing positions.
10. NH-NL indicator may also be plotted for stocks making weekly high or lows
11. It may also be plotted for monthly or quarterly high – lows.
Stocks above 50 day moving average
1. It tracks the % of stocks trading above 50 days moving average.
2. It oscillated between 0-100.
3. Those trading above are under the bull control and those below are under bear control.
4. Greed lasts longer than fear. So, the tops are broader but bottoms are sharper.
5. The indicator does not give very accurate results and cannot differentiate between short term
corrections and major reversals.
Other stock market indicators
1. Advance - Decline line is related to participation of majority of people during up moves and
declines.
2. Each day the number of stocks that closer higher is added and those closing lower is subtracted
from the previous day’s value.
3. The Most Active Stocks Indicator (MAS) is actually an advance-decline indicator of the 15 most
active stocks on New York Stock Exchange.
4. All indicators cannot be used always due to changes in the markets. Some of them which were used
earlier have become redundant today.
Consensus and Commitment Indicators
1. High degree of bullish or bearish consensus among market journalists indicates that the current
trend is about to get over soon.
2. When there is no conflict between the bulls and the bears, the trend soon dies off.
3. Advisors as a group do not perform any better than the crowd.
4. Buying opportunity arises when majority of advisors are bearish.
5. Financial journalists try to give a balanced and vague picture of the current market direction. When
their articles start talking about a single direction, the trend is ripe and may change soon.
6. Financial magazines are good contrary indicators of future direction of the markets.
7. Position limit is the number of contracts a speculator is allowed to hold at a time in a market.
8. Position limits prevent large speculators from bullying the markets.
9. The three groups of market participants are hedgers (Commercials), large speculators and small
speculators.
10. Hedgers do not have speculative position limits.
11. Open interest = positions of large speculators + positions of hedgers + positions of small
speculators.
12. Hedgers (Commercials) can legally speculate in futures markets using inside information.
13. If a person holds more than 5 % of the stock, any buying or selling has to be reported to the SEC.
14. Insider buying is typically observed after a huge fall, and insider selling when the market rallies
to a high.
15. More than three insiders buying or selling within a month in the same company is significant about
that share.
16. Short per cent of float is typically one to two per cent of total publicly held shares free for
trading.
17. Higher short per cent indicates high degree of bearishness about the stock.
18. Day to cover indicates the duration required for covering shorts under normal conditions and is
typically one-two days. This is a theoretical duration, but very long time to cover also indicates
excessive bearishness.
19. ‘Bid’ is the price the buyer is ready to offer whereas ‘Ask’ is the price the seller is demanding.
The difference between the two is termed as the ‘Bid-Ask Spread’.
20. Price is decided by the actions of all three, buyers, sellers and undecided people.
21. When the strength of the bulls and the bears is nearly same, an intelligent trader stays away from
the markets.
22. The New York Stock Exchange was formed in 1792, as a club of traders under a cottonwood tree.
On rainy days, they used to move in Fraunces Tavern, which was nearby.
23. A successful trader must take his trading decisions individually, without influence of others.
24. Crowds are powerful, but not very intelligent.
25. One can make money in the markets only because someone else is losing it. Good company
results, favourable economic environment, low interest rates do not put money in the markets.
26. In the stock markets, insiders in the companies make consistent profits if treated as a group.
27. Insiders more commonly make money by passing the inside information to others. This makes
complete elimination of insider trading impossible.
28. Insider trading also gets reflected in the charts.
29. Rational reason for trading is desire to earn money.
30. Irrational reasons for trading include thrills, urge for gambling, getting excitement.
31. People trade for both, rational as well as irrational reasons.
32. Firms dealing in cash as well as futures markets have major advantages such as getting factual
inside information and exemption from speculative position limits.
33. Most of the trading firms are involved in hedging as well as speculating.
34. Employees in a trading firm make money more easily as their own money is not at risk when they
are trading. This gives them a psychological advantage over one who is putting his own money in
trading.
35. Individual trader can afford to remain inactive in the turbulent markets. This is the advantage of
individual trader over institutional traders.
36. Private traders tend to overtrade, and lose the advantage of being inactive at times.
37. Toolboxes allow trader to take trading decisions. However, depending on their type, they are
more or less receptive to modifications from the trader. White box is completely receptive to changes
in parameters, grey box allows only some changes, whereas black box cannot be changed.
Chapter 10- Basic Candlestick Charting
(The notes given below cover more patterns than given in the prescribed text).

1. Japanese Candlesticks were developed during 17th Century for forecasting rice prices.
2. Typical candlesticks have four prices. Open, high, low and close. The difference between open and
close is shown by a vertical band called as body of the candle. The difference between high and body
is shown as a vertical line termed upper shadow (or upper wick) and the difference between the body
and low is shown by another vertical line called the lower shadow (or lower wick).
3. Depending on the size of body of the candle and shadows, the candlesticks are divided in different
types.
4. The types are normal candle, doji (candle with no or negligible body), Shaven top or shaven
bottom candle (candle with no or negligible shadow on one or both sides). Shaven candle is a more
general term.
5. The signals of candlesticks depend on the type of candlesticks as well as the mutual arrangement of
2,3 or more candlesticks placed consecutively in front of each other.
6. Bullish candlesticks have close higher than open. They are typically indicated by white, green or
blue body. Bearish candlesticks have close lower than open. They are typically indicated by black or
red line. (Original Japanese convention was red for bullish and black for bearish as red is the colour
of rising sun. However, now we use red or black, both indicating bearish lines).
7. Depending on arrangement of candlesticks, we get continuation or reversal patterns. The signals
once given tend to continue for a few more candles.

Chapters 11-15- Oscillators and Indicators at a glance:

1. Absolute Breadth Index: Developed by Fosback. Measures the magnitude of the changes. It
neglects the direction of change. Measured from the difference between advancing stocks and
declining stocks.
2. Accumulation/Distribution Line: Momentum Indicator. Based on the logic that movement
accompanied by volume is more sound.
3. Advance/Decline Line (More commonly known as A/D Line): Useful for measuring overall market
strength.
Similar to accumulation distribution. However, it does not consider volume. It is the difference
between advancing and declining issues added to previous value of A/D line.
4. Advance/Decline Ratio: It is the ratio of number of advancing stocks to declining stocks. It is a
market breadth indicator.
5. Andrew’s Pitchfork: It was developed by Dr. Alan Andrews and looks like three parallel lines.
These lines are based on three points, and are indicative of support and resistance levels.
6. Arms Index: Developed by Richard Arms. This is also dependent on number of stocks advancing
and declining along with associated volume. This is also known as TRIN meaning TRading INdex.
7. Average True Range (ATR): Developed by J. Welles Wilder. It measures overall volatility.
8. Bollinger Bands: These bands are also dependent on volatility. They are typically drawn at 2
standard deviations on either side of (usually) 20 days moving average. Prices moving outside the
lower or upper band indicate continuation of trend.
9. Breadth Thrust Indicator: It was developed by Dr. Martin Zweig and is a market momentum
indicator. It is the ratio of number of advancing stocks to the sum of advancing and declining stocks.
Often it is plotted as percentage of stocks advancing to total number of stocks advancing or declining
over a 10 day period.
10. Chaikin Money Flow: Comparison of closing price is done with the day’s range. Close near the
high point of the range is regarded as the money flowing in, whereas close near the low of the range is
considered as the money flowing out. This is multiplied by volume, to indicate the amount of money
flowing in or out of the system.
11. Chaikin Oscillator: Moving average of accumulation/distribution line.
12. Commodity Channel Index (CCI): Developed by Lambert. It measures the deviation of price of
security from mean price over a fixed period of time. It can be used for commodities as well as other
instruments.
13. Directional Movement Index (DMI, also called as Advanced Directional Index or ADX):
Typically used as three lines, +DI, -DI and ADX. For improved accuracy sometimes more lines
(averages of the above lines) may also be introduced. Out of –DI or +DI, whichever is up determines
the direction. However, whether that signal should be followed or not is decided using ADX line.
14. McClellan Oscillator: Market breadth indicator based on average difference between advanced
and declined stocks. Typically plotted as a difference between 19 day and 39 day moving average of
advance-decline line.
15. McClellan Summation Index: This is based on McClellan Oscillator, and is also an indicator of
market breadth.
16. Momentum Oscillator: The ratio of change in price over a fixed time to that of the price at the
beginning of that time period is termed as the momentum. A continuous line representing momentum is
termed as the momentum oscillator. It is a lead indicator as the stock starts losing momentum before it
changes the direction.
17. Money Flow Index (MFI): It is the product of typical price and traded volume. It is also a
momentum oscillator, but considers volume.
18. Moving Average Convergence Divergence (MACD): Developed by Gerard Appel. This is also a
momentum indicator but is trend following type. It is a laggard, means gives buy as well as sell
signals late. It is the difference between a shorter term and longer term moving average often plotted
with its own average to generate buy and sell signals.
19. Moving Average: It is the average price of a security over a period of time. This is preferred to
actual price, as it is smoothened and is less jerky. Typically, it is plotted in two ways, simple and
weighted. Simple moving average is easy to calculate but neglects older data. Weighted average
never neglects any data, but as the data gets older, its importance goes on decreasing. Exponential
moving average is a special type of weighted average. The moving average is also used by traders for
generating buy and sell signals. Buy when the price closes above the average and sell when it closes
below the average. There are other types of moving averages such as triangular moving average,
variable moving average, volume adjusted moving average, etc. but are less commonly used.
20. New High-New Low (NHNL) cumulative indicator: This is used for confirming the current trend.
How many stocks are making a new high and how many are making a new low in the given period of
time is used for calculating NHNL cumulative indicator. When market is being balanced by only a
few stocks, but the overall market breadth is in the opposite direction, it can be found out using this
indicator.
21. New High/Low Ratio: The ratio of number of stocks making 52 week high to the number of stocks
making 52 week low. When the markets are likely to undergo major uptrend or downtrend, this
indicator reaches extreme values. Hence, it can be used as a contra-indicator. (Sometimes, instead of
plotting ratio, the difference between the two is plotted).
22. On Balance Volume: It is a momentum indicator developed by Joe Granville. It relates price
change with volume. On a bullish day, the entire volume is assumed to be buying volume (positive)
and on bearish day, it is considered as selling volume (negative). On balance volume is the sum of all
volumes, positive and negative, over a period of time. It works on an assumption that OBV leads the
price. Hence as OBV turns positive, bullish trend will follow and as OBV turns negative, selling will
emerge.
23. Open Interest: It is used in derivatives markets. The number of open positions in a futures or
options contracts is called as open interest in that contract. The change in open interest is more
important than the value itself. Increasing open interest in a contract indicates that the current market
trend is likely to continue more. Decreasing open interest indicates traders are unwinding the open
positions, and the current trend may change soon.
24. Overbought/Oversold Oscillator: This indicator shows then the market is overbought or oversold
to that traders can liquidate their existing positions and book profits. Typically, when the indicator
rises to overbought level and falls from there, it gives a sell signal. Similarly, when it reaches
oversold level and starts rising, a buy signal is generated. It is usually plotted as a 10 days
exponential moving average of the difference between advancing and declining stocks.
25. Parabolic Stop and Reversal (PSAR): It was developed by J. Welles Wilder. It is commonly used
for determining the trailing stop levels. SAR levels keep moving in the direction of the price at every
time interval, thereby allowing traders to modify their stops.
26. Positive Volume Index: Volume in the market is mainly generated by uninformed players. This
indicator helps in identifying when uninformed players have started following the trend. As and when
this indicator increases, the reversal is close by.
27. Rate of Change (ROC or Price ROC): This is a momentum oscillator that compares current price
with the price N days ago. Usually, this difference is plotted as percentage or as points. (It is also
plotted as a ratio, when it is called momentum oscillator). This is a lead indicator and changes
direction before the security. When low of ROC is above zero, it is an indication that the prices may
move higher. Similarly a top made below zero indicates that the prices may move lower.
28. Put/Call Ratio: It was developed by Martin Zweig. It is a market sentiment indicator. It is the ratio
of the number of open interest in puts to number of open interest in calls. (Interpretation of put call
ratio is a matter of contradictions. Some authors consider high put call ratio as an indicator that the
markets will move up, whereas others say it is a contra-indicator. They advise sell when put call
ratio goes above 1.5 and buy when it falls below 0.7. However, very high or very low values of
put/call ratio in the expiry week are not indicative of any direction).
29. Relative Momentum Index: It was developed by Roger Altman. This is a variation of Relative
Strength Index. However, it also considers momentum. Similar to RSI, it ranges typically between 30
and 70.
30.Relative Strength: The ratio of price change in one security or market to that of other security or
market is termed as the relative strength. (Should not be confused with relative strength index). It is
advisable, that one should buy a stock with higher relative strength and short sell a stock or an index
with lower relative strength, as a hedge. Note: It is possible that the stock is falling, but its relative
strength is still increasing as the other security with which it is being compared is falling at faster
rate. Similarly, it is possible that the relative strength of a stock is decreasing, when it is advancing in
price, if the other stock is rising at a faster rate.
31. Relative Strength Index (RSI): It was developed by J. Welles Wilder. Most widely used for
determining overbought and oversold levels. (It different that relative strength. It DOES NOT
compare the strength of two underlying, but that of a single underlying over the period of time, usually
14 days). Levels below 30 are considered oversold and indicate that the bottom may be close.
Similarly levels above 70 are overbought and indicate possible proximity to market tops. Often used
for divergence studies.
32. Relative Volatility Index (RVI): It was developed by Donald Dorsey. It measures relative
volatility. It is based on 10 days standard deviation of highest and lowest prices. Levels above 60 are
overbought and levels below 40 are oversold. When RVI>50, it gives a buy signal whereas RVI<50
generates a sell signal.
33. Stochastic: This is made up of two lines, %K line and %D line. %K line depends on where
today’s close was compared to the low of N days. This is divided by the range for N days and
multiplied by 100 to get %K. %D line is a moving average of %K.
%K =
Buying is done when %K or %D line fall below 20 and rise above 20. Selling is done when these
line rise above 80 and fall below it.
34. Swing Index: Developed by J. Welles Wilder. It compares the price change today with that of
yesterday, to determine the swing in price that is going on.
35. Volume Rate of Change (Volume ROC): Just like price ROC, change in volume is given
importance than change in price.
36. Williams % R: It was developed by Larry Williams and is a momentum indicator used for
determining overbought and oversold levels. It is calculated as-

By default its value is negative, as current close cannot be higher than highest high in N days. – 20 is
overbought and -80 is oversold.
37. In Derivatives markets, rising price with increasing open interest indicates long built up, Falling
(or rarely stagnant) prices with decreasing open interest indicate profit booking, Falling prices with
increasing open interest indicate short built up, rising prices with decreasing open interest indicate
short covering. The last step is witnessed after a fall.
Chapter 16-20
1. There are three major places where investors invest their money expecting returns.
a. Government accepts money from investors as there is a gap between the taxes collected and
expenses, which needs to be filled up.
b. Companies need investor’s money to run their business and to expand.
c. Hard assets that allow the investors to possess at one price and exit at higher price.
2. Financial markets work on three Rs - Returns, Risk and Relative Value.
3. Government borrows money from investors in different ways such as-
a. Bills (shorter than one year)
b. Notes (longer than 1 year, often up to 10 years)
c. Bonds (Longer than 10 years)
4. Companies may also issue bills, notes or bonds.
5. Equity is partial ownership of company. Company sells this ownership to generate funds. This
option is not available for the government to generate funds.
6. Instead of cash, stocks or bonds, one may invest in hard assets.
7. Performance of financial markets is reflected in indices.
8. Financial markets offer two basic choices for investment. They are Debt and Equity. Debt is a
promise to pay back with interest, whereas equity is complete or partial ownership of the company.
9. New assets and securities are sold in primary market.
10. In secondary markets, investors trade among themselves.
11. The three main types of analyses are Fundamental Analysis, Technical Analysis and Quantitative
Analysis.
12. Bid price is the highest a buyer is ready to pay, whereas ask price is the lowest a seller is willing
to accept.
13. Bid-ask Spread or Spread is the difference between bid and ask price.
14. Volume is NOT truly a part of quotations. Quotations typically include the symbol, the uptick and
downtick arrows, last traded price, Change in price during the session, Bid-ask prices, Time of data
update and price range.
15. Govt. bonds pay interest, stocks pay dividends, whereas real estate pays rent as additional
payment besides the change in price. Commodities do not pay these extra payments.
16. Returns without any adjustments are termed nominal returns.
17. Commodities have transportation and storage expenses whereas real estate has maintenance
expenses.
18. Returns are reduced due to costs and expenses. Taxes also reduce the returns.
19. Market risk is the risk involved when the markets go opposite to the anticipated direction.
20. Liquidity risk is when it is not easy to find buyers at the expected price for an asset. For example,
10 year treasury note has more buyers than 10 year corporate note. The later has higher liquidity risk.
21. Risks outside the markets are- Economic Risk, Political Risk, Policy Risk, Currency Risk, Credit
Risk, Business Risk.
22. Companies that are the most exposed to economic risks are termed as cyclicals.
23. Monetary policy is decided by FED and affects the amount of funds available. Typically,
alteration of interest rates is carried out in Monetary Policy. Monetary easing/tightening is covered
under monetary policy.
24. Fiscal policy decides the tax rates and government spending.
25. Currency risk affects international trades due to the change in price relation between the two
currencies.
26. Credit rating agencies assess the risk that goes with debt.
27. It is difficult to determine the exact relative value in real estate as the units are seldom identical
and do not change hands frequently.
28. Less the borrower needs money, more secure is the debt paid to him.
29. Exchange rates not including the US dollar are often termed as cross rates
30.Declining currency of a country makes goods or services exported from that country cheaper for
others.
31. Fixing of exchange rate to a stable currency allows an economy to bounce from years of
contraction.
32. Currency of a country may be linked to a single currency, or to a basket of currencies or may be
free floating.
33. Central banks intervene to maintain the value of their currency within limits.
34. Governments affect the value of their currency by three means. Pegging, buying and selling foreign
currency or officially devaluing their own currency.
35. Bank deposits have low market risk and low liquidity risk.
36. Federal Fund Rate is the interest rate in banks for overnight loans.
37. Inflation risk exists when the money is in the form of cash, bank deposit or in bonds.
38. In hyperinflation, the value of currency reduces very fast, till it is finally redundant.
39. Treasury bills are securities that the government sells to borrow funds for durations less than a
year.
40. Treasury bills are treated same was as paper currency.
41. Some banks and security firms have to bid at every auction of bills sold by the government. These
are termed as primary dealers.
42. An interest rate of 1 basis point means 0.01 % interest rate.
43. The least risk is involved in US government bills.
44. The difference between the rate offered by less secure body on deposits and that offered by US
government on bills is termed as Rate Spread. Rate spread is typically expressed in basis points.
45. By note and bond selling, the government pays to investor. This payment is termed as yield.
46. Lower yield commercial paper (Bonds or notes) has higher price.
47. Yield is projected annual return on a bond based on current price and future interest payment.
48. Foreign central banks are indirect bidders for bonds and have to go through primary bidders.
49. Bid to cover ratio is an indicator for demand for government bonds.
50. Offer size for bond sale (in dollars) multiplied by bid to cover ratio gives the total sum investors
are willing to commit for that sale of bonds. Ratio higher than unity indicate there is more interest in
the minds of investors than the number of bonds government is offering.
51. Treasury Inflation Protected Securities (TIPS) are the bonds for which the principal is adjusted as
per the inflation. TIPS are a form of inflation indexed debt.
52. Most of the treasury borrowing is through fixed rate debt.
53. Quotes on TIPS show the real yield and not the nominal yield.
54. Downward sloping treasury yield curve is termed as an inverted yield curve. It typically indicates
slowing economic growth.
55. If short term (2 year) and longer term (10 year) yields are the same, we get flattened yield curve.
If shorter term yield is more, we get inverted yield curve.
56. When yield on short term paper is greater than yield on long term paper, the spread is said to be
negative.
57. Treasury bill returns come only from the price change, whereas treasury notes and bond returns
come from price change as well as the interest paid.
Companies
58. Companies can generate funds in more ways than the government.
59. Selling of corporate bonds, corporate notes, corporate bills and equity are methods to generate
funds for companies.
60. The risk in company bonds, notes, bills is more than that of the government.
61. Companies cannot force others to buy these. Companies cannot print money.
62. Companies have risk of going bankrupt. In spite of this, they have to attract funds overcoming
government competition.
63. Banks can borrow funds from each other at an interest. This way, the banks having low cash can
still have access to funds, whereas the banks having surplus cash earn interest on it.
64. Similar to Government issuing Treasury Bills, Commercial Paper (CP in short) is issued by
companies.
65. Credit risk is considered small when the credit rating of the borrower is at least BBB- by S&P
and Finch, or Baa3 by Moody’s.
66. High Yield bonds are often called junk bonds, as the rating of companies issuing them is often
lower than BBB- by S&P or Finch or lower than Baa3 by Moody’s. Junk bonds are also called non-
investment grade bonds.
67. Bonds issued by companies with very good credit ratings are termed as investment grade
securities.
68. Debentures are notes and bonds without any collateral other than a company’s full faith and credit.
69. Debentures are also termed as unsecured loans.
70. Notes and bonds issued by companies have some collateral to back them.
71. Corporate notes and bonds can be traded in the secondary market, but this happens on a very
small scale.
72. Bond’s annual interest rate is also called coupon rate.
73. Money can be made through Corporate Notes and Corporate Bonds in two ways. a. through
interest earned (fixed) and b. by market price increase.
74. Sometimes companies also sell floating interest rate notes and bonds. In these, the interest rate is
not fixed but is linked to some market rate. This is more common with companies for which the
balance sheet is closely related to interest rates.
75. Inflation related corporate bonds are also sold by some companies.
76. Corporate bonds may have options linked to them. Callable bonds- Company has option to buy
them back before maturity. Putable bonds- investors can sell them back to company before maturity.
Convertible bonds- Investors can swap debt for equity.
77. Sell of shares permits companies to raise funds that they do not have to repay.
78. Stock holders can make money through dividends as well as by market price increase.
79. Companies may be cyclical or defensive. Cyclical include commodity, energy, technology,
industrial, media, retailers, automobiles, home builders, etc. Defensive include health care,
telephone, utility, food and beverages, consumer staples. Consumer companies are in both.
77. Stocks are classified into growth stocks and value stocks. They are also classified based on their
market capitalization, or based one industry in which the company functions.
78. Physical gold is also called bullion.
79. Primary market for gold is only when the mining company sells it to customers.
80. Spot as well as futures trading in gold takes place only in the secondary market.
81. Over the counter buying and selling takes place in the spot markets.
82. Gold, silver, platinum and palladium are treated as precious metals preferred for investments.
83. Commodities are classified into five categories. Precious metals, base metals, energy, agricultural
products and livestock.
84. Moody’s REAL index is based on real estate.
85. S & P Case-Shiller index is also related to real estate sales.
86. Real estate is classified into three classes. Commercial, residential and land.
87. Cap Rate in real estate indicates the annual returns an investor may get on a property.
88. Cap rate depends on income through rentals as well as expenses towards maintenance and repair
costs.
89. A trade weighted index compares the value of a currency against others.
90. Indexes can track price changes including dividends, interest returns etc.
91. Bond benchmark indices indicate returns, whereas stock market indices indicate price change.
92. Dow Jones Industrial Average and S&P 500 cover the entire industry in USA. Nasdaq composite
is industry specific. Russel 2000 focuses on small cap companies.
93. Dow Jones Industrial Average is a price weighted index, S&P 500 is a float weighted, whereas
NASDAQ is a market capital weighted index.
94. The number of shares that are available for trading is called the float.
95. The most widely followed stock market indicators are price based indicators.
96. Futures roll over means the traders close the contracts for shorter duration (usually near month)
and open identical position in the contracts for same underlying for another month of longer duration.
97. Physical Commodities involve storage and maintenance costs, which are not incurred in futures
contracts on commodities.
98. Price of gold depends on demand from jewellery makers, electronics equipment producers and
investors.
99. Precious metal investors do not get interest or dividend on the invested amount. Their earnings
are solely restricted to price increase of the commodity.
100. During the times of economic, financial and political instability, the funds are invariably
diverted into gold and investments in gold always go up in such times.
Chapter 21,22- Statistics
1. The accuracy decreases or standard deviation increases if the quantity of data is small, if it is
incompetent or if only representative set of data is available.
2. Large standard deviation indicates extremely scattered data points.
3. Higher the standard deviation, lower will be possibility of finding an average which will represent
it.
4. Sample error = 1/Square root N, ….where N is the number of data points in the set.
5. Geometric Mean G = (a1 . a2 . a3 . a4 …. . an)1/n.

6. Quadratic Mean =
7. Harmonic mean is given by -

It may also be written as-

8. Arithmetic mean is obtained by adding the data points together, and dividing the sum by the number
of data points.
9. Median is the middle value of a set of data. Should there be two numbers that appear at the middle
of a set of data points, then arithmetic mean of these two numbers is the median for the set. Median is
the most useful when the central value of an incomplete set is to be determined.
10. Mode is the most common value (or the data that appears maximum number of times) in the given
set.
11. When the data is distributed more towards one side of the mean, it is said to be skewed.
Skewness is given by-
Skewness = (Mean - Median)/Standard deviation.
12. Peakedness of the clustered data is called as Kurtosis. If the distribution curve is flattish, it is said
to have negative kurtosis and if it is taller, it is positive kurtosis.
13. Standard deviation does not work with skewed data, so frequency distribution is important.
14. When future data can be predicted using past data, the relation is termed as auto-correlation or
serial correlation.
15. Trends can exist in systems where there is auto-correlation.
16. t-statistic or t-test is used for the measurement of closeness of a small set of data to the normal
data.
17. Beta is the relationship of a stock or an index to another index or portfolio.
18. Beta () equal to 0 means there is no correlation between the stock and the market. > 1 means
the stock is more volatile than the market. between zero and 1 means the stock is less volatile than
the market. = 1 means the stock is as volatile as the market.
19. Beta ( is found by calculating the linear regression of a stock or a market with the index.
20. Sharpe Ratio is given by equation-

Sharpe Ratio = .
It is used for determining the performance of a portfolio.

21. Treynor Ratio = .

22. Price is where demand and supply balance each other at a particular time.
23. The relationship between demand and price is linked to elasticity of demand. Elasticity of
demand is defined as the ratio of relative change in demand to relative change in price.
24. The relationship between supply and price is linked to elasticity of supply. Elasticity of supply is
defined as the ratio of relative change in supply to relative change in price.
25. Linear regression is a method which helps to fit a straight line into a series of numbers. The slope
of the line gives the on-going trend in the markets.
Chapter 23,24 - Aronson
1. Objective methods are thoroughly back tested.
2. The rules of objective methods are clearly defined.
3. Subjective methods are not crystal clear and leave a lot of space to individual interpretations.
4. All objective methods can be implemented as a computer programme.
5. For objective rules, the signal cannot be conflicting or ambiguous.
6. Detrending may be done by taking the difference or ratio for a time series.
7. When a series is detrended, it remains oscillating within a well defined range.
Chapter 25,26- Ned Davis
1. Market gurus also do not know where the market is actually headed.
2. All the predictions about the future direction of the markets are vulnerable to uncertainties.
3. Ego of a trader costs him the most. (Responsible for increasing his losses)
4. Ned Davis advises using timing models instead of following market Gurus.
5. Timing models give many small profits instead of few large profits and they also increase the
success rate.
6. The important trading strategies of stock market millionaires include-a. Objective methods of
picking stocks, b. Disciplined methods that limits risk and c. Flexibility when necessary.
7. Ned Davis gives four major keys to making money- a. Objectivity, b. Discipline, c. Flexibility and
d. Risk management. Others also add Humility and Integrity to this list.
8. Seven Insights form John Bogle- a. Balancing returns and risk is not easy, b. Predictions have high
level of errors, c. Never act on impulse, d. There is no Good portfolio should give good returns over
the long term, e. Investing requires discipline, steadfastness, patience and common sense, f. One
should ignore the crowd and be patient. g. There is no secret to investing.
9. All make mistakes, but for winners, the mistakes are small whereas for losers the mistakes are big.
10. Survival in the market is the most important job for a trader.
11. Allow criticism about you to improve you, but don’t take it so seriously that it would hurt you.
12. Newsletter named ‘The Chartist’ gives four major negative traits – a. Not taking the losses in
time, b. Being too much optimistic near the tops and too much worried near the bottoms, c. Failing to
take responsibility d. Not following the discipline.
13. Crowd psychology and liquidity are inversely related.
14. People often create their own realities.
15. Ned Davis gives important rules- a. Do not go against the trend, b. Do not act against Fed action,
c. Be careful about crowd actions at the extremes.
16. A top in the market is the place where we find maximum optimism and a bottom is where we
find extreme pessimism.
17. At the points of extreme optimism, there is little liquidity.
18. Nine rules given by Ned Davis- a. Don’t go against the tape, b. Don’t go against the Fed, c.
Beware of action of crowds at the extreme points, d. Use objective indicators, e. Maintain discipline
while trading, f. Manage risk, g. Be flexible, h. Manage money, i. Study history to avoid mistakes.
19. Success of a model depends on the data. See that the data is obtained fast and is error free. It
should be updated regularly.
20. Indicators are internal and external. The Internal indicators are based on the market itself, e.g.
price trend, momentum and breadth. External indicators are not the part of the markets but impact the
markets nevertheless. E.g. Interest rates.
21. Other external indicators include sentiment, money supply (availability or liquidity), etc. Interest
rates and availability of funds are also termed as monetary indicators.
22. Fed lowers the interest rates when the economy is in trouble and liquidity is low. The interest
rates can be raised when inflation is to be controlled and there is more liquidity in the system.
23. GDP and CPI can be classified as economic indicators.
24. In many cases, good economic growth is bad for bonds and stocks.
25. Moving averages are internal indicators. Their crossings and slope can be used for judging the
direction of the markets.
26. It is also an internal indicator. To calculate momentum take the ratio of today’s price to that of the
price ‘n’ days ago and subtract 1 from the ratio. If the result is positive, the trend is up and if it is
negative, the trend is down.
27. Different indicators can be combined to give a single composite reading. This is the basis of your
trading model.
Chapter 27-34 - Elder
1. A Bull bets on a rally whereas a Bear bets on a decline in prices.
2. Traders are of three types, buyers, sellers and undecided.
3. Ask is the price demanded by the seller, whereas bid is the price the buyer is willing to pay. The
price difference between these two is termed as the Bid-Ask Spread.
4. Undecided players put pressure on the buyers to pay the higher price than they are willing to pay,
as well as sellers to sell at the prices lower than they expect.
5. Price is defined as the momentary consensus of all market participants.
6. When the masses are greedy, the prices shoot up. When the masses are fearful, the prices are on a
decline.
7. Chart patterns express how the mass psychology swings in the markets.
8. You have to keep paying for slippages every time you execute an order.
9. New York Stock Exchange was formed in 1792 under a cottonwood tree.
10. A successful trader must think independently. He should analyse the market alone and take trading
decisions on his own.
11. Money enters the market, because somebody else has tried to gain it by risking his capital.
12. The only category, who as a group has been successful in making profits consistently is the
insiders in companies.
13. Charts represent price changes due to the action of all market participants including insiders.
14. Most of the people trade partly due to rational and partly due to irrational reasons. Rational
reasons are desire to earn money. Irrational reasons include willingness to gamble or for thrills.
15. Institutional traders have large amount of funds as well as low slippages. They also have better
access to information. Some of them are exempt from speculative position limits.
16. Private traders often overtrade and lose money due to that. They should refrain from trading in the
periods of uncertainty (which is their advantage over institutional traders. Institutional traders have
to compulsorily trade).
17. There are three types of toolboxes, Black, white and grey. Black are pre-programmed and offer no
flexibility. White are programmable and provide a wide array of tools from which the trader can
choose those of his choice. Grey boxes offer limited modifications in otherwise pre-programmed tool
box.
18. Track records of most of the advisors are poor.
19. People joining trading groups show primitive thinking. Human nature makes people give up their
independence under stress. One should trade independently.
20. Trading strategies should be kept simple. They should be written down and followed to the word.
21. If you are taking decisions on the spur of the moment, then you are more prone to follow the
crowd.
22.Instead of forecasting the market directions, one should manage his positions. The risk should be
kept under control.
23. Technical analysis is actually a study of mass psychology. One should read the market but manage
his own actions.
24. To be successful, a. change according to the power of bulls and bears, b. Have a good money
management plan and c. Be disciplined.
Chapter 35-38 (Elder)
1. The stocks that make a new yearly high on a particular day are leaders in strength, whereas those
which make a yearly low on the same day are leaders in weakness.
2. New high/new low (NH-NL) index can be obtained from the difference between NH and NL.
3. New High – New Low indicator may be regarded as the best leading indicator.
4. When NH - NL, the difference is zero. When NH>NL, the index is positive and when NH<NL, the
index is negative.
5. It is plotted as a continuous line, with zero as a reference.
6. Three important aspects about NH-NL are- a. whether it is positive or negative b. Slope of the line
c. Divergences if any.
7. If NH-NL is below centreline for a few months, and then moves above zero, it indicates that the
bottom is in place and a bull charge may take place. One should buy at this level. Opposite is true for
selling.
8. When NH-NL rallies with the market, uptrend is confirmed and vice versa.
9. Divergence between NH-NL and the market indicates that the trend is likely to change and one
should book profit in existing positions.
10. NH-NL indicator may also be plotted for stocks making weekly high or lows
11. It may also be plotted for monthly or quarterly high – lows.
Stocks above 50 day moving average
1. It tracks the % of stocks trading above 50 days moving average.
2. It oscillated between 0-100.
3. Those trading above are under the bull control and those below are under bear control.
4. Greed lasts longer than fear. So, the tops are broader but bottoms are sharper.
5. The indicator does not give very accurate results and cannot differentiate between short term
corrections and major reversals.
Other stock market indicators
1. Advance - Decline line is related to participation of majority of people during up moves and
declines.
2. Each day the number of stocks that closer higher is added and those closing lower is subtracted
from the previous day’s value.
3. The Most Active Stocks Indicator (MAS) is actually an advance-decline indicator of the 15 most
active stocks on New York Stock Exchange.
4. All indicators cannot be used always due to changes in the markets. Some of them which were used
earlier have become redundant today.
Consensus and Commitment Indicators
1. High degree of bullish or bearish consensus among market journalists indicates that the current
trend is about to get over soon.
2. When there is no conflict between the bulls and the bears, the trend soon dies off.
3. Advisors as a group do not perform any better than the crowd.
4. Buying opportunity arises when majority of advisors are bearish.
5. Financial journalists try to give a balanced and vague picture of the current market direction. When
their articles start talking about a single direction, the trend is ripe and may change soon.
6. Financial magazines are good contrary indicators of future direction of the markets.
7. Position limit is the number of contracts a speculator is allowed to hold at a time in a market.
8. Position limits prevent large speculators from bullying the markets.
9. The three groups of market participants are hedgers (Commercials), large speculators and small
speculators.
10. Hedgers do not have speculative position limits.
11. Open interest = positions of large speculators + positions of hedgers + positions of small
speculators.
12. Hedgers (Commercials) can legally speculate in futures markets using inside information.
13. If a person holds more than 5 % of the stock, any buying or selling has to be reported to the SEC.
14. Insider buying is typically observed after a huge fall, and insider selling when the market rallies
to a high.
15. More than three insiders buying or selling within a month in the same company is significant about
that share.
16. Short per cent of float is typically one to two per cent of total publicly held shares free for
trading.
17. Higher short per cent indicates high degree of bearishness about the stock.
18. Day to cover indicates the duration required for covering shorts under normal conditions and is
typically one-two days. This is a theoretical duration, but very long time to cover also indicates
excessive bearishness.
19. ‘Bid’ is the price the buyer is ready to offer whereas ‘Ask’ is the price the seller is demanding.
The difference between the two is termed as the ‘Bid-Ask Spread’.
20. Price is decided by the actions of all three, buyers, sellers and undecided people.
21. When the strength of the bulls and the bears is nearly same, an intelligent trader stays away from
the markets.
22. The New York Stock Exchange was formed in 1792, as a club of traders under a cottonwood tree.
On rainy days, they used to move in Fraunce’s Tavern, which was nearby.
23. A successful trader must take his trading decisions individually, without influence of others.
24. Crowds are powerful, but not very intelligent.
25. One can make money in the markets only because someone else is losing it. Good company
results, favourable economic environment, low interest rates do not put money in the markets.
26. In the stock markets, insiders in the companies make consistent profits if treated as a group.
27. Insiders more commonly make money by passing the inside information to others. This makes
complete elimination of insider trading impossible.
28. Insider trading also gets reflected in the charts.
29. Rational reason for trading is desire to earn money.
30. Irrational reasons for trading include thrills, urge for gambling, getting excitement.
31. People trade for both, rational as well as irrational reasons.
32. Firms dealing in cash as well as futures markets have major advantages such as getting factual
inside information and exemption from speculative position limits.
33. Most of the trading firms are involved in hedging as well as speculating.
34. Employees in a trading firm make money more easily as their own money is not at risk when they
are trading. This gives them a psychological advantage over one who is putting his own money in
trading.
35. Individual trader can afford to remain inactive in the turbulent markets. This is the advantage of
individual trader over institutional traders.
36. Private traders tend to overtrade, and lose the advantage of being inactive at times.
37. Toolboxes allow trader to take trading decisions. However, depending on their type, they are
more or less receptive to modifications from the trader. White box is completely receptive to changes
in parameters, grey box allows only some changes, whereas black box cannot be changed.
Chapter 39-40 – Gorman
1. Prices move in wave patterns. A typical wave has five waves in the up trend and three in the
corrective trend. Collectively it is called as a cycle.
2. In a cycle, there is one main trend and one secondary trend. Main trend is made up of five waves,
1,2,3,4 and 5. Out of these, waves 1,3 and 5 are in the direction of the main trend. They are termed as
motive waves. Waves 2 and 4 are opposite to the main trend. They are termed as corrective waves. In
the secondary trend, the direction is opposite to that of the main trend. The secondary trend is made
up of three waves, a, b and c. Waves a and c are in the direction of the secondary trend, whereas
wave b is opposite to it. Total 8 waves make one complete cycle.
3. Wave 3 is never the smallest wave out of 1,3 and 5.
4. Wave 4 cannot superimpose with wave 1 in the most basic pattern.
5. Wave 2 cannot retrace wave 1 completely.
6. A typical impulse wave will show 5-3-5-3-5 type of pattern.
7. Sometimes, we get an elongated impulse wave which has 9 waves instead of usual 5. This is
termed as extended wave. If wave 1 is extended, wave 3 and 5 are usually of identical length. In a
double extension, waves 3 and 5 get extended.
8. In a bull market, there will be 5 upward waves and 3 corrective waves, whereas in a bear market,
5 waves will be downwards and 3 upwards.
9. Sometimes wave 5 fails to reach the line joining the tops of 1 and 3. This is termed as fifth wave
truncation. Bull market truncation often ends in a diagonal.
10. A typical diagonal shows 3-3-3-3-3 type of wave structure.
11. In a leading diagonal, waves 2 n 4 are always zigzag (5-3-5). Diagonals can be of different types
and have different wave structures.
12. A triangle is a A-B-C-D-E type wave pattern.
13. Flat is another type of correction and can have different wave structure.
14. Fibonacci ratios are often used for projecting the price targets for waves. Ideal Fibonacci ratio is
0.618 or 61.8 %. When considered as a correction it reaches 38.2 % of the initial price move.
However, there may be multiple Fibonacci levels for a correction. When many Fibonacci levels are
placed in a close proximity, it is termed as a cluster.
Chapter 41-45, Burton and Shah
1. According to the semi strong definition of Efficient Market Hypothesis (EMH), the stock prices
accurately reflect all publically available information.
2. According to EMH, no stock is cheap or expensive (overpriced).
3. According to weak form of EMH, knowledge about past values of stocks has no impact on the
future prices.
4. The semi strong definition of EMH is criticised as- a. Volatility of stocks cannot justify EMH. b.
Predictability in direction of stock price is against EMH. c. Anomalies in stock prices do exit, which
is not possible according to EMH.
Chapter 46-50, Bulkowski
1. Flags and pennants have a lot of similarities between them. Both indicate a quick move, from a few
days up to 3 weeks, and are found at the middle of the move. Flags are bound by two almost parallel
lines, whereas pennants are bound by two converging lines. Success rate is over 60 % in reaching the
targets for flags and about 55% for pennants. Formation is usually with receding volumes.
2. Head and shoulder bottom has three troughs with the middle trough deeper than the other two. The
period of formation may be up to three months. Success rate is over 80 %. Volume is high on the left
shoulder, less for the head and least for the right shoulder. Volume increases on the breakout. Left and
right shoulders are nearly symmetrical. Neckline is the line joining the joints of two shoulders. Too
steep necklines should not be followed. Low volume breakout is likely to fail. Even after a breakout
with good volumes, half the formations show throwbacks. Minimum price target is same as the head
height from the point of breakout.
Important observations in HNS bottom (and top):
2.a. Three valleys for HNS Bottom with central valley below the remaining two. Similarly, HNS top
shows three peaks with central peak above the other two.
2. b. Shoulders should be nearly symmetrical and equidistant from the head.
2. c. The line joining the tops (Valley for HNS Tops) between the shoulder and the head should have
nearly the same value. (This is not obeyed in all cases, especially if the neckline is slanting).
2. d. Usually the volume decreases from left to right.
3. Head and shoulder top has three crests with the middle crest taller than the other two. The period
of formation may be up to three months. Success rate is over 80 %. Volume is high on the left
shoulder, less for the head and least for the right shoulder. Ideally, the volume increases on the
breakout. Left and right shoulders are nearly symmetrical. Neckline is the line joining the joints of
two shoulders. Too steep necklines should not be followed. Low volume breakout is likely to fail.
Even after a breakout with good volumes, half the formations show throwbacks. Minimum price target
is same as the head height from the point of breakout.(Most of the points are similar to HNS bottom,
however, increased volume at the breakout point is less important in HNS top).
4.a. Ascending Triangle: Bullish. Resistance line horizontal, support line ascending. Takes about 3
months to form. Success rate ~ 68 %. Throwbacks are seen in most of the cases. Breakout distance to
apex is about two third (63%). Most likely rise 20 %. Volume decreases from left to right, but
increases on breakout.
4.b. Descending Triangle: Bearish. Resistance line sloping down, support line horizontal. Takes about
3 months to form. Success rate ~ 55 %. Pullbacks are seen in most of the cases. Breakout distance to
apex is about two third (69%). Most likely decline between 10-20 %. Volume decreases from left to
right, but increases on breakout.
4.c. Symmetrical Triangle- Bearish Continuation: Also called Coil or Spring. Initial trend is down,
forms symmetrical triangle for about three months, breakout is downward. Both trendlines are sloping
(converging). Very good success rate. Pullbacks very common.
4.d. Symmetrical Triangle - Bullish Reversal: Also called Coil or Spring. Initial trend is down.
Forms symmetrical triangle for about three months. Breakout is upwards. Volume has to be high on
breakout. Both the trendlines are converging. Success rate high
4.e. Symmetrical Triangle- Bearish Reversal: Also called Coil or Spring. Initial trend is up. Forms
symmetrical triangle for about three months. Breakout is downwards. Volume has to be decreasing
during formation but high on breakout. Both the trendlines are converging. Success rate high.
4.f. Symmetrical Triangle - Bullish Continuation- Also called Coil or Spring. Initial trend is up,
forms symmetrical triangle for about three months, breakout is upward. Both trendlines are sloping
(converging). Very good success rate. Throwbacks are very common.
Chapter 51,52- Volatility Index (VIX)
1. VIX is an indicator of implied volatility in the markets. In options market, options are traded at
option premium. This option premium is used for the calculation of volatility. VIX was first
developed by Brenner and Galai in 1986. VIX, the volatility index, is always given as percentage and
indicates the approximate movement in the index in coming days, typically over a 30 day period.
2. Statistically speaking VIX is a square root of par variance swap rate over a 30 day period for an
index. In USA, VIX is typically calculated for S&P 500. It is often quoted as annualised standard
deviation. It is a weighted index.
3. If the value of VIX is 18, it means there is 68% probability that the index may be less than or equal
to 18 % up or down within a year.
4. Black Scholes model preferred for calculating option premium is widely applied for the
calculation and application of VIX.
5. Implied Volatility is the theoretical value formulated in order to represent the volatility of an
underlying option, and is determined from the traded price of that option.
6. Volatility cannot be directly measured. It is calculated theoretically from the actual price of option.
The Black-Scholes model gives a mathematical equation to calculate price of an option. Using this
equation, and the actual price of option being traded, the volatility can be calculated.
7. Option price depends on the price of the underlying as well as the strike price. For the same
underlying, we find different implied volatilities for different strike prices. Usually, the volatility that
is published is for At The Money (ATM) options. (When the strike price is almost the same or very
close to the current market price, the option is said to be ATM option).
Chapter 53- Kaufmann- Seasonality
1. Seasonality is a cycle that occurs annually.
2. The interchangability of the product is called fungibility.
3. Seasonal patterns are usually determined using the monthly data.
4. For determining the seasonality, the data has to be first detrended.
5. Cycles - Lows on price chart are approximately placed after a certain time period. The price
movement between consecutive lows is termed as a cycle. Depending on time frames, different cycles
appear in the markets.
a. 28 day cycle also called trading cycle or 20 day cycle. It has about 20 trading sessions, or 28
calendar days hence the name. Typically, the first 10 days the market is expected to move up, and the
later 10 days it is expected to move down. In reality, this is seldom followed, though the lows are
frequently seen 16-22 days apart from each other.
b. 4 year cycle (Kitchin cycle or presidential cycle): Kitchin cycle is said to be 40 months, but is
usually observed almost 4 years apart as an average. In reality the cyclical lows are seen between
40-53 months. As the year of lows matches with the first year of working in US president, it is also
termed as the presidential cycle.
c. 9.2 year cycle (Also called the Juglar Cycle or 10 year cycle): As the name suggests, cyclical lows
are between 9-10 years apart from each other.
d. 54 year cycle (Kondratiff Wave or Life Cycle).
Chapter 54- Levy

Already covered with VIX (Chapter 51, 52).

Practice Questions
1. New High - New Low index is negative when –
a. NH=NL
b. NH>NL
c. NH≤ NL
d. NH<NL
2. Which of the following statements about NH-NL line is INCORRECT?
a. It is the difference between the number of stocks making new high to those making new lows on a
trading day
b. It is a leading indicator
c. It is plotted as a continuous line
d. It is overbought above 80 and oversold below 20.
3. Which of the following are NOT shown by NH-NL line?
a. Divergence
b. Overbought and oversold levels.
c. Slope
d. Positive as well as negative values.
4. Dow Jones Industrial Average (DJIA) is composed of price movement of 50 stocks. It was
observed that 33 stocks were trading above their 50 days moving average, 13 were trading below the
50 day moving average whereas 4 were along the 50 day moving average. 50 days moving average
line is sloping up. What can you conclude about DJIA?
a. It is in the control of bulls and is likely to move higher.
b. It will depend on the actual angle of slope of the 50 day moving average line. Nothing can be said
with given information.
c. As an average, two third of the stocks are always above 50 days moving average, so there is
nothing unusual with this observation.
d. It is overbought and one should book profit in the long positions. .
5. When the stock market direction is to be determined, 60 % stocks have closed above their 50 day
moving average, whereas 35 % have closed below. 5 % are just along the line. Which stocks are
better candidates for short selling?
a. Those closing above the line
b. Those closing below the line.
c. Those closing along the line.
d. Those closing along the line but were recently above the line.
6. NH-NL indicator is NOT plotted for-
a. Monthly data
b. Weekly data
c. Daily data
d. Hourly data
7. Which of the following statements about indicators is CORRECT?
a. All indicators can be used in all types of markets in all time frames.
b. Indicators are market specific. One type of indicators cannot be used in other type of markets.
c. Some indicators which were useful once cannot be used now and have become redundant.
d. Indicators cannot be used for generating signals. They can only support the candlestick charts.
8. When the investment related articles from experts are clearly bearish,
a. The market is about to top out.
b. the market is about to bottom out.
c. Market has topped out already and it is time to liquidate long positions if held still.
d. Market has bottomed out already and has started rising.
9. The number of contracts a speculator is permitted to hold at a given time in the markets is termed
as-
a. Open interest
b. Speculator trading limit
c. Margin
d. Position limit
10. To prevent the large speculators from bullying the markets, _____ have been introduced.
a. Leveraged positions.
b. Position limits.
c. Open interest limits
d. Circuit breakers
11. Which of the following DOES NOT have a trader involved in selling?
a. Primary Market
b. Secondary market
c. Options Market
d. Futures Market
12. In stock markets, the only group making successive profits is-
a. Large institutions.
b. Small speculators
c. Company Insiders
d. Derivatives traders
13. What is the greatest advantage a small trader has over large institutions?
a. Access to inside information.
b. Receiving data faster
c. Periods of inactivity
d. Faster response time
14. Marie wants to sell shares of Uxbridge International. The price at which she places the order is
termed as-
a. Bid
b. Ask
c. Spread
d. Supply
15. What happens when the bid-ask spread becomes zero?
a. Execution of a buy order
b. Execution of a sell order
c. A tick appears on the chart
d. Any one of the above takes place.
16. A professional trader-
a. Takes position in wild times and exits as it quietens
b. Takes position in wild times and exits before is quietens
c. Enters in quiet time and exits when in becomes wild
d. Enters and exits only when the market is quiet.
17. When you make money trading shares, it is provided by-
a. A loser who makes a wrong trade
b. Partly by loser and partly by earnings of the company
c. Entirely due to improved earnings of the company
d. Partly by loser, partially by earnings, and partially by other factors affecting the price.
18. Which of the following are the reasons behind trading in markets? i. Good returns on investment
ii. Gambling iii. Excitement
a. i
b. i and ii
c. i, ii, and iii
d. i and iii
19. ________ is/are the main leader of the market crowds.
a. Price of a security
b. Large Institutional Investors
c. Momentum of the underlying
d. Large number of market players who are trading on an impulse.
20. Which is the weakest part of a trading system?
a. The trader
b. The system
c. The oscillators
d. Price patterns
21. Which of the following statements is WRONG?
a. Prices go up when there are more buyers than sellers in the markets
b. Charts reflect the overall sentiment of market players during the course of time.
c. You should not exit the open position till the stop loss is actually triggered, even if you feel the
position is going against you.
d. A trade is not complete till the bid ask spread becomes zero.
22. Which of the following statements is wrong?
a. In futures markets, number of net buyers is always equal to the number of net sellers.
b. Stock stops falling when the bears become cautious and stop selling.
c. When the market rallies, bears are defensive
d. In all markets, bulls are ready to chase the rising price.
23. For stock markets to fall,
a. Ask must chase the bid
b. Bid must chase the ask
c. Either bid or ask should chase the other
d. Neither bid or ask should chase the other.
24. Which of the following statements is correct?
a. In a bull market, greed is stronger than the fear
b. In a bull market, fear is stronger than the greed.
c. Greed is always stronger than fear.
d. Fear is always stronger than greed.
25. Which of the following can be regarded as the most reliable signal?
a. A new high formed at the daily opening
b. A new low formed at the weekly opening
c. A new high formed at daily close
d. A new low formed at weekly close.
26. The maximum power of the bears is represented by-
a. Highest point of the bar
b. Close of the bearish bar
c. Low of the bar
d. Opening of bullish bar.
27. Why does a trader lose his objectivity while trading according to Prof. Elder?
a. Greed
b. Fear
c. Herd mentality
d. Following an expert
28. What is the main leader of market crowds?
a. Sentiment
b. Greed
c. Fear
d. Price
29. An elongated impulse wave whose motive subwave is showing a total of nine subwaves. This
type of wave is called-
a. Motive wave
b. Extension.
c. Double wave
d. Complex correction.
30. Wave 4 can enter the top of wave 1 if-
a. A motive wave is being formed.
b. A diagonal is being formed
c. A vicious bear market is taking place.
d. A sharper, complex correction is taking place.
31. Which of the following is NOT a basic corrective pattern according to Elliott Wave Theory?
a. Zig zag
b. Flat
c. Triangle
d. Diagonal
32. In a zig zag type corrective pattern,
a. Wave A and C are corrective and wave B is impulse.
b. Wave A and C are impulse and wave B is corrective.
c. Wave A, B and C all are corrective.
d. Out of A, B and C, any two are impulse and the third is corrective.
33. It was observed that wave A started at 27 and continued till 24. Wave B was completed at 28 and
wave C got completed at 23. How can this pattern be best described?
a. Expanding flat
b. Regular flat
c. Running flat
d. Leading diagonal.
34. How is the wave structure given in the diagram best described?

a. Contracting triangle
b. Zigzag
c. Running triangle
d. Running flat
35. According to Efficient Market Hypothesis, which of the following statements is WRONG?
a. Markets discount everything every fast.
b. There are no definite support or resistance levels.
c. There is no meaning to words like the market is oversold.
d. Previous resistance is not easy to break.
36. Which model is usually used by a noise player according to Burton and Shah?
a. Extrapolative Model
b. Efficient Market Hypothesis
c. Rotational Model
d. Perception Model
37. Abreu-Brunnermeier model focuses on-
a. Bubbles and their bursting
b. Efficient market hypothesis
c. Dividend movement projections.
d. Arbitrage and divergence
38. Venus saw the chart of Xeta technologies. The stock was between 25 and 32 for a period of six
months. She drew two horizontal lines at these two levels. Today, the stock is trading at 35. The
horizontal line at 32 represents_______ for the stock.
a. Resistance
b. Support
c. Either resistance or support
d. It cannot be correctly decided unless the further move of the stock is watched.
39. Ronney is studying the chart of ABC logistics. The stock is moving between 10.5 to 11.5 for the
last four months. This region can be best termed as-
a. Congestion Zone
b. Accumulation zone
c. Distribution Zone
d. Region of Consolidation
40. If we compare the strength of support and resistance on charts of different time frame,
a. Long term supports are weaker than short term supports.
b. Long term supports are stronger but resistances weaker.
c. Both long and short term supports and resistances are equally strong
d. Both support and resistance on long term charts are stronger than short term charts.
41. Moin found that LMN Computers had given a buy signal on 10 minute chart but sell signal on
hourly chart. End of the day charts are neutral. What action would be most appropriate in this
condition?
a. Buy the stock with a tight stop loss
b. Short sell the stock
c. Do not trade the stock
d. Buy the stock but keep the stop loss slightly more away.
42. Who gets the information first?
a. Street trader
b. Brokers
c. Stock market experts
d. Corporate insiders
43. What is the basic difference between professionals and amateurs?
a. Professionals satisfy irrational goals outside the markets, amateurs do it inside the market.
b. Professionals have all inside information, amateurs do not.
c. Professionals have years of experience. Amateurs do not.
d. Professionals use sophisticated software, amateurs rarely do.
44. Which of the following is NOT related to Fibonacci ratio phi ()?
a. 0.618
b. 1.618
c. 0.500
d. 2.618
45. Which techniques should the investors adopt while taking decisions?
a. Which are recommended by gurus of financial forecasting
b. Which are proven as reliable tools in the past
c. Which best suit their trading style and psyche
d. Instead of sticking to one set of tools, they should find the tools that are working in that market
scenario and act accordingly.
46. Which is the biggest flaw in his trading that does not allow him to make big profits?
a. Too slow response
b. Too fast response
c. Noise in the markets
d. Involvement of his ego in market views.
47. Which group of the following may be termed as the key to making money?
a. Objectivity, Analysis, Discipline and risk management
b. Objectivity, flexibility, discipline and risk management
c. Subjectivity, research, discipline and risk management
d. Studies, Discipline, risk control and non-leveraged positions.
48. Why are indicators used primarily in the analysis of a chart?
a. To manage the risk
b. To determine the entry point
c. To determine the stop loss
d. To determine the targets.
49. Price of money means-
a. How difficult it is to earn money.
b. Interest rates charged on borrowed money
c. Inflation that changes the purchasing power of money
d. Purchasing power itself.
50. Three things should never be neglected in the market. Which one of the below four DOES NOT fit
in this list?
a. Ticker Tape
b. Federal Reserve
c. Crowd at the extremes
d. Advice from market experts.
51. Which of the following statements about ‘rate of change’ indicator is correct?
a. It sensitivity is always fixed.
b. Its sensitivity increases with increase in time.
c. Its sensitivity is never constant but cannot be changed by changing time.
d. Its sensitivity increases with decrease in time.
52. Thomas found that the momentum of Spearhead Computers had suddenly increased. What can he
conclude?
a. The prices may decrease
b. The prices have already increased but may revert soon.
c. The prices have already increased but may continue rising.
d. As momentum often leads the prices, an upward move may soon follow.
53. The stock price of Kennedy Consultants is falling for last 30 days. Ronny observed that one
indicator was still rising continuously. Which of the following is h observing?
a. 10 day Moving average.
b. Relative strength
c. Relative strength index
d. Rate of change
54. Reuters CCI I a measure of-
a. Inflation
b. Deflation
c. Stagflation
d. Recession
55. Which of the following is termed as High Risk Debt?
a. Stocks
b. Bonds
c. Derivatives
d. Commodities
56. Sultan found that when Sabah Airlines stock went down by 15 %, Finex Industries stock went
down by 9 %. What action can be taken in this scenario considering he has to avoid huge risk?
a. Buy Sabah airlines and sell Finex industries.
b. Sell Sabah Airlines and buy Finex industries.
c. Buy both. They have fallen too much.
d. Short sell both the stocks, they are falling.
57. Which of the following is the best suited to decide whether a stock is underperforming a market or
not?
a. Relative strength
b. Relative strength index
c. Divergence studies
d. Moving averages
58. What is a mode?
a. Mean value from a set of observations
b. Average of middle values
c. Number than is repeated maximum number of times in a set of observations
d. Number left after removing highest and lowest values from a set of observations.
59. Which of the following statements is CORRECT?
a. Mode, mean and median of a set of numbers is usually same or very close.
b. Median is an integer if number of observations is odd, and it is a non-integer if number of
observations is even.
c. Mean and median are often closer to each other, but mode may or may not be close to these two.
d. Every set of data has to have a mean, a median and a mode.
60. Irfan is determining mean for the data 123.4, 125.7, 129.5, 122.8, 124.7, 133.5, 127.8, 129.5,
130.5, 128.7, 129.5, 132.8. What would be the correct mean?
a. 129.5.
b. 128.2.
c. 129.1.
d. 128.9.
61. When data points are scattered,
a. Standard deviation reduces
b. Accuracy increases
c. Standard deviation increases
d. Sensitivity increases
62. Quadratic mean is given by-

a. (a1 x a2 x a3 x a4 …. X an)1/n.

b.

c.
d. (Mean - Median)/Standard deviation.
63. When the data is skewed, frequency distribution gets importance because-
a. Skewed data is not usually obtained in a system.
b. Its processing becomes difficult without frequency distribution.
c. Standard deviation does not work with skewed data.
d. Kurtosis increases with skewed data
64. The ratio of relative change in supply to relative change in price is termed as-
a. Demand supply ratio
b. Demand conversion ratio
c. Relativity of price
d. Elasticity of supply
65. _______________ is also called the presidential cycle.
a. Kondratiff Cycle
b. Kitchin cycle
c. 28 day cycle
d. Juglar Cycle
66. Which of the following statements is NOT in accordance with the ethical standards adopted?
a. The interest of clients should be rated higher than that of the analyst.
b. During the analysis of a stock, an analyst should also give weightage to the views of other analysts.
c. One should encourage others to practice high standards of ethics.
d. One should strive to maintain and improve the competence.
67. Billy is an independent analyst and runs an advisory service. In his advisory service, he informs
his clients about the investment opportunities in stocks. He advised his clients to go long on
Ferrochem Inc. The position is still open and NONE of his clients have permitted him to disclose the
information. The stock rose by 20 % in a few days. In an article written in local newspaper, Billy
disclosed that he had recommended the stock to his clients and they are still holding it, with 20 %
profit. How can his action be described?
a. He has violated the code by disclosing the information.
b. There is no violation.
c. He has disclosed the information, which was not required by the law. His action is against the best
interest of his clients.
d. If the law of the land permits this type of disclosure, then there is no violation, else it will be
regarded as a violation.
68. VHS Finance, a broking house for trading securities offers an interesting package to their existing
clients. If the existing client bring new clients to VRS Finance, 10 % of the brokerage generated will
be paid to the existing client. Binny is an existing client of VHS, who is also a technical analyst. He
encourages his own circle of customers to open accounts with VHS. His view is to get that extra 10
% income. In the light of ethics, how is his action viewed?
a. His action puts self interest ahead of that of the customers.
b. His extra income is illegal and hence in violation of the code.
c. It is possible that his action may influence unnecessary trades for his clients in order to generate
extra brokerage.
d. There is no violation of ethics on his behalf as the clients would have traded anywhere else any
way.
69. According to Efficient Market Hypothesis, Prices accurately summarise_________
a. The sentiment about the stock in public
b. All the publicly and privately known information about the stock
c. All future expectations from the stock.
d. All the past information about the stock.
70. According to Markowitz analysis, when one investor is risk taking and other is risk averse,
a. First should be buying risky assets whereas later should not.
b. Both should not buy risky assets
c. Both should buy risky assets
d. First should buy less number of risky assets, whereas later should buy more.
71. For effective arbitrage strategies, what is the essential characteristic an asset should have?
a. Beta
b. Fungibility
c. Noise
d. Volatility
72. ADX has _______ number of lines indicating the overall direction in which a trade should be
taken.
a. 2
b. 3
c. 2 or 3
d. 4
73. The deviation of price of a security from the mean over a fized duration of time is measure in –
a. Chaikin Money Flow Index
b. McClellan Oscillator
c. Commodity Channel Index
d. Relative Strength index
74. McClellan Oscillator is-
a. Momentum indicator
b. Sentiment indicator
c. Market breadth indicator
d. Price volatility indicator
75. Jessy found that the volume shown by the indicator ‘On-balance Volume’ was negative. What can
she conclude from this observation?
a. The calculation of indicator is wrong. There cannot be negative volume.
b. When shares change hand, the volume is negative for the seller, so it is from seller’s account.
c. It indicates the bearishness in the underlying.
d. On-balance volume is always negative. Nothing can be concluded from this.
76. Roberta plots the ratio of number of stocks making 52 week high to number of stocks making 52
week low as an indicator. Which of the following statements would be correct about this indicator?
i. It indicates market momentum.
ii. It indicates market sentiment.
iii. It can be used as a contra indicator.
iv. It indicates market breadth.
Which of the above statements are CORRECT?
a. i. and iii.
b. ii and iii
c. i, ii, iii and iv
d. ii, iii and iv
77. Parabolic SAR is commonly used by the traders while determining the stop losses. Which of the
following is the correct statement about it?
a. It moves in the direction of price movement at every time interval.
b. It moves in the direction of price movement after every low or high is made.
c. It always remains below a higher low or above a lower high.
d. It always remains above a higher low or below the lower high.
78. Which of the following observations indicate a stronger bearish signal?
a. Peak above zero shown by Price ROC
b. Peak below zero shown by Price ROC
c. Low above zero shown by price ROC
d. Low below zero shown by price ROC.
79. Put call ratio is –
a. Market breadth indicator
b. Market momentum indicator
c. Market sentiment indicator
d. External Indicator for markets.
80. It was observed that Zircon Crystals stock was falling. However, its relative strength compared to
the index was higher. What can you conclude from this observation?
a. The stock is falling faster than the index.
b. The index is falling faster than the stock.
c. The stock may soon be overbought.
d. The index may soon be oversold.
81. In the calculation of relative strength index, price data for
a. A single stock is used.
b. Minimum two stocks or indices is required.
c. Maximum two stocks or indices is required.
d. Exactly two stocks or indices is required.
82. Andrew’s pitchfork DOES NOT give information about-
a. Support
b. Resistance
c. Trend
d. Target
83. Which of the following indicates short covering in futures market?
a. Price decreasing and open interest increasing.
b. Price decreasing and open interest decreasing.
c. Price increasing and open interest increasing.
d. Price increasing and open interest decreasing.
84. Zoya found that the futures price of Codex International was decreasing, and the open interest was
also decreasing. Which of the following is taking place in the stock?
a. Short covering
b. Short built up
c. Long built up
d. Profit booking
85. As Volatility Index (VIX) increases, the time value for the option premium for the same contract
for same number of days to expiry-
a. Becomes zero
b. Decreases but does not become zero
c. Increases
d. Remains unchanged
86. Which model is widely used for the calculations for option premiums as well as for volatility
index (VIX)?
a. Black-Scholes Model
b. Wilder Model
c. Atkin’s Model
d. Dow model
87. Which of the following statements about implied volatility is WRONG?
a. It cannot be directly measured.
b. It is a probability of future moves in the markets
c. Option premiums are dependent on volatility
d. It directly affects stock prices.
88. Identify the pattern marked in a circle in the following chart-

a. Inverted flag
b. Pennant
c. Ascending Triangle
d. Rectangle
89. Identify the type of pattern marked with a circle in the given chart-

a. Bullish continuation
b. Bullish reversal
c. Bearish continuation
d. Bearish reversal
90. In a typical head and shoulder formation, the highest volume is observed at-
a. On the left half of the left shoulder
b. On the right half of the head
c. On the right half of the right shoulder
d. At the joint between the head and right shoulder.
91. Which of the following statements about Head and Shoulder top is correct?
a. The volume remains constant throughout the formation.
b. Pullbacks are common after the breakout
c. The right shoulder is usually smaller than the left shoulder
d. The head has twice the width compared to the shoulders.
92. A typical head and shoulder formation requires about ____________ for formation.
a. Three days
b. Three weeks
c. Three months
d. Three years.
93. Which of the following is NOT a bullish continuation pattern?
a. Flag
b. Ascending triangle
c. Head and shoulder
d. Pennant
94. _________ is also called as a spring.
a. Flag
b. Head and shoulder
c. Ascending triangle
d. Symmetrical triangle
95. Which pattern do you observe from A to B in the chart given below?
a. Symmetrical triangle
b. Descending triangle
c. Ascending triangle
d. Head and shoulder top
96. How can the pattern formed between point A to C in chart given below be described?

a. Head and shoulder

b. Inverted Flag
c. Inverted Pennant
d. Double Bottom
97. Which of the following patterns shows price move between two parallel lines?
a. Head and shoulder
b. Symmetrical triangle
c. Ascending triangle
d. Flag
98. In an ascending triangle,
a. Support line is horizontal, but resistance line is slanting
b. Support line is slanting, but the resistance line is horizontal.
c. Both the lines are horizontal.
d. Both the lines are slanting.
99. In the chart given below, point A is at 370, B is at 290 and C is at 320. Assuming there is a break
down at point C, what would be the target for this formation?

a. 260
b. 270
c. 240
d. 200
100. Which of the following lines is Bullish Engulfing?

a. A
b. B
c. C
d. D
101. Typical borrowing by the government by selling bills is for the period-
a. Shorter than 1 year
b. 1-5 years
c. 1-10 years
d. longer than 10 years.
102. Typical borrowing by the government by selling notes is for the period-
a. Shorter than 1 year
b. 1-5 years
c. 1-10 years
d. longer than 10 years.
103. Which of the following is sold by the companies, but not by the government?
a. bills
b. bonds
c. notes
d. equity
104. Financial markets offer two choices for investment. These are-
a. Debt and Equity
b. Debt and Bonds
c. Equity and Commodity
d. Futures and Options.
105. What is Debt?
a. A promise to own part of a company
b. A promise to transfer some rights to the holder at a later date.
c. A promise to pay back the principal with interest.
d. A promise to demand funds from the investors if required.
106. Ask indicates-
a. The price offered by the buyer
b. The price demanded by the seller
c. The price difference between the highest offering buyer and the lowest demanding seller
d. The price at which the trade takes place.
107. _______ is also called as the spread.
a. The price offered by the buyer
b. The price demanded by the seller
c. The price difference between the highest offering buyer and the lowest demanding seller
d. The price at which the trade takes place.
108. Which of the following is NOT associated with commodities as an asset?
a. Taxes
b. Storage cost
c. Transportation cost
d. Dividend
109. Which of the following usually has higher liquidity risk?
a. Government bonds
b. Corporate bonds
c. Stocks in Dow Jones Industrial Index
d. Gold
110. Tax rates are decided by-
a. Fiscal policy
b. Monetary Policy
c. Economic policy
d. Micro-finance policy
111. Currency Risk is maximum affecting the companies that have-
a. Low capital
b. Producing consumer goods
c. Involved in international trades
d. Involved in commodities
112. Match the correct pair from A, B and C with 1,2 and 3.
A. Monetary Policy1. Control on spending by the government.
B. Fiscal Policy2. Alteration of Interest Rates
C. Credit rating agency3. Assessing the risk in Debt
The correct match is-
a. A-1, B-3, C-2.
b. A-1, B-2, C-3.
c. A-2, B-1, C-3.
d. A-3, B-2, C-1.
113. In which asset class it is difficult to determine the exact relative value?
a. Stocks
b. Bonds
c. Commodities
d. Real Estate
114. Exchange rates between two currencies, not involving the US dollar are termed as-
a. Cross rates
b. Non-US rates
c. Mutual rates
d. Local rates
115. In 2015, China lowered the value of its currency. This would-
a. Make imports cheaper in China
b. Make exported goods cheaper in China
c. Make Chinese goods cheaper in other countries
d. Make exporting to China more profitable for other countries.
116. Which of the following is a correct statement?
a. Currency may be pegged to a single stable currency
b. Currency may be pegged to a basket of currencies
c. Currency may be free floating currency which is not pegged to any other currency.
d. All these are possible.
117. Who maintains the value of currency of a country within limits?
a. Government of that country
b. UNO
c. Central bank of that country
d. Investors and hedgers
118. Which of the following has maximum risk from the view of a banker?
a. Investing in Government Debt
b. Investing in Corporate Debt
c. Investing in Personal Debt
d. All these debts have equal amount of risk.
119. Which of the following has more inflation risk?
a. Money in cash
b. Money in bank deposits
c. Money in bonds
d. All these have equal inflation risk.
120. Which of the following has closest tradability as paper currency?
a. Government bonds
b. Government Notes
c. Government bills
d. Corporate bonds
121. Which of the following has the least inflation risk?
a. Equity
b. Cash
c. Bank deposits
d. Commodities
122. Which of the following is also termed as commercial paper?
a. Paper that is used for printing equity certificates, bank notes, etc.
b. Paper that is traded as a commodity
c. Government bonds
d. Currency notes.
123. The Government is offering 4 % on its bills. Corporates are offering 6 %. The difference in rates
is typically expressed as-
a. 50 %
b. 2 %
c. 200 basis points
d. 1.5 times
124. Which of the following statements is CORRECT?
a. Lower the price of government paper, lower the yield.
b. Higher the price of government paper, higher the risk.
c. Higher the price of government paper, lower the yield.
d. Lower the price of corporate bonds, lower the risk.
125. A French bank wants to buy US government bonds. What route should they take?
a. Participate in US government auctions.
b. Offer US government their proposal though there is no auction.
c. Buy bonds from primary dealers
d. All the three routes given above are applicable.
126. Rebecca found that the yield curve was sloping up. What does this indicate?
a. Nothing. Normal yield curve always slopes up.
b. It indicates increasing inflation.
c. It indicates that the yield has been on the rise in the recent past.
d. It indicates that the yield curve is inverted, and economy is slowing.
127. When short term yield is more than long term yield,
a. The yield curve slopes up and indicates slowing of economy
b. The yield curve slopes up and indicates growth of economy
c. The yield curve slopes down and indicates slowing of economy
d. The yield curve slopes down and indicates growth of economy
128. Which of the following gives returns only due to price change? Treasury bills, treasury bonds,
Agricultural commodities or Precious metals?
a. Agricultural commodities and precious metals.
b. Precious metals and treasury bills
c. Agricultural commodities, precious metals and treasury bills.
d. Agricultural commodities, precious metals, treasury bonds as well as treasury bills.
129. Which method of generation of funds is available for the companies, but not for the government?
a. Selling of bonds
b. Selling of notes
c. Selling of bills
d. Selling of equity
130. According to S&P’s credit rating, those borrowers with at least rating of ______ have small
credit risk.
a. AAA+
b. BAA+
c. BBB-
d. CAA+
131. Eagle Airways wants to sell some commercial instruments in order to generate funds. They have
no intentions of buying them back but issue shares of the company to investors on a later date. What
type of commercial instrument should they sell?
a. Callable Bonds
b. Putable Bonds
c. Convertible bonds
d. Corporate notes
132. _______ are the instruments which the investors can sell back to company even before maturity.
a. Callable Bonds
b. Putable Bonds
c. Convertible bonds
d. Corporate notes
133. Which of the following group indicates precious metals available for investments?
a. Gold. Silver, platinum and copper
b. Gold, silver and platinum
c. Gold, silver, platinum and palladium
d. Gold, silver, platinum and nickel
134. S & P Case-Shiller index is related to-
a. Equities
b. Commodities
c. Foreign exchange
d. Real estate
135. Which of the following focuses on returns?
a. Bond benchmark indices
b. Stock market indices
c. Bank Indices
d. Capital Fund Flow indices
136. When can the investment in precious metals be expected to rise faster than the others?
a. In stable economy
b. In growing economy
c. In shrinking economy
d. In unstable economy
137. Detrended time series-
a. Shows a distinct direction of movement.
b. Tends to remain range bound.
c. Shows distinct patterns like head and shoulder
d. Is never flat.
138. For detrending, the most popular method is-
a. Taking the difference in a time series.
b. Taking the ratio in a time series.
c. Taking the difference or ratio in a time series
d. Taking the reciprocal of a time series.
139. Where do we find the oldest evidence of use of technical analysis?
a. Papyus in Babylon
b. Earthen tablets in Babylon
c. Wooden plank markings in Babylon
d. Stone carvings in Babylon
140. Price charts have come into application since-
a. 1830
b. 1870
c. 1890
d. 1930
141. The original Charles Dow average had ___ railroad and ___ industry stocks.
a. 20, 10
b. 2, 9
c. 9, 2
d. 10,10.
142. According to Second Law of Wyckoff Method,
a. When stock and index diverge, correction is due.
b. When price and volume diverge, correction is due.
c. When volumes of any two underlying diverge, they tend to correct.
d. When prices of any two underlying diverge, they tend to correct.
143.________ is regarded as the first institute to properly teach technical analysis.
a. Dow Jones Institute of Technical Analysis
b. Robert Rhea Institute
c. Golden Gate University, San Francisco
d. The Stock Market Institute, (formerly Richard D. Wyckoff Associates)
144. A complete collection of daily charts of the Wall Street was first published by-
a. Samuel Nelson
b. Robert Rhea
c. Richard Wyckoff
d. William Hamilton
145. Dow theory was put forward in a systematic way by-
a. Samuel Nelson
b. Robert Rhea
c. Richard Wyckoff
d. William Hamilton
146. _____________stated that, ‘in the long run, prices of stocks adjust themselves to return on
investment’.
a. Brown
b. Goetzmann
c. Russell
d. Rhea
147. According to Russell, when Dow Jones industrial average moves below _____________for the
second time, it is a confirmation of bear market.
a. 30 days
b. 30 weeks
c. 200 days
d. 52 weeks
148. _______ tested and linked the market moves with breadth.
a. Gartley
b. Russell
c. Goetzmann
d. William Hamilton
149. Jacob uses weekly data for his studies. As an analytical tool to detect the trend he uses 10 weeks
simple moving average. Maria uses end of the day data and uses 10 days simple moving average.
What is the advantage of Maria’s method to Jacob’s method?
a. She will be able to take more trades.
b. Her method will generate more brokerage
c. She would get the signals early.
d. Her trading will be more interesting. Jacob’s method would be boring.
150. Demand for government bonds is indicated by-
a. Bid to cover ratio
b. Bid ask spread
c. Days to deliver number
d. Opinions of investment advisors
151. In a perfectly stagnant economy, what would be the relation between 2 year yield and 10 year
yield on bonds?
a. 2 year yield would be more.
b. 10 year yield would be more.
c. Both the yields would be same.
d. Both the yields would keep oscillating up and down, crossing each other repeatedly.
152. Which of these can be traded in secondary markets? Equity, corporate notes or corporate bonds?
a. Only equity
b. All three.
c. Equity and bonds.
d. Equity and notes
153. What is the advantage for the companies of selling equity to investors over bonds and notes?
a. Investors tend to buy equity more than bonds or notes.
b. Equity is more liquid than bonds or notes
c. Equity need not be purchased back.
d. Equity gives voting rights to investors.
154. Which of the following indices is related to real estate sales?
a. Nasdaq OMX
b. Case-Shiller Index
c. Russel 2000
d. BM & F Bowespa
155. Which of the following indices is price weighted index?
a. DJIA
b. S & P
c. Nasdaq
d. Russel 2000
156. Financial and political instability would show positive effect on the price of-
a. Stocks
b. Bonds
c. Bullion
d. Real estate
157. Out of technical analysis and quantitative analysis, which one is considered superior and why?
a. Technical analysis because it has more predictive power.
b. Technical analysis because the methods are better analysed.
c. Quantitative analysis because it can be demonstratively value added.
d. Quantitative analysis because it uses more complex methods of calculations.
158. According to Charles Dow, a bull market begins when-
a. Stock starts making higher highs
b. An average exceeds the previous high point
c. When the third wave of a down cycle get completed
d. When common people start investing in the markets.
159. According to Charles Dow, the main trend lasts for-
a. three-six months
b. twelve months
c. four-six years
d. ten-twelve years
160. According to the observations put up by Charles Dow, how much is the minimum magnitude of a
secondary wave?
a. half

b. 3/8th
c. 1/4th

d. 5/8th
161. According to Charles Dow, if a primary move is longer,
a. The secondary move will be smaller.
b. The secondary move will be longer
c. The secondary move may be sideways
d. The secondary move would be shorter in magnitude but longer in time.
162. Who gave the name ‘Dow Theory’ to the thoughts put forward by Charles Dow?
a. Samuel Nelson
b. Robert Rhea
c. Richard Wyckoff
d. William Hamilton
163. ______ advised that day-to-day movements should be charted because they usually develop into
patterns with forecasting value.
a. Samuel Nelson
b. Robert Rhea
c. Richard Wyckoff
d. William Hamilton
164. According to Russell, the major bull market ends when the yields for major Dow Jones
Industrials reach-
a. 3.5
b. 5.0
c. 7.5
d. <2.0
165. Jacob uses weekly data for his studies. As an analytical tool to detect the trend he uses 10 weeks
simple moving average. Maria uses end of the day data and uses 10 days simple moving average.
What is the disadvantage of Maria’s method to Jacob’s method?
a. The signals would appear early
b. There would be more false signals.
c. Rapid action would be required in her method.
d. Profit margins will be always less for her method.
166. ______indicates high degree of bearishness in the markets.
a. High open interest
b. High short per cent float
c. Low open interest
d. Low short per cent float
167. What is the meaning of free float of shares?
a. Total number of shares of the company
b. Total number of shares held by small investors.
c. Total number of shares available for selling in the open markets.
d. Total number of shares without any pledge or mortgage.
168. What does the term ‘Days to Cover’ indicate?
a. The number of days from the actual trade taking place till delivery of the shares.
b. Duration required for covering shorts under normal conditions.
c. Minimum number of days a trader must hold certain stocks before selling.
d. Number of days remaining for the expiry of futures contracts.
169. Which of the following is/are powerful but have limited intelligence and knowledge of the
markets?
a. Large speculators
b. Hedgers
c. Arbitragers
d. Crowd
170. When does the information start getting reflected in the price?
a. When insiders get it.
b. When it reaches public
c. When it reaches institutional investors
d. When it is announced on television or newspapers
Answers to Practice Questions
1. New High - New Low index is negative when –
1. d. NH<NL(Chapter 6-9, General Market Indicators)
2. Which of the following statements about NH-NL line is INCORRECT?
2.d. It is overbought above 80 and oversold below 20. (There are no overbought or oversold levels
on NH-NL). (Chapter 6-9, General Market Indicators)
3. Which of the following are NOT shown by NH-NL line?
3. b. Overbought and oversold levels. (Chapter 6-9, General Market Indicators)
4. Dow Jones Industrial Average (DJIA) is composed of price movement of 50 stocks. It was
observed that 33 stocks were trading above their 50 days moving average, 13 were trading below the
50 day moving average whereas 4 were along the 50 day moving average. 50 days moving average
line is sloping up. What can you conclude about DJIA?
4. a. It is in the control of bulls and is likely to move higher. (However, usually we use % of stocks
that are closing above their 50 days moving average and not the number of stocks) (Chapter 6-9,
General Market Indicators)
5. When the stock market direction is to be determined, 60 % stocks have closed above their 50 day
moving average, whereas 35 % have closed below. 5 % are just along the line. Which stocks are
better candidates for short selling?
5. b. Those closing below the line. (Chapter 6-9, General Market Indicators)
6. NH-NL indicator is NOT plotted for-
6. d. Hourly data. (Chapter 6-9, General Market Indicators)
7. Which of the following statements about indicators is CORRECT?
7. c. Some indicators which were useful once cannot be used now and have become redundant.
(Chapter 6-9, General Market Indicators)
8. When the investment related articles from experts are clearly bearish,
8. b. the market is about to bottom out. (Chapter 6-9, General Market Indicators)
9. The number of contracts a speculator is permitted to hold at a given time in the markets is termed
as-
9. d. Position limit. (Chapter 6-9, General Market Indicators)
10. To prevent the large speculators from bullying the markets, _____ have been introduced.
10. b. Position limits. (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
11. Which of the following DOES NOT have a trader involved in selling?
11. a. Primary market (It is the company that sells the shares in primary market, and not a trader).
(Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
12. In stock markets, the only group making successive profits is-
12. c. Company insiders. (Chapter 27-38, Mass Psychology)
13. What is the greatest advantage a small trader has over large institutions?
13. c. Periods of inactivity. ( 27-38, Mass Psychology)
14. Marie wants to sell shares of Uxbridge International. The price at which she places the order is
termed as-
14. b. Ask (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
15. What happens when the bid-ask spread becomes zero?
15. c. A tick appears on the chart (Chapter 6-9, General Market Indicators)
16. A professional trader-
16.c. Enters in quiet time and exits when in becomes wild (Chapter 6-9, General Market Indicators,
27-38, Mass Psychology)
17. When you make money trading shares, it is provided by-
17. a. A loser who makes a wrong trade (Chapter 6-9, General Market Indicators, 27-38, Mass
Psychology)
18. Which of the following are the reasons behind trading in markets? i. Good returns on investment
ii. Gambling iii. Excitement
18. c. i, ii, and iii (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
19. ________ is/are the main leader of the market crowds.
19. a. Price of a security (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
20. Which is the weakest part of a trading system?
20. a. The trader (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
21. Which of the following statements is WRONG?
21. a. Prices go up when there are more buyers than sellers in the markets (Chapter 6-9, General
Market Indicators, 27-38, Mass Psychology)
22. Which of the following statements is wrong?
22. d. In all markets, bulls are ready to chase the rising price(Chapter 6-9, General Market Indicators,
27-38, Mass Psychology)
23. For stock markets to fall,
23. a. Ask must chase the bid (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
24. Which of the following statements is correct?
24. d. Fear is always stronger than greed. (Chapter 6-9, General Market Indicators, 27-38, Mass
Psychology)
25. Which of the following can be regarded as the most reliable signal?
25. d. A new low formed at weekly close (Chapter 6-9, General Market Indicators, 27-38, Mass
Psychology)
26. The maximum power of the bears is represented by-
26. c. Low of the bar (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
27. Why does a trader lose his objectivity while trading according to Prof. Elder?
27. b. fear(Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
28. What is the main leader of market crowds?
28. d. price (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
29. An elongated impulse wave whose motive subwave is showing a total of nine subwaves. This
type of wave is called-
29. b. Extension. (Chapters 39-40. Elliott Wave Theory)
30. Wave 4 can enter the top of wave 1 if-
30. b. A diagonal is being formed (Chapters 39-40. Elliott Wave Theory)
31. Which of the following is NOT a basic corrective pattern according to Elliott Wave Theory?
31. d. Diagonal (Chapters 39-40. Elliott Wave Theory)
32. In a zig zag type corrective pattern,
32. b. Wave A and C are impulse and wave B is corrective(Chapters 39-40. Elliott Wave Theory)
33. It was observed that wave A started at 27 and continued till 24. Wave B was completed at 28 and
wave C got completed at 23. How can this pattern be best described?
33. a. Expanding flat (Chapters 39-40. Elliott Wave Theory)
34. How is the wave structure given in the diagram best described?
34. a. Contracting triangle (Chapters 39-40. Elliott Wave Theory)
35. According to Efficient Market Hypothesis, which of the following statements is WRONG?
35. d. Previous resistance is not easy to break. (Burton and Shah, different chapters)
36. Which model is usually used by a noise player according to Burton and Shah?
36. a. Extrapolative Model (Burton and Shah, Chapter 7, Page 67)
37. Abreu-Brunnermeier model focuses on-
37. a. Bubbles and their bursting (Burton and Shah, Chapter 7, Page 75).
38. Venus saw the chart of Xeta technologies. The stock was between 25 and 32 for a period of six
months. She drew two horizontal lines at these two levels. Today, the stock is trading at 35. The
horizontal line at 32 represents_______ for the stock.
38. b. Support (It was resistance earlier. Now as the stock has crossed that level, it will act as a
support. (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
39. Ronney is studying the chart of ABC logistics. The stock is moving between 10.5 to 11.5 for the
last four months. This region can be best termed as-
39. a. Congestion Zone (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
40. If we compare the strength of support and resistance on charts of different time frame,
40. d. Both support and resistance on long term charts are stronger than short term charts. (Chapter 6-
9, General Market Indicators, 27-38, Mass Psychology)
41. Moin found that LMN Computers had given a buy signal on 10 minute chart but sell signal on
hourly chart. End of the day charts are neutral. What action would be most appropriate in this
condition?
41. c. Do not trade the stock (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
42. Who gets the information first?
42. d. Corporate insiders (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
43. What is the basic difference between professionals and amateurs?
43. a. Professionals satisfy irrational goals outside the markets, amateurs do it inside the market.
(Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
44. Which of the following is NOT related to Fibonacci ratio phi ()?
44. c. 0.500 (Chapters 39-40. Elliott Wave Theory)
45. Which techniques should the investors adopt while taking decisions?
45. c. Which best suits their trading style and psyche (Chapter 25-26, Being right or making money).
46. Which is the biggest flaw in his trading that does not allow him to make big profits?
46. d. Involvement of his ego in market views
47. Which group of the following may be termed as the key to making money?
47. b. Objectivity, flexibility, discipline and risk management (Chapter 25-26, Being right or making
money).
48. Why are indicators used primarily in the analysis of a chart?
48. a. To manage the risk (Chapter 25-26, Being right or making money).
49. Price of money means-
49. b. Interest rates charged on borrowed money (Chapter 25-26, Being right or making money).
50. Three things should never be neglected in the market. Which one of the below four DOES NOT fit
in this list?
50. d. Advice from market experts. (Chapter 25-26, Being right or making money).
51. Which of the following statements about ‘rate of change’ indicator is correct?
51. d. Its sensitivity increases with decrease in time. (Chapter 25-26, Being right or making money).
52. Thomas found that the momentum of Spearhead Computers had suddenly increased. What can he
conclude?
52. c. The prices have already increased but may continue rising. (Chapter 25-26, Being right or
making money).
53. The stock price of Kennedy Consultants is falling for last 30 days. Ronny observed that one
indicator was still rising continuously. Which of the following is h observing?
53. b. Relative strength. It is more of understanding based question. As relative strength is
comparison with some other asset, if that asset is falling faster, relative strength can still increase).
(Chapter 25-26, Being right or making money).
54. Reuters CCI I a measure of-
54. a. inflation. (Chapter 25-26, Being right or making money).
55. Which of the following is termed as High Risk Debt?
55. c. Derivatives (Chapter 25-26, Being right or making money).
56. Sultan found that when Sabah Airlines stock went down by 15 %, Finex Industries stock went
down by 9 %. What action can be taken in this scenario considering he has to avoid huge risk?
56. b. Sell Sabah Airlines and buy Finex industries. Though both are falling, the later has greater
relative strength. Buying the stronger stock and selling weak stock lowers the risk. So, though both are
falling, he should not take only short direction. (Chapter 54)
57. Which of the following is the best suited to decide whether a stock is underperforming a market or
not?
57. a. Relative strength(Chapter 54)
58. What is a mode?
58. c. Number than is repeated maximum number of times in a set of observations
59. Which of the following statements is CORRECT?
59. c. Mean and median are often closer to each other, but mode may or may not be close to these
two. (If none of the data is repeated, there may not be any mode for that set)
60. Irfan is determining mean for the data 123.4, 125.7, 129.5, 122.8, 124.7, 133.5, 127.8, 129.5,
130.5, 128.7, 129.5, 132.8. What would be the correct mean?
60. b. 128.2
61. When data points are scattered,
61. c. Standard deviation increases.
62. Quadratic mean is given by-

62. b.
63. When the data is skewed, frequency distribution gets importance because-
63. c. Standard deviation does not work with skewed data.
64. The ratio of relative change in supply to relative change in price is termed as-
64. d. Elasticity of supply
65. _______________ is also called the presidential cycle.
65. b. Kitchin cycle
66. Which of the following statements is NOT in accordance with the ethical standards adopted?
66. b. During the analysis of a stock, an analyst should also give weightage to the views of other
analysts. (Analysis should be independent. This means views of others should NOT be influencing
your analysis).
67. Billy is an independent analyst and runs an advisory service. In his advisory service, he informs
his clients about the investment opportunities in stocks. He advised his clients to go long on
Ferrochem Inc. The position is still open and NONE of his clients have permitted him to disclose the
information. The stock rose by 20 % in a few days. In an article written in local newspaper, Billy
disclosed that he had recommended the stock to his clients and they are still holding it, with 20 %
profit. How can his action be described?
67. b. There is no violation. (He has not disclosed who are his clients or any information that would
affect the confidentiality of his clients. He is just disclosing that his clients already own the stock).
68. VHS Finance, a broking house for trading securities offers an interesting package to their existing
clients. If the existing client bring new clients to VRS Finance, 10 % of the brokerage generated will
be paid to the existing client. Binny is an existing client of VHS, who is also a technical analyst. He
encourages his own circle of customers to open accounts with VHS. His view is to get that extra 10
% income. In the light of ethics, how is his action viewed?
68. c. It is possible that his action may influence unnecessary trades for his clients in order to
generate extra brokerage.
69. According to Efficient Market Hypothesis, Prices accurately summarise_________
69. b. All the publicly and privately known information about the stock. (Burton and Shah, chapter 1,
Page 6; chapter 1, Page 8- Strong form of EMH)
70. According to Markowitz analysis, when one investor is risk taking and other is risk averse,
70. c. Both should buy risky assets (Burton and Shah, Chapter 2, Page 17. According to this model,
both should invest into risky assets, but to different degree. First should buy more whereas later
should be exposed less).
71. For effective arbitrage strategies, what is the essential characteristic an asset should have?
71. b. Fungibility (Burton and Shah, Chapter 4)
72. ADX has _______ number of lines indicating the overall direction in which a trade should be
taken.
72.a. 2. (Only +DI and –DI tell the direction. Though there are three lines in the indicator, the third
line, ADX or DMI as it is called does not provide any information about the direction).
73. The deviation of price of a security from the mean over a fized duration of time is measure in –
73. c. Commodity Channel Index.
74. McClellan Oscillator is-
74.c. Market breadth indicator
75. Jessy found that the volume shown by the indicator ‘On-balance Volume’ was negative. What can
she conclude from this observation?
75. c. It indicates the bearishness in the underlying.(On-balance volume is positive on the day the
market is up. The entire volume is considered buyer’s volume and is treated as positive. On the other
hand on a down day, the entire volume is negative).
76. Roberta plots the ratio of number of stocks making 52 week high to number of stocks making 52
week low as an indicator. Which of the following statements would be correct about this indicator?
76. d. ii, iii and iv.
77. Parabolic SAR is commonly used by the traders while determining the stop losses. Which of the
following is the correct statement about it?
77. a. It moves in the direction of price movement at every time interval.(Parabolic SAR levels keep
moving in the direction of the price at every time interval, thereby allowing traders to modify their
stops).
78. Which of the following observations indicate a stronger bearish signal?
78. b. Peak below zero shown by price ROC.
79. Put call ratio is –
79. c. Market sentiment indicator.
80. It was observed that Zircon Crystals stock was falling. However, its relative strength compared to
the index was higher. What can you conclude from this observation?
80. b. The index is falling faster than the stock.
81. In the calculation of relative strength index, price data for
81. a. A single stock is used. (In relative strength, two stocks are compared. However, in relative
strength index, only a single stock is used over the period of time).
82. Andrew’s pitchfork DOES NOT give information about-
82. d. Target. (It directly gives support, resistance and trend. However, the stock may keep moving in
this range for a long time, so no information about the target is given).
83. Which of the following indicates short covering in futures market?
83. d. Price increasing and open interest decreasing.
84. Zoya found that the futures price of Codex International was decreasing, and the open interest was
also decreasing. Which of the following is taking place in the stock?
84. d. Profit booking.
85. As Volatility Index (VIX) increases, the time value for the option premium for the same contract
for same number of days to expiry-
85. c. Increases
86. Which model is widely used for the calculations for option premiums as well as for volatility
index (VIX)?
86. a. Black-Scholes Model
87. Which of the following statements about implied volatility is WRONG?
87. d. It directly affects stock prices. (It affects option prices, not stock prices)
88. Identify the pattern marked in a circle in the following chart-
88. a. Inverted flag
89. Identify the type of pattern marked with a circle in the given chart-
89. c. Bearish continuation.
90. In a typical head and shoulder formation, the highest volume is observed at-
90. a. On the left half of the left shoulder
91. Which of the following statements about Head and Shoulder top is correct?
91. b. Pullbacks are common after the breakout.
92. A typical head and shoulder formation requires about ____________ for formation.
92. c. Three months.
93. Which of the following is NOT a bullish continuation pattern?
93. c. Head and shoulder.
94. _________ is also called as a spring.
94. d. Symmetrical triangle.
95. Which pattern do you observe from A to B in the chart given below?
95. d. Head and shoulder top.
96. How can the pattern formed between point A to C in chart given below be described?
96. b. Inverted Flag.
97. Which of the following patterns shows price move between two parallel lines?
97. d. flag.
98. In an ascending triangle,
98. b. Support line is slanting but the resistance line is horizontal.
99. In the chart given below, point A is at 370, B is at 290 and C is at 320. Assuming there is a break
down at point C, what would be the target for this formation?
99. c. 240.
100. Which of the following lines is Bullish Engulfing?
100. d.
101. Typical borrowing by the government by selling bills is for the period-
101. a. shorter than 1 year
102. Typical borrowing by the government by selling notes is for the period-
102. c. 1-10 years
103. Which of the following is sold by the companies, but not by the government?
103. d. equity
104. Financial markets offer two choices for investment. These are-
104. a. Debt and Equity.
105. What is Debt?
105. c. A promise to pay back the principal with interest.
106. Ask indicates-
106. b. The price demanded by the seller
107. _______ is also called as the spread.
107. c. The price difference between the highest offering buyer and the lowest demanding seller.
108. Which of the following is NOT associated with commodities as an asset?
108. d. Dividend
109. Which of the following usually has higher liquidity risk?
109. b. Corporate Bonds
110. Tax rates are decided by-
110. a. Fiscal policy.
111. Currency Risk is maximum affecting the companies that have-
111. c. Involved in international trades.
112. Match the correct pair from A, B and C with 1,2 and 3.
112. c. A-2, B-1, C-3.
113. In which asset class it is difficult to determine the exact relative value?
113. d. Real Estate. (Rarely the units are exactly identical and liquidity is low. Price is too
subjective).
114. Exchange rates between two currencies, not involving the US dollar are termed as-
114. a. Cross rates.
115. In 2015, China lowered the value of its currency. This would-
115. c. Make Chinese goods cheaper in other countries
116. Which of the following is a correct statement?
116. d. All these are possible.
117. Who maintains the value of currency of a country within limits?
117. c. Central bank of that country
118. Which of the following has maximum risk from the view of a banker?
118. c. Investing in Personal debt.
119. Which of the following has more inflation risk?
119. d. All these have equal inflation risk. (Except fo inflation adjusted bonds, all bonds have equal
risk as bank deposits and cash).
120. Which of the following has closest tradability as paper currency?
120. c. Government bills.
121. Which of the following has the least inflation risk?
121. d. Commodities.
122. Which of the following is also termed as commercial paper?
122. c. Government bonds.
123. The Government is offering 4 % on its bills. Corporates are offering 6 %. The difference in rates
is typically expressed as-
123. c. 200 basis points. (Rate spread is typically expressed in the terms of basis points, where 1
basis point is 0.01 %).
124. Which of the following statements is CORRECT?
124. c. Higher the price of government paper, lower the yield.
125. A French bank wants to buy US government bonds. What route should they take?
125. c. Buy bonds from primary dealers (Foreign banks cannot participate in government auctions,
and have to buy through primary dealers).
126. Rebecca found that the yield curve was sloping up. What does this indicate?
126. a. Nothing. Normal yield curve always slopes up.
127. When short term yield is more than long term yield,
127. c. The yield curve slopes down and indicates slowing of economy.
128. Which of the following gives returns only due to price change? Treasury bills, treasury bonds,
Agricultural commodities or Precious metals?
128. c. Agricultural commodities, precious metals and treasury bills. (Treasury bonds also give
interest as an additional form of returns other than the price change).
129. Which method of generation of funds is available for the companies, but not for the government?
129. d. Selling of equity
130. According to S&P’s credit rating, those borrowers with at least rating of ______ have small
credit risk.
130. c. BBB-.
131. Eagle Airways wants to sell some commercial instruments in order to generate funds. They have
no intentions of buying them back but issue shares of the company to investors on a later date. What
type of commercial instrument should they sell?
131. c. Convertible bonds (Callable bonds- Company has option to buy them back before maturity.
Putable bonds- investors can sell them back to company before maturity. Convertible bonds-
Investors can swap debt for equity).
132. _______ are the instruments which the investors can sell back to company even before maturity.
132. b. Putable bonds.
133. Which of the following group indicates precious metals available for investments?
133. c. Gold, silver, platinum and palladium
134. S & P Case-Shiller index is related to-
134. d. Real Estate.
135. Which of the following focuses on returns?
135. a. Bond benchmark indices.
136. When can the investment in precious metals be expected to rise faster than the others?
136. d. In unstable economy
137. Detrended time series-
137. b. Tends to remain range bound.
138. For detrending, the most popular method is-
138. c. Taking the difference or ratio of a time series.
139. Where do we find the oldest evidence of use of technical analysis?
139. b. Earthen tablets in Babylon(Chapter 1-5- History of technical analysis)
140. Price charts have come into application since-
140. a. 1830(Chapter 1-5- History of technical analysis)
141. The original Charles Dow average had ___ railroad and ___ industry stocks.
141. c. 9,2. (Chapter 1-5- History of technical analysis)
142. According to Second Law of Wyckoff Method,
142. b. When price and volume diverge, correction is due. (Chapter 1-5- History of technical
analysis)
143.________ is regarded as the first institute to properly teach technical analysis.
143. d. The Stock Market Institute (formerly Richard D. Wyckoff Associates) (Chapter 1-5- History
of technical analysis)
144. A complete collection of daily charts of the Wall Street was first published by-
144. b. Robert Rhea(Chapter 1-5- History of technical analysis)
145. Dow theory was put forward in a systematic way by-
145. b. Robert Rhea(Chapter 1-5- History of technical analysis)
146. _____________stated that, ‘in the long run, prices of stocks adjust themselves to return on
investment’.
146. c. Russell. (Chapter 1-5- History of technical analysis)
147. According to Russell, when Dow Jones industrial average moves below _____________for the
second time, it is a confirmation of bear market.
147. b. 30 weeks. (Chapter 1-5- History of technical analysis)
148. _______ tested and linked the market moves with breadth.
148. a. Gartley(Chapter 1-5- History of technical analysis)
149. Jacob uses weekly data for his studies. As an analytical tool to detect the trend he uses 10 weeks
simple moving average. Maria uses end of the day data and uses 10 days simple moving average.
What is the advantage of Maria’s method to Jacob’s method?
149. c. She would get the signals early. (Chapter 1-5- History of technical analysis)
150. Demand for government bonds is indicated by-
150. a. Bid to cover ratio
151. In a perfectly stagnant economy, what would be the relation between 2 year yield and 10 year
yield on bonds?
151. c. Both the yields would be same (This condition is theoretical and not likely to continue, but
questions can be asked).
152. Which of these can be traded in secondary markets? Equity, corporate notes or corporate bonds?
152. b. All three (however, notes and bonds have very low liquidity).
153. What is the advantage for the companies of selling equity to investors over bonds and notes?
153. c. Equity need not be purchased back.
154. Which of the following indices is related to real estate sales?
154. b. Case-Shiller Index
155. Which of the following indices is price weighted index?
155.a. DJIA
156. Financial and political instability would show positive effect on the price of-
156. c. Bullion
157. Out of technical analysis and quantitative analysis, which one is considered superior and why?
157. c. Quantitative analysis because it can be demonstratively value added. (Chapter 1-5- History of
technical analysis)
158. According to Charles Dow, a bull market begins when-
158. b. An average exceeds the previous high point. (Chapter 1-5- History of technical analysis)
159. According to Charles Dow, the main trend lasts for-
159.c. Four – six years(Chapter 1-5- History of technical analysis)
160. According to the observations put up by Charles Dow, how much is the minimum magnitude of a
secondary wave?

160. b. 3/8th. (Chapter 1-5- History of technical analysis)

161. According to Charles Dow, if a primary move is longer,

161. b. The secondary move will be longer. (At least 3/8th of primary move). (Chapter 1-5- History
of technical analysis)
162. Who gave the name ‘Dow Theory’ to the thoughts put forward by Charles Dow?
162. a. Samuel Nelson. (Chapter 1-5- History of technical analysis)
163. ______ advised that day-to-day movements should be charted because they usually develop into
patterns with forecasting value.
163. b. Robert Rhea(Chapter 1-5- History of technical analysis)
164. According to Russell, the major bull market ends when the yields for major Dow Jones
Industrials reach-
164. a. 3.5. (Chapter 1-5- History of technical analysis)
165. Jacob uses weekly data for his studies. As an analytical tool to detect the trend he uses 10 weeks
simple moving average. Maria uses end of the day data and uses 10 days simple moving average.
What is the disadvantage of Maria’s method to Jacob’s method?
165. b. There would be more false signals. (Chapter 1-5- History of technical analysis)
166. ______indicates high degree of bearishness in the markets.
166. b. High short per cent float. (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
167. What is the meaning of free float of shares?
167. c. Total number of shares available for selling in the open markets. (Chapter 6-9, General
Market Indicators, 27-38, Mass Psychology)
168. What does the term ‘Days to Cover’ indicate?
168. b. Duration required for covering shorts under normal conditions. (Chapter 6-9, General Market
Indicators, 27-38, Mass Psychology)
169. Which of the following is/are powerful but have limited intelligence and knowledge of the
markets?
169. d. Crowd (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
170. When does the information start getting reflected in the price?
170. a. When the insiders get it.
Additional Questions on Chart Patterns
1. Which rectangle patterns perform better than all others?
a. Tall and more time
b. Short height and short time
c. Short height but more time
d. Tall but formed in short time
2. Wendy observed that Texan Oil stock was in a downtrend. In the period of August 2015 to February
2016, it formed three valley with middle valley deeper than the other two and started moving up
again. Which of the following formations will NOT show such a pattern in the chart?
a. Head and shoulder bottom.
b. Inverted Head and Shoulder
c. Saucer formation
d. Rectangle
3. Which pattern is visible in the area marked with a circle in the chart given below?

a. Symmetrical triangle
b. Ascending triangle
c. Descending triangle
d. Head and shoulder top
4. In the chart given below, four formations have been marked with letters A, B, C and D. Identify flag
pattern from these.
a. A.
b. B.
c. C.
d. D
5. In the chart given below, four formations have been marked with letters A, B, C and D. Identify a
bullish reversal pattern from these.

a. A.
b. B.
c. C.
d. D
6. In the chart given below, four formations have been marked with letters A, B, C and D. Which of
these is NOT a reversal pattern?

a. A.
b. B.
c. C.
d. D
7. In the chart given below, four formations have been marked with letters A, B, C and D. Which of
the following would be the most appropriate term to describe pattern D?

a. Head and shoulder bottom

b. Double top
c. Rounding top
d. Flag
8. Which of the following best describes the formation marked in the rectangle?

a. Head and shoulder top

b. Rounding top
c. Double top
d. Triple top
9. Minor high is typically separated from a higher high by an approximate period of ___________.
a. Five days
b. Ten days
c. Fifteen days
d. One month
10. To have a clearer view of historical price data, especially when the markets have moved many-
fold in this period, a technical analyst should use-
a. Magnification of data
b. Algebraic scale
c. Logarithmic scale
d. Different scale for different time frames
11. Which of the following slices through the price?
a. Internal trendline
b. External trendline
c. Logarithmic trendline
d. Curved trendline
12. Which of the following touches the price ends but DOES NOT slice through the price?
a. Internal trendline
b. External trendline
c. Logarithmic trendline
d. Curved trendline
13. When the price moves are parabolic, which trendline should be used?
a. Internal trendline
b. External trendline
c. Algebraic trendline
d. Curved trendline
14.Which trendline should be regarded as the best?
a. The one that has maximum touches without slicing through the price
b. The one that has maximum touches even if it slices through the price
c. Curved trendline joining the lowest points without slicing through the price.
d. Algebraic trendline joining the highest points without slicing through the price.
15. Which of the following trendlines best represents a trend?
a. Straight trendline
b. Curved trendline
c. Either straight or curved trendline
d. Straight trendline for short term and curved for long term.
16. What is the minimum number of points a trendline should connect?
a. One
b. Two
c. Three or more
d. There is no restriction on the number.
17. The level where buying pressure becomes more than selling pressure and the stock reverses its
previous trend is termed as-
a. Resistance
b. Support
c. A long term support or resistance
d. A temporary support or resistance
18. Which of the following levels may be regarded as the most important level where selling pressure
exceeded buying pressure by the largest margin?

a. A
b. B
c. C
d. D
19. Which of the following is the LEAST likely to act as support or resistance?
a. Gaps
b. Trendlines
c. Round Numbers
d. Horizontal consolidation regions
20. Which of the following is the likely to be the STRONGEST support or resistance?
a. Gaps
b. Trendlines
c. Round Numbers
d. Horizontal consolidation regions
21. Martha is expecting that the stock of Hans Data Systems to go up from 10.55. She has purchased
the stock at this price. What would be the ideal stop loss considering that the stock has recently listed
and no other information is available about the stock?
a. 10.10
b. 10.00
c. 9.90
d. 9.00
22. Xperia Infotainment is in an uptrend. The stock has made an all-time high of 93 and started
correcting from there. Thereafter it corrected to 90, and has spent nearly 2 months in the range 90-93.
What is likely to be the next price move for this stock once it breaks out of this range on the upper
side?
a. Can’t say anything with this much information.
b. The stock may retest 93.
c. The stock is likely to reach 100.
d. The stock may collapse again and go below 90.
23. Which type of gap is indicated by ‘A’?

a. Area gap
b. Breakaway gap
c. Measuring gap
d. Exhaustion gap
24. Match the correct description in column A with the type of gap in column B
Column AColumn B
1. Runaway gapA. Fills in a few days
2. Exhaustion gapB. Occurs around midway
3. Area gapC. formed when prices move out of a range
4. Breakaway gapD. Formed at the end of a price move.
The correct pairs are-
a. 1-B, 2-D, 3-A, 4-C.
b. 1-C, 2-A, 3-B, 4-D.
c. 1-D, 2-C, 3-B, 4-A.
d. 1-A, 2-B, 3-D, 4-C.
25. Which of the gaps are usually large?
a. Area gap
b. Breakaway gap
c. Measuring gap
d. Exhaustion gap
26. The prices move in the direction of the breakout but return to the level of breakout within 30 days.
This is termed as-
a. Pullback
b. Retracement
c. Throwback
d. Loop
27. Trends lasting for about 4 months may be classified as-
a. Short term trends
b. Medium term trends
c. Long term trends
d. Short term trends in a bull market but long term in a bear market.
28. A small dip in price before a pattern begins is termed as-
a. Retracement
b. Undershoot
c. Correction
d. Exhaustion (of previous trend)
29. Which of the following statements is WRONG?
a. Ascending triangle usually breaks out on the upper side
b. A rectangle is formed when one party wants to buy a large number of shares at a fixed price and
other wants to sell at a fixed price higher than the first.
c. Volume normally increases from left to right in a rectangle.
d. Head and shoulder pattern shows better success rate if the neckline is near horizontal.
30. How can the pattern marked with a circle in the chart given below be described?

a. Head and shoulder bottom

b. Rectangle
c. Ascending triangle
d. Descending triangle
31. In a descending triangle, what is the minimum preferred number of touches to the trendlines on
either side?
a. Three
b. Five
c. Six
d. Four
32. In a descending triangle, the supports follow______________trend.
a. Horizontal
b. Upward
c. Downward
d. Either upward or downward
33. Which of the patterns is the most confusing according to Bulkowsky?
a. Rectangle
b. Ascending triangle
c. Descending Triangle
d. Symmetrical triangle
34. Which of the following patterns DOES NOT have any slanting trendlines?
a. Rectangle
b. Ascending triangle
c. Descending Triangle
d. Symmetrical triangle
35. Which of the following patterns has two slanting trendlines?
a. Rectangle
b. Ascending triangle
c. Descending Triangle
d. Symmetrical triangle
36. Which of the following patterns has two slanting trendlines?
a. Rectangle
b. Flag
c. Pennant
d. Ascending triangle
37. Which of the following patterns DOES NOT have two slanting trendlines?
a. Pennant
b. Ascending triangle
c. Widening Top
d. Symmetrical triangle
38. Which of the following patterns DOES NOT have converging trendlines?
a. Rectangle
b. Ascending triangle
c. Descending Triangle
d. Symmetrical triangle
39. ___________ take usually shorter than three weeks to form.
a. Flags
b. Symmetrical triangles
c. Ascending triangles
d. Descending triangles
40. In a double top reversal, what is the time difference between the two tops?
a. Two to seven weeks
b. Three to six months
c. Always less than one month
d. Usually 2-10 days.
41. Given below is the weekly chart of Tata Steel.

Which pattern is visible in the region market with the circle?

a. Flag
b. Double top
c. Triple bottom
d. Double bottom
42. Given below is the weekly chart of Tata Steel.
Identify the pattern marked with a circle.
a. Head and shoulder top
b. Double Top
c. Ascending triangle
d. Descending triangle
43. What should be the price wise difference between the three tops in triple top formation?
a. The price should be slightly increasing at the three peaks.
b. The price should be slightly decreasing at the three peaks.
c. The price should be exactly same at the three peaks.
d. The price need not be exactly the same at all the three peaks.
44. A typical head and shoulder bottom takes ________ to form.
a. 2-3 weeks
b. 2-3 months
c. 6-8 months
d. About 2 years
45. Identify the pattern marked in the circle

a. Flag
b. Pennant
c. Descending triangle
d. Head and shoulder
46. Identify the price pattern seen in the chart given below marked with a circle.

a. Head and shoulder top

b. Double top
c. Triple top
d. Inverted head and shoulder
47. Identify the price pattern seen in the chart given below marked with a circle.

a. Head and shoulder

b. Double bottom
c. Triple bottom
d. Flag
48. Identify the pattern marked with a circle in the chart given below

a. Head and shoulder bottom

b. Rectangle
c.Double bottom
d. Triple bottom
49. Identify the pattern marked with a circle in the chart given below-

a. Head and shoulder bottom

b. Ascending triangle
c. Descending triangle
d. Rectangle
50. Identify the pattern marked with a circle in the chart given below

a. Ascending triangle
b. Descending triangle
c. Symmetrical triangle
d. Rectangle
Answers to Additional Questions on Chart Patterns
1. a. Tall and more time (Tall and Wide- Bulkowsky, Chapter 1).
2. d. Rectangle. (In a rectangle, the central valley cannot be deeper than the other two. All will have
to be of almost the same depth).
3. d. Head and shoulder top.
4. a. A.
5. b. B.
6. a. A.
7. c. Rounding Top
8. d. Triple top (In a triple top, the middle peak can be a little below the other two- Bulkowsky,
Chapter 17).
9. a. Five days (Bulkowsky, chapter 2)
10. c. Logarithmic scale
11. a. Internal trendline (Bulkowsky, chapter 3)
12. b. External trendline (Bulkowsky, chapter 3)
13. d. Curved trendline
14. b. The one that has maximum touches even if it slices through the price (Bulkowsky, Chapter 3).
15. c. Either straight or curved trendline (Bulkowsky- Use the best fitting trendline. Curved trendlines
do not always appear in the long term. They appear only if the price change in parabolic and over a
wide range. So, either one may be used as the case may be).
16. b. Two.
17. b. Support. (Buying more than selling- that is support).
18. d. D.
19. a. Gaps (Bulkowsky, Chapter 4)
20. d. Horizontal consolidation regions.
21. c. 9.90 (The stop loss should be slightly below the round figures, as round figures often act as
support or resistance).
22. c. The stock is likely to reach 100 (Bulkowsky, chapter 4. Use next closest round number for
determining the point of reversal even if the stock has never reached there before).
23. c. Measuring gap (Or continuation gap or runaway gap. It is approximately at the middle of the
downtrend).
24. a. 1-B, 2-D, 3-A, 4-C.
25. d. Exhaustion gap (Bulkowsky, Chapter 5 - Gaps)
26. d. Loop (Bulkowsky, chapter 6)
27. b. Medium term trends. (Bulkowsky, Chapter 7)
28. b. Undershoot (Bulkowsky, Chapter 7).
29. c. Volume normally increases from left to right in a rectangle. (Chapter 7, 8)
30. Ascending triangle.

31. b. Five (Bulkowsky, Chapter 9)

32. a. Horizontal (Bulkowsky, Chapter 9).
33. d. Symmetrical triangle. (Bulkowsky, chapter 10)
34. a. Rectangle (Bulkowsky, Chapter 7,8,9,10)
35. d. Symmetrical Triangle (Bulkowsky, Chapter 7,8,9,10)
36. c. Pennant
37. b. Ascending Triangle (Bulkowsky, Chapter 7,8,9,10, 11).
38. a. Rectangle (Bulkowsky, Chapter 7,8,9,10)
39. a. Flags (Bulkowsky, Chapter 11)
40. a. Two to seven weeks (Bulkowsky, Chapter 12. Different authors give different timeframes for
this. While Bulkowsky considers two to seven weeks, majority of others agree on one to three
months. However, the most important to note is time is immaterial, but the same level acting as a
resistance twice is more significant).
41. c. Triple bottom. (It is not double bottom. There are clearly three lows reaching almost the same
level. The low formed much earlier has acted as a support, but the time gap of nearly two and a half
years is too large to be called a double bottom).
42. b. Double Top.
43. d. The price need not be exactly the same at all the three peaks.(Visibly the three peaks should
appear close to each other. They need not be exactly same. They may be slightly ascending or
descending. As long as visibly they are at the same level, it is acceptable).
44. b. 2-3 months. (Bulkowsky, chapter 16).
45. c. Descending triangle

46. c. Triple top.

47. c. Triple bottom.
48. b. Rectangle. (It is a rectangle. It has three lows at identical level, but it also has the tops at the
identical levels. So we can fit two parallel trendlines, making it a rectangle.

49. c. Descending triangle

50. c. Symmetrical Triangle

Level 1 Question Paper 1
1. On 15th April 2016, Enrico Technologies made a 52 week high. On the same day, Hank Motors
made a new yearly low. Which of the following statements about Hank Motors is correct?
a. It is likely to bottom out soon.
b. It is a market laggard.
c. It is a market leader in weakness.
d. None of the above statements are correct.
2. New High - New Low index is negative when –
a. NH=NL
b. NH>NL
c. NH≤ NL
d. NH<NL
3. NH-NL Index is plotted as-
a. Histogram
b. Continuous line oscillating between 0-100
c. Continuous line with 0 as reference.
d. Histogram with 0 as central line.
4. Which of the following are NOT shown by NH-NL line?
a. Divergence
b. Overbought and oversold levels.
c. Slope
d. Positive as well as negative values.
5. Ricky is a new trader in stock markets. He observed that the NH-NL index has dropped below
zero. For the last several months it was positive. What would be the right conclusion from his
observation?
a. The market was overbought and is in a correction mode.
b. The market has topped out, and likely to show a big fall after this.
c. The market must have already corrected as NH-NL is a laggard.
d. NH-NL indicator cannot give any clear indications when it is below zero.
6. Which of the following statement about the market tops and bottoms is CORRECT?
a. Usually the market tops are broader than the bottoms.
b. Usually the market tops and bottoms are equally broad as an average.
c. Usually, the market bottoms are broader than the tops.
d. When greed is more, bottoms are broader and when fear is more, tops are broader.
7. When NH-NL is rallying and the market is also rallying, what can be said about the situation?
a. It is confirming the uptrend.
b. Both always rally together, so there is no additional information here.
c. Both are usually opposite to each other, so this poses some doubt about the uptrend.
d. It will depend on which one of the two is having higher slope.
8. When majority of advisors are giving buy calls,
a. One should look for buying opportunity
b. One should immediately initiate long positions.
c. One should immediately go short.
d. One should exit long positions.
9. The sum of position of large speculators, position of hedgers and position of small speculators is
termed as-
a. Position limit
b. Arbitrage limit
c. Fund flow limit
d. Open interest
10. When do you expect the insider buying to come up?
a. After a rally
b. After the stock has rallied by 10-20 %
c. After a huge fall
d. Once the stock has corrected by 31.8 %
11. Which of the following is responsible for deciding the price?
a. Buyers
b. Sellers
c. undecided participants
d. All three
12. Which of the following DOES NOT get reflected in the price charts?
a. Open market trading
b. Derivatives trading.
c. Insider trading
d. Preferential allotment of shares
13. Why do common people trade in the markets?
a. Rational Reasons
b. Irrational reasons.
c. Rational as well as irrational reasons.
d. Neither for rational reasons, nor for irrational reasons.
14. Who of the following puts pressure on the mind-set of trading parties?
a. Bulls
b. bears
c. either bulls or bears
d. undecided traders
15. How does Elder describe the behaviour of the crowd?
a. Strong, well defined action.
b. Primitive, simple and repetitive
c. Always on the wrong side
d. Always confused, against the trend
16. Only two of the following four (i, ii, iii and iv) options are correct.
The firms that trade in cash as well as futures markets have two major advantages.
i. Money is available in abundance
ii. Brokerages and other slippages are low
iii. They have true inside information
iv. They are exempt from speculative position limits that exist in many futures markets.
The correct statements according to Prof. Elder are-
a. i and ii
b. ii and iii
c. iii and iv
d. ii and iv
17. Which of the following is a key feature of a smart group of traders?
a. Discussing and finalising which trades to take
b. Independently deciding on which trades to take
c. Collective ideas about trading
d. It points out neglected factors if any by other members of the group.
18. When short sellers start covering their positions,_______
a. Market starts coming up slowly.
b. Market shows sudden sharp rallies
c. Markets show long periods of inaction
d. Markets become highly volatile.
19. Which of the following prices is often termed as an amateur’s opinion about the price?
a. Open
b. Close
c. High
d. Low
20. When the markets are chaotic, the strategy a trader should adopt is –
a. Remain either bullish or bearish, but never trade both directions.
b. Increase the speed of trading and switch from bullish to bearish and back very fast.
c. Use indicators to determine the change in trends as soon as they happen
d. Refrain from trading.
21. Which of the following indicates a stronger congestion zone?
a. Tall with high volume
b. narrow with high volume
c. Tall with low volume
d. Narrow with low volume
22. The difference between the entry point to protective stop multiplied by the position size should
not be greater than ____ % of equity capital.
a. 5
b. 10
c. 7
d. 2
23. What is the greatest advantage that an employee of a trading firm has over an individual trader?
a. He has large pool of funds
b. He can trade with latest software
c. He has psychological advantage
d. He pays much less in brokerages and other slippages
24. Which of the following statements is WRONG about Elliott Wave Theory
a. Wave 2 never retraces more than 100 % of wave 1
b. Wave 4 never retraces more than 100 % of wave 2
c. Wave 3 is always the longest motive wave
d. Every wave is a part of a wave of larger degree
25. Harold numbered the wave as shown in the diagram

What can be said about this?

a. Harold has not numbered the waves correctly.
b. Harold is observing beginning of a very big bull market
c. Harold is witnessing a complex correction
d. Harold is witnessing a bear market truncation.
26. In a leading diagonal,
a. Waves 1,3,5 are always zigzag
b. Waves 2 & 4 are always zigzag
c. Wave 2 or 4, one is a zigzag and other is a flat
d. Wave 4 cannot overlap with wave 1.
27. Wave structure in a flat correction is-
a. 5-3-5
b. 5-5-3
c. 5-5-5
c. 3-3-5
28. A triangle is a ______ wave pattern described as_________
a. Three, A-B-C
b. Three, 1-2-3
c. Five, A-B-C-D-E
d. Five, 1-2-3-4-5
29. Which of the following waves typically give countertrend in Elliott Wave Theory?
a. Waves 1,2, 3,4, 5
b. Waves 1,3,5
c. Waves 2,4
d. Either waves 1,3,5 or waves 2,4.
30. Paul is a trader. He observed that markets were down for the last three months. Even now, all the
experts in different media were bearish on the markets. News papers were printing stories about bad
state of economy. However, the technical indicators which he has found working very well earlier,
were not showing the bearish mood. They had turned up and were indicating buy. What should Paul
do?
a. continue holding short positions. You cannot go against the sentiment.
b. Trust the experts and increase short positions.
c. Bear markets usually last more than three months. They cannot be over so fast. Neglect the
indicators.
d. Trust the indicators and exit the short positions.
31. Which of the following is NOT an important factor in deciding the direction of stock markets?
a. Demand and supply
b. Actions of Federal Reserve
c. Crowd psychology
d. Buy or sell calls given by majority of analysts.
32. John conducted a survey to find how many people in the market think that the market will go up in
the next three months. His studies showed that nearly 86 % people were bullish on the markets.
Which of the following statements is most likely to be correct?
a. Market will go up as a large majority of people is bullish.
b. Market movement cannot be predicted just by public sentiment.
c. Market may come down as extreme public sentiment usually indicates last stage of that trend.
d. Market may first consolidate, and then go up.
33. Why does Federal Reserve (Fed) increase the interest rates?
a. To keep inflation low and economic growth high
b. To keep inflation low and low economic growth
c. To keep inflation high and low economic growth
d. To keep low inflation and moderate economic growth.
34. Number of stocks going up to number of stocks going down is commonly referred as-
a. Market Range
b. Market Width
c. Market Breadth
d. Market Proportionality
35. Johann is a short term trader. Usually he holds a position open for a few days - rarely exceeding
a month. Which moving average should he ideally use for determining the general trend in the stocks?
a. 50 days
b. 200 days
c. 5 days
d. 2 hours
36. Which tool of analysis DOES NOT include price action?
a. Moving averages
b. Stochastic
c. Internal indicators
d. External indicators
37. When very few investors are bullish, it usually indicates-
a. Rising market
b. Falling market
c. Market about to top out
d. Market about to bottom out.
38. Which one of the following is LESS LIKELY to happen before a major market top?
a. Increased investments in mutual funds
b. Investors low on cash
c. Stock plus bond funds are at record high
d. Mutual funds sitting on large amount of cash- not invested fully
39. Which of the following cannot be determined from price movement of one stock?
a. MACD
b. Rate of Change
c. Stochastic
d. Relative strength
40. Hiya found that relative strength line of Bana Textiles against the index was flat. What would she
conclude from this?
a. The stock is not rising.
b. The stock is not falling
c. There is no conclusive observation from this data
d. Both the stock and the index are rising or falling at the same rate.
41. Jacob found the closing price of Amby Products as 11.4, 11.7, 11.9, 11.3, 11.5 and 11.8. What
would be the mean of these prices?
a. 11.5
b. 11.7
c. 11.6
d. 11.55
42. Which of the following statements is CORRECT?
a. Method of calculation of the mean depend on number of observations.
b. Method of determination of the median depends on number of observations.
c. Method of determination of the mode depends on number of observations.
d. Median cannot be determined if the number of observations is even.
43. Reema is using 50 DMA for the determining the trend. Which of the following should she use?
a. Mode
b. Median
c. Mean
d. Either mode, median or mean.
44. When the number of data points in a set is small, the standard deviation-
a. Increases
b. Decreases
c. Remains unchanged
d. Is variable
45. Sample error in a set of observations having N data points is-
a. Reciprocal of N
b. Square root of N
c. Reciprocal of square root of N
d. Square root of the reciprocal of N
46. If the distribution curve is flattish, it is said to have-
a. Negative Kurtosis
b. Kurtosis neutrality
c. Positive Kurtosis
d. Low Kurtosis
47. It was observed that beta for Astra Labs was 0.7. This means-
a. The stock is 70 % more volatile than the market
b. The stock is 70 % less volatile than the market
c. The stock is 70 % volatile compared to the market.
d. The stock goes down by 30 % when the market goes up by 100 %.
48. The price movement between two consecutive lows on the chart is termed as-
a. Trend
b. Direction
c. Cycle
d. Wave
49. Which of the following statements is WRONG?
a. Ethical behaviour is the one that is morally correct.
b. Stricter laws indicate ethical behaviour of all participants.
c. Most people have a natural tendency to pursue their self interest over interest of other.
d. Laws and regulations do not cover all unethical behaviour.
50. John is a technical analyst. He found that the stock of ABC International had broken below an
important support and was a good stock to short sell. He decided to include this in his report which is
due in the evening. However, during lunch, he overheard a talk in a restaurant that the company was to
get an important contract, which would have caused the stock to double in price soon. What action
should he take?
a. Just neglect the stock. Make no mention in his report.
b. Change his views and advice buy on the stock.
c. Give sell recommendation as per technical studies.
d. Give sell recommendation, but mention that it is possible that the stock may go higher if that
contract is awarded to ABC International.
51. Richard stays in UK, where the laws of compliance are strict. However, he sends his reports by
email to a company in a small African country, Ankona, where the laws of compliance are more
relaxed. During his actions, which laws he has to comply?
a. UK
b. Ankona
c. Both, UK and Ankona, whichever is stricter as per the case.
d. Either UK or Ankona, as per his choice.
52. Which of the following correctly defines Plagiarism?
a. Mass psychology which affects the public.
b. Incorrect representation that can harm the analysis.
c. Unauthorised copying of significant quantity of matter without giving due credit to the author.
d. Panic actions taken by money managers that can erode the value of investors.
53. in the sense of Efficient Market Hypothesis, Burton and Shah term technical analysis as-
a. Sensible, intelligent individuals
b. Irrational, noise players
c. Informed players
d. Market players with inside information.
54. Burton and Shah describe trend following models as-
a. Herd Mentality
b. Systematic use of technical analysis
c. Contrary to fundamental analysis
d. Detrimental to market stability.
55. According to Schiller Model,
a. Stock price at any given time cannot be mathematically calculated.
b. Stock price at any given time can be calculated using a mathematical equation.
c. Stock price at any given time is independent of dividend.
d. Stock prices and dividend movements, both can be accurately determined at any given time.
56. Which of the following is NOT used typically against the Efficient market Hypothesis?
a. Volatility of markets
b. Predictability about the market direction
c. Pricing Anomalies in the markets
d. Earnings from the markets
57. According to Burton and Shah, noise traders are mostly trading on-
a. Fresh information as it comes in.
b. Stale and mostly bogus information.
c. Fresh information with no means of verification.
d. The advice from market experts.
58. According to Shleifer model, who are called the sophisticated investors?
a. Arbitrageurs
b. Irrational investors
c. Money managers
d. Insiders
59. Advance Decline Line is plotted using-
a. The sum of the number of advancing and declining stocks.
b. The product of the number of advancing and declining stocks
c. The difference between the number of advancing and declining stocks
d. The ratio of the number of advancing and declining stocks.
60. In Bollinger Bands, two lines are drawn on either side of a moving average. They are ____
distance away from the moving average.
a. one standard deviation
b. One and a half times the standard deviation.
c. Two standard deviations.
d. Three standard deviations.
61. Directional Movement Index is an oscillator composed of ____ number of lines.
a. Two
b. Three
c. Four
d. Usually two, sometimes three.
62. Which of the following can be calculated using traded volume?
a. Money Flow Index
b. Relative Strength Index
c. Price ROC
d. Stochastic
63. Number of open positions in options is termed as-
a. Typical volume
b. On balance volume.
c. Open interest
d. Option Spread
64. Which of the following statements correctly describes Parabolic SAR?
a. It is plotted along the prices.
b. It is overbought above 80 and oversold below 20.
c. It value is always negative.
d. It is usually used for deciding the targets.
65. Price Rate of Change (Price ROC) is a-
a. Market breadth indicator.
b. Momentum indicator
c. Sentiment Indicator
d. Indicator based on open interest.
66. Relative strength is an important tool used for taking trading decisions. Given below are three
statements about relative strength.
i. It is the ratio of price of one security to the other.
ii. It is overbought above 70 and oversold below 30.
iii. It is better to short the stock with higher relative strength and buy the one with lower relative
strength.
Which of the following options is CORRECT?
a. i and ii.
b. ii and iii
c. All are correct.
d. All are wrong.
67. Aruna observed that Reliance Industries stock had gone up by 10 % in three weeks. Tata motors
had gone up by 8 % in the same period. Under these observations, the most appropriate action
between these two would be-
a. Buy both the stocks.
b. Buy Reliance Industries and sell Tata Motors.
c. Sell Reliance Industries and buy Tata Motors.
d. Sell both. They have come up too fast.
68. In Williams % R indicator,
a. 20 is overbought level.
b. -20 is overbought level.
c. 20 is oversold level.
d. -20 is oversold level.
69. Exponential moving average is-
a. Third type of moving average besides simple and weighted.
b. A type of simple moving average
c. A type of weighted moving average
d. The moving average of which there are two subtypes- simple or weighted.
70. Which of the following statements is correct according to the weak form of Efficient market
Hypothesis?
a. Using yesterday’s price of a stock, today’ price can be predicted
b. Yesterday’s available information would be the same as today’s available information.
c. Today’s price of a stock has no relation with yesterday’s price.
d. Stock markets will always keep facing bubbles.
71. If the value of volatility index is 14 %, it means,
a. it means there is 68% probability that the index may be less than or equal to 14 % up or down
within a year.
b. it means there is 68% probability that the index may be less than or equal to 14 % up or down
within a month.
c. it means there is 68% probability that the index may be less than or equal to 14 % up or down
within a week.
d. it means there is 68% probability that the index may be less than or equal to 14 % up or down in
the next directional move.
72. Usual flags and pennants extend up to _____
a. 3 days
b. 3 weeks
c. 3 months
d. Several months
73. Success rate for flags and pennants is-
a. 40-50 %
b. 50-60 %
c. 60-70 %
d. 70-80 %
74. Considering the complete price move with a flag pattern, where is the flag typically located?
a. At the bottom of the entire price change
b. At the top of the entire price change
c. At the mid-point of the entire price change
d. In top one-third of the entire price change
75. When a stock undergoes head and shoulder formation with horizontal neckline and gives a
breakout after that, the price change can be described as-
a. Ascending triangle followed by descending triangle.
b. Broadening symmetrical triangle followed by narrowing symmetrical triangle.
c. Higher top higher bottom formation changing into lower top lower bottom.
d. Rising wedge followed by falling wedge.
76. Which of the following patters rarely show throw-backs or pull-backs?
a. Head and shoulder
b. Flag
c. Ascending Triangle
d. Symmetrical triangle
77. In the head and shoulder formation, the head height is 360, height of right shoulder is 325, and the
neckline is at 300. What would be the target for this formation?
a. 360 + 60 = 420.
b. 300 – 60 = 240
c. 300 – 25 = 375
d. 360 – 25 = 335
78. In a symmetrical triangle,
a. Support line is horizontal, but resistance line is slanting
b. Support line is slanting, but the resistance line is horizontal.
c. Both the lines are horizontal.
d. Both the lines are slanting.
79. Which of the following is a bullish reversal?
a. Hanging Man
b. Shooting star
c. Thrusting Line
d. Morning star
80. Which is the formation seen on the last day in this chart?

a. Engulfing line
b. Thrusting line
c. Dragonfly doji
d. Piercing line
81. Markets work on three R’s. These are-
a. Returns, risk, relative value
b. Rate of interest, returns, risk
c. Rate of interest, risk, relative value
d. Rate of interest, relative value, returns
82. The form of government debt that is of the longest duration is-
a. Bills
b. Notes
c. Bonds
d. Equity
83. Which of the following DOES NOT qualify as hard assets?
a. Equity
b. Gold
c. Real Estate
d. Work of Art
84. Stock exchanges are-
a. Primary markets
b. Secondary markets
c. Either primary or secondary markets
d. Primary as well as secondary markets
85. Which asset class of the following DOES NOT pay any extra returns other than change in price?
a. Government bonds
b. Stocks
c. Real Estate
d. Commodities
86. When a stock goes in the direction opposite to the expected one, the risk involved is termed as-
a. Liquidity Risk
b. Policy risk
c. Economic Risk
d. Market Risk
87. When the interest rates are lowered,
a. The liquidity in the system decreases
b. The liquidity in the system increases
c. The liquidity remains unchanged
d. The liquidity has no relation with interest rates.
88. Interest rates were lowered by the central bank in Brazil. What effect on the economy is
expected?
a. The inflation will decrease.
b. The inflation would remain unchanged.
c. The inflation may rise.
d. The value of currency may increase.
89. When a central bank in a country fixes the value of its currency to some other stable currency, this
is termed as-
a. Floating of the currency
b. Pegging of the currency
c. Monetising of the currency
d. Devaluing of the currency
90. Which of the following has least credit risk?
a. Deposits in private banks
b. Corporate bonds
c. Government Bonds
d. Personal loans
91. When value of a currency decreases very fast, till it is redundant, the state of economy is called
as-
a. Deflation
b. Inflation
c. Hyperinflation
d. Stagflation
92. Some banks have to bid at every auction of bills by the government. They may sell these bills
further to other investors. These banks are termed as_______ in bills.
a. Primary dealers
b. Distributors
c. Issuers
d. Corporate bankers
93. Interest paid by the government to investors on bonds is termed as-
a. Returns
b. Dividend
c. Yield
d. Returns, dividend or yield.
94. The product of offer size for bond selling in dollars multiplied by bid to cover ratio is 2.0. This
indicates-
a. Supply of bonds is less than the demand
b. Supply of bonds is more than the demand
c. Supply of bonds is just meeting the demand.
d. Supply of bonds is exactly double than the demand.
95. When the yield curve is inverted,
a. Yield on short term paper is more than that on long term paper.
b. Yield on short term paper is less than that on long term paper.
c. Yield on short term paper is same as that on long term paper.
d. The yield is negative on the bonds.
96. Which of the following is NOT a limitations for corporates over the government when it comes to
generation of funds?
a. Corporates cannot make it mandatory to others to buy their paper.
b. Corporates cannot print money.
c. Corporates have more bankruptcy risk
d. Corporates can sell equity
97. What is the difference between company notes and company debentures?
a. They are effectively the same types of instruments.
b. Notes are short term, debentures are long term.
c. Notes have collaterals. Debentures do not have any.
d. Notes can be traded in secondary markets, debenture cannot.
98. Which of the following contains all the companies are in the category called cyclicals?
a. Commodity, energy, technology, health care.
b. Commodity, technology, media, home makers
c. Health care, telephone, utility, food and beverages.
d. Retailers, consumer staples, telephone, technology.
99. ________ in real estate indicates the annual returns an investor may get on a property.
a. Return Ratio
b. Cap Rate
c. Return Surplus
d. Top returns
100. Which of the following indices is a float weighted index?
a. DJIA
b. S & P
c. Nasdaq
d. Russel 2000
101. Which of the following metals is NOT considered as a precious metal?
a. Gold
b. Silver
c. Palladium
d. Nickel
102. According to _____________ there are no exploitable patterns in markets where trading
strategies could be applied.
a. Efficient Market Hypothesis
b. Random Walk Theory
c. Dow Theory
d. Elliott Wave Thoery
102.a. Efficient Market Hypothesis(Chapter 1-5- History of technical analysis)
103. Which of the following indicates short covering in futures market?
a. Price decreasing and open interest increasing.
b. Price decreasing and open interest decreasing.
c. Price increasing and open interest increasing.
d. Price increasing and open interest decreasing.
104. The candlestick charting technique was developed and used by-
a. Homma Shigita
b. Yokori Kimata
c. Munehisa Homma
d. Kikamuro Henma
105. According to Charles Dow, the market has _____ well defined movements that fit into each
other.
a. 2
b. 3
c. 5
d. 5 + 3 = 8
106. Who should be credited for developing point and figure charting method?
a. Charles Dow
b. Robert Rhea
c. William Hamilton
d. Richard Wyckoff
107. According to Gartley, the Dow theory should actually be considered as the joint work of Dow
and ________.
a. Samuel Nelson
b. Robert Rhea
c. Richard Wyckoff
d. William Hamilton
108. According to Dow Theory, when penny stocks (fancy stocks) start rallying,
a. A full force bull market would follow
b. The main market would undergo a corrective phase
c. The existing bull trend in the markets would soon come to an end.
d. Market would bottom out soon.
109. Charles Dow observed that whenever the market is dull, it is followed by-
a. An advance
b. A decline
c. A decline in the bull market and an advance in the bear market.
d. An advance in bull market and a decline in a bear market.
110. Which of the following is NOT a continuation pattern?
a. Falling three method
b. Dark cloud cover
c. Pennant
d. Upside gap three
111. What is the main leader of market crowds?
a. Sentiment
b. Greed
c. Fear
d. Price
112. Bonds from companies without any collateral are termed as-
a. Equity
b. Investment Bonds
c. Debentures
d. Bills
113. If wave 1 is extended, which typical phenomenon is observed from wave 3 and 5?
a. They are of equal length
b. Wave 5 is longer than 3
c. Wave 3 is longest wave and 5 is shortest
d. Out of 3 and 5 at least is also extended.
114. In a diagonal formation in a bull market, there are two trendines, one joining the highs of
diagonal and the other joining the lows. What is observed about these trendlines in majority of cases?
a. Usually the two trendlines are diverging
b. Usually the two trendlines are parellel
c. Usually the two are converging
d. Nothing can be said about these two.
115. Volatility is typically plotted for-
a. Time period of 1 day
b. Time period of 7 days
c. Time period of 30 days
d. Time period of 365 days.
116. Which of the following is NOT a reversal pattern?
a. Window
b. Engulfing Line
c. Piercing Line
d. Harami
117. Identify the pattern formed on the last day on the chart given below

a. Bullish belt hold

b. Bullish engulfing
c. Bullish harami
d. Morning star
118. Which of the following is NOT a debt instrument?
a. bills
b. bonds
c. notes
d. equity
119. Sheila uses Relative strength for taking trading decisions. Which of the following actions would
be the best action?
a. Buy the stock with higher relative strength and stay away from the one with lower relative strength.
b. Sell the stock with lower relative strength and stay away from the stock with higher relative
strength
c. Buy both the stocks, with higher as well as lower relative strengths.
d. Buy the stock with higher relative strength and sell the stock with lower relative strength.
120. Which of the following statements is CORRECT?
a. Stock market advisors as a group perform better than the common public.
b. Stock market advisors as a group perform worse than the common public.
c. Stock market advisors as a group perform almost identically as that of the common public.
d. Performance of the stock marker advisors cannot be compared with that of the common public.
Answers to Paper 1
1. On 15th April 2016, Enrico Technologies made a 52 week high. On the same day, Hank Motors
made a new yearly low. Which of the following statements about Hank Motors is correct?
1. c. It is a market leader in weakness. (The stocks that make a new yearly high on a particular day
are leaders in strength, whereas those which make a yearly low on the same day are leaders in
weakness). (Chapter 6-9, General Market Indicators)
2. New High - New Low index is negative when –
2. d. NH<NL(Chapter 6-9, General Market Indicators)
3. NH-NL Index is plotted as-
3. c. Continuous line with 0 as reference. (Chapter 6-9, General Market Indicators)
4. Which of the following are NOT shown by NH-NL line?
4. b. Overbought and oversold levels. (Chapter 6-9, General Market Indicators)
5. Ricky is a new trader in stock markets. He observed that the NH-NL index has dropped below
zero. For the last several months it was positive. What would be the right conclusion from his
observation?
5. b. The market has topped out, and likely to show a big fall after this. (Chapter 6-9, General Market
Indicators)
6. Which of the following statement about the market tops and bottoms is CORRECT?
6. a. Usually the market tops are broader than the bottoms. (Chapter 6-9, General Market Indicators)
7. When NH-NL is rallying and the market is also rallying, what can be said about the situation?
7. a. It is confirming the uptrend. (Chapter 6-9, General Market Indicators)
8. When majority of advisors are giving buy calls,
8. d. One should exit long positions. (Chapter 6-9, General Market Indicators)
9. The sum of position of large speculators, position of hedgers and position of small speculators is
termed as-
9. d. open interest. (Chapter 6-9, General Market Indicators)
10. When do you expect the insider buying to come up?
10. c. After a huge fall. (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
11. Which of the following is responsible for deciding the price?
11. d. All three. (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
12. Which of the following DOES NOT get reflected in the price charts?
12. Preferential allotment of shares. (Chapter 6-9, General Market Indicators, 27-38, Mass
Psychology)
13. Why do common people trade in the markets?
13. c. Rational as well as irrational reasons. (Chapters 27-38, Mass Psychology)
14. Who of the following puts pressure on the mind-set of trading parties?
14. d. Undecided traders (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
15. How does Elder describe the behaviour of the crowd?
15. b. Primitive, simple and repetitive (Chapter 6-9, General Market Indicators, 27-38, Mass
Psychology)
16. Only two of the following four (i, ii, iii and iv) options are correct.
16.c. iii and iv (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
17. Which of the following is a key feature of a smart group of traders?
17. b. Independently deciding on which trades to take (Chapter 6-9, General Market Indicators, 27-
38, Mass Psychology)
18. When short sellers start covering their positions,_______
18. b. Market shows sudden sharp rallies (Chapter 6-9, General Market Indicators, 27-38, Mass
Psychology)
19. Which of the following prices is often termed as an amateur’s opinion about the price?
19. a. Open(Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
20. When the markets are chaotic, the strategy a trader should adopt is –
20. d. Refrain from trading (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
21. Which of the following indicates a stronger congestion zone?
21. a. Tall with high volume (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
22. The difference between the entry point to protective stop multiplied by the position size should
not be greater than ____ % of equity capital.
22. d. 2 (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
23. What is the greatest advantage that an employee of a trading firm has over an individual trader?
23. c. He has psychological advantage (Chapter 6-9, General Market Indicators, 27-38, Mass
Psychology)
24. Which of the following statements is WRONG about Elliott Wave Theory
24. c. Wave 3 is always the longest motive wave. (Note- it cannot be the shortest, does not mean it is
the longest) (Chapters 39-40. Elliott Wave Theory)
25. Harold numbered the wave as shown in the diagram.
What can be said about this?
25. d. Harold is witnessing a bear market truncation. (Chapters 39-40. Elliott Wave Theory)
26. In a leading diagonal,
26. b. Waves 2 & 4 are always zigzag (Chapters 39-40. Elliott Wave Theory)
27. Wave structure in a flat correction is-
27. d. 3-3-5 (Chapters 39-40. Elliott Wave Theory)
28. A triangle is a ______ wave pattern described as_________
28. c. Five, A-B-C-D-E (Chapters 39-40. Elliott Wave Theory)
29. Which of the following waves typically give countertrend in Elliott Wave Theory?
29. c. Waves 2,4 (Chapters 39-40. Elliott Wave Theory)
30. Paul is a trader. He observed that markets were down for the last three months. Even now, all the
experts in different media were bearish on the markets. News papers were printing stories about bad
state of economy. However, the technical indicators which he has found working very well earlier,
were not showing the bearish mood. They had turned up and were indicating buy. What should Paul
do?
30. d. Trust the indicators and exit the short positions (Chapter 25-26, Being right or making money).
31. Which of the following is NOT an important factor in deciding the direction of stock markets?
31. d. Buy or sell calls given by majority of analysts (Chapter 25-26, Being right or making money).
32. John conducted a survey to find how many people in the market think that the market will go up in
the next three months. His studies showed that nearly 86 % people were bullish on the markets.
Which of the following statements is most likely to be correct?
32. c. Market may come down as extreme public sentiment usually indicates last stage of that trend.
(Chapter 25-26, Being right or making money).
33. Why does Federal Reserve (Fed) increase the interest rates?
33. d. To keep low inflation and moderate economic growth (Chapter 25-26, Being right or making
money).
34. Number of stocks going up to number of stocks going down is commonly referred as-
34. c. Market Breadth (Chapter 25-26, Being right or making money).
35. Johann is a short term trader. Usually he holds a position open for a few days - rarely exceeding
a month. Which moving average should he ideally use for determining the general trend in the stocks?
35. c. 5 days (2 hours is too short and 50 days or 200 days are too long periods for his style of
trading). (Chapter 25-26, Being right or making money).
36. Which tool of analysis DOES NOT include price action?
36. d. External indicators(Chapter 25-26, Being right or making money).
37. When very few investors are bullish, it usually indicates-
37. d. market about to bottom out. (Chapter 25-26, Being right or making money).
38. Which one of the following is LESS LIKELY to happen before a major market top?
38. d. Mutual funds sitting on large amount of cash- not invested fully (Chapter 25-26, Being right or
making money).
39. Which of the following cannot be determined from price movement of one stock?
39. d. Relative strength. (Relative strength is the comparison of change in price of one asset with
another. A single chart cannot give that) (Chapter 54)
40. Hiya found that relative strength line of Bana Textiles against the index was flat. What would she
conclude from this?
40. d. Both the stock and the index are rising or falling at the same rate. (Chapter 54)
41. Jacob found the closing price of Amby Products as 11.4, 11.7, 11.9, 11.3, 11.5 and 11.8. What
would be the mean of these prices?
41. c. 11.6
42. Which of the following statements is CORRECT?
42. b. Method of determination of the median depends on number of observations. (If the number of
observations is odd, median is the middle value. However, if the number of observations is even,
median is the average of middle two values).
43. Reema is using 50 DMA for the determining the trend. Which of the following should she use?
43. c. Mean
44. When the number of data points in a set is small, the standard deviation-
44. a. Increases.
45. Sample error in a set of observations having N data points is-
45. c. Reciprocal of square root of N
46. If the distribution curve is flattish, it is said to have-
46. a. Negative Kurtosis
47. It was observed that beta for Astra Labs was 0.7. This means-
47. c. The stock is 70 % volatile compared to the market.
48. The price movement between two consecutive lows on the chart is termed as-
48. c. Cycle
49. Which of the following statements is WRONG?
49. b. Stricter laws indicate ethical behaviour of participants.
50. John is a technical analyst. He found that the stock of ABC International had broken below an
important support and was a good stock to short sell. He decided to include this in his report which is
due in the evening. However, during lunch, he overheard a talk in a restaurant that the company was to
get an important contract, which would have caused the stock to double in price soon. What action
should he take?
50. c. Give sell recommendation as per technical studies.
51. Richard stays in UK, where the laws of compliance are strict. However, he sends his reports by
email to a company in a small African country, Ankona, where the laws of compliance are more
relaxed. During his actions, which laws he has to comply?
51. c. Both, UK and Ankona, whichever is stricter as per the case. (See page 22 of Standards and
Practices for similar example).
52. Which of the following correctly defines Plagiarism?
52. c. Unauthorised copying of significant quantity of matter without giving due credit to the author
53. in the sense of Efficient Market Hypothesis, Burton and Shah term technical analysis as-
53. b. Irrational, noise players (Burton and Shah, Chapter 7, Page 67)
54. Burton and Shah describe trend following models as-
54. a. Herd Mentality (Burton and Shah, Chapter 7, Page 70)
55. According to Schiller Model,
55. b. Stock price at any given time can be calculated using a mathematical equation. (Burton and
Shah, Chapter 7, Page 73)
56. Which of the following is NOT used typically against the Efficient market Hypothesis?
56. d. Earnings from the markets (Burton and shah, chapter 1, Page 7. Volatility, predictability and
Pricing anomalies are three lines that criticise EMH).
57. According to Burton and Shah, noise traders are mostly trading on-
57. b. Stale and mostly bogus information (Burton and Shah, Chapter 3, Page 30)
58. According to Shleifer model, who are called the sophisticated investors?
58. a. Arbitrageurs (Burton and Shah, chapter 5, Page 45)
59. Advance Decline Line is plotted using-
59. c. The difference between the number of advancing and declining stocks. (A/D ratio is different
indicator)
60. In Bollinger Bands, two lines are drawn on either side of a moving average. They are ____
distance away from the moving average.
60. c. Two standard deviations.
61. Directional Movement Index is an oscillator composed of ____ number of lines.
61. b. Three
62. Which of the following can be calculated using traded volume?
62. a. Money flow index (Money flow index is the product of typical price and traded volume)
63. Number of open positions in options is termed as-
63. c. Open interest
64. Which of the following statements correctly describes Parabolic SAR?
64. a. It is plotted along the prices.
65. Price Rate of Change (Price ROC) is a-
65. b. Momentum indicator.
66. Relative strength is an important tool used for taking trading decisions. Given below are three
statements about relative strength.
66. d. All are wrong. (None of them is actually applicable to relative strength. Relative strength is the
ratio of change in price of one stock or index to that of the other. It has no overbought or oversold
regions).
67. Aruna observed that Reliance Industries stock had gone up by 10 % in three weeks. Tata motors
had gone up by 8 % in the same period. Under these observations, the most appropriate action
between these two would be-
67. b. Buy Reliance Industries and sell Tata Motors. (It is advisable, that one should buy a stock with
higher relative strength and short sell a stock or an index with lower relative strength, as a hedge. It is
true that the two are not too much apart in their performance, but the rule says so, and hence has to be
applied as it is. It is true that in reality, one may buy both and look for some other stock as a hedge,
but using whatever data is given, the correct answer is b).
68. In Williams % R indicator,
68. b. -20 is overbought level.
69. Exponential moving average is-
69. c. A type of weighted moving average
70. Which of the following statements is correct according to the weak form of Efficient market
Hypothesis?
70. c. Today’s price of a stock has no relation with yesterday’s price.
71. If the value of volatility index is 14 %, it means,
71. a. it means there is 68% probability that the index may be less than or equal to 14 % up or down
within a year. (Interestingly, there are different inferences drawn by different authors from the level of
VIX. This one is the most popular and found in the syllabus so I considered this over here).
72. Usual flags and pennants extend up to _____
72. b. 3 weeks.
73. Success rate for flags and pennants is-
73. b. 50-60 %.
74. Considering the complete price move with a flag pattern, where is the flag typically located?
74. c. At the mid-point of the entire price change
75. When a stock undergoes head and shoulder formation with horizontal neckline and gives a
breakout after that, the price change can be described as-
75. c. Higher top higher bottom formation changing into lower top lower bottom.
76. Which of the following patters rarely show throw-backs or pull-backs?
76. b. Flag
77. In the head and shoulder formation, the head height is 360, height of right shoulder is 325, and the
neckline is at 300. What would be the target for this formation?
77. b. 300- 60 = 240.
78. In a symmetrical triangle,
78. d. Both the lines are slanting.
79. Which of the following is a bullish reversal?
79. d. Morning star
80. Which is the formation seen on the last day in this chart?
80. c. Dragonfly doji
81. Markets work on three R’s. These are-
81. a. Returns, risk, relative value.
82. The form of government debt that is of the longest duration is-
82. c. Bonds
83. Which of the following DOES NOT qualify as hard assets?
83. a. Equity
84. Stock exchanges are-
84. b. Secondary markets.
85. Which asset class of the following DOES NOT pay any extra returns other than change in price?
85. d. Commodities.
86. When a stock goes in the direction opposite to the expected one, the risk involved is termed as-
86. d. Market Risk
87. When the interest rates are lowered,
87. b. The liquidity in the system increases.
88. Interest rates were lowered by the central bank in Brazil. What effect on the economy is
expected?
88. c. The inflation may rise. (Rising inflation is a result of monetary relaxation, i.e. lowering of
interest rates).
89. When a central bank in a country fixes the value of its currency to some other stable currency, this
is termed as-
89. b. Pegging of the currency
90. Which of the following has least credit risk?
90. c. Government Bonds
91. When value of a currency decreases very fast, till it is redundant, the state of economy is called
as-
91. c. Hyperinflation.
92. Some banks have to bid at every auction of bills by the government. They may sell these bills
further to other investors. These banks are termed as_______ in bills.
92. a. Primary dealers
93. Interest paid by the government to investors on bonds is termed as-
93. c. Yield
94. The product of offer size for bond selling in dollars multiplied by bid to cover ratio is 2.0. This
indicates-
94. a. Supply of bonds is less than the demand. (Greater the product of size and bid to cover ratio,
more the demand. Ratio of 2.0 indicates investors are ready to invest double the amount than what the
government is offering in that auction).
95. When the yield curve is inverted,
95. a. Yield on short term paper is more than that on long term paper.
96. Which of the following is NOT a limitations for corporates over the government when it comes to
generation of funds?
96. d. Corporates can sell equity.
97. What is the difference between company notes and company debentures?
97. c. Notes have collaterals. Debentures do not have any.
98. Which of the following contains all the companies are in the category called cyclicals?
98. b. Commodity, technology, media, home makers.
99. ________ in real estate indicates the annual returns an investor may get on a property.
99. b. Cap rate
100. Which of the following indices is a float weighted index?
100. b. S & P
101. Which of the following metals is NOT considered as a precious metal?
101. d. Nickel.
102. According to _____________ there are no exploitable patterns in markets where trading
strategies could be applied.
102.a. Efficient Market Hypothesis (Chapter 1-5- History of technical analysis)
103. Which of the following indicates short covering in futures market?
103. d. Price increasing and open interest decreasing.
104. The candlestick charting technique was developed and used by-
104. c. Munehisa Homma (Chapter 1-5- History of technical analysis)
105. According to Charles Dow, the market has _____ well defined movements that fit into each
other.
105. b. 3(Chapter 1-5- History of technical analysis)
106. Who should be credited for developing point and figure charting method?
106. d. Richard Wyckoff(Chapter 1-5- History of technical analysis)
107. According to Gartley, the Dow theory should actually be considered as the joint work of Dow
and ________.
107. d. William Hamilton. (Chapter 1-5- History of technical analysis)
108. According to Dow Theory, when penny stocks (fancy stocks) start rallying,
108. c. The existing bull trend in the markets would soon come to an end. (Chapter 1-5- History of
technical analysis)
109. Charles Dow observed that whenever the market is dull, it is followed by-
109. d. An advance in bull market and a decline in a bear market. (Chapter 1-5- History of technical
analysis)
110. Which of the following is NOT a continuation pattern?
110. b. Dark cloud cover
111. What is the main leader of market crowds?
111. d. price (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
112. Bonds from companies without any collateral are termed as-
112. c. Debentures
113. If wave 1 is extended, which typical phenomenon is observed from wave 3 and 5?
113. a. They are of equal length (Chapters 39-40. Elliott Wave Theory)
114. In a diagonal formation in a bull market, there are two trendines, one joining the highs of
diagonal and the other joining the lows. What is observed about these trendlines in majority of cases?
114. c. Usually the two are converging (Chapters 39-40. Elliott Wave Theory)
115. Volatility is typically plotted for-
115. c. Time period of 30 days
116. Which of the following is NOT a reversal pattern?
116.a. Window (Gap).
117. Identify the pattern formed on the last day on the chart given below
117. a. Bullish belt hold. (It is a piercing line, but that option a two day pattern. Any way, it is not
available. However, considering the single candle, it is a bullish belt hold)
118. Which of the following is NOT a debt instrument?
118. d. equity (It is partial ownership of the company and not a debt).
119. Sheila uses Relative strength for taking trading decisions. Which of the following actions would
be the best action?
119. d. Buy the stock with higher relative strength and sell the stock with lower relative strength.
120. Which of the following statements is CORRECT?
120. c. Stock market advisors as a group perform almost identically as that of the common public.
(Chapter 6-9, General Market Indicators)
Level 1 Question Paper 2
1. New High New Low index can be obtained from-
a. Adding the number of new lows to number of new highs on a particular day.
b. Subtracting the number of new lows from the number of new highs.
c. Dividing the number of new lows by the number of new highs.
d. Multiplying the number of new lows with the number of new highs and the product divided by the
total number of stocks.
2. Which observation about NH-NL Line is NOT used for predicting the future direction of the
markets?
a. Slope of the NH-NL line
b. Positive or negative value of NH-NL
c. Divergences shown by the NH-NL line.
d. Number of stocks that have not moved
3. Merlin saw that the NH-NL was moving sharply up, but the market was flat over the last few days.
What action would you suggest?
a. Wait and watch. Just one indicator going up cannot tell anything for sure.
b. NH-NL is a contra indicator. It is going up means the market may fall down.
c. NH-NL is a leading indicator. It is going up means the market may soon rally. Profit should be
booked in short positions.
d. NH-NL may times shows divergences. They should be neglected as unless the price starts moving,
nothing can be said for sure.
4. What is the major drawback of 50 day moving average indicator?
a. It is a lead indicator
b. It cannot differentiate between a short term correction and a major reversal.
c. It is usually not applicable to markets which show larger trends in prices.
d. It gives too many signals, many of them are false.
5. Which of the following describes the Most Active Stocks Indicator on New York Stock Exchange?
a. An advance-decline indicator of 15 most active stocks.
b. Index composed for 50 most active stocks.
c. Advance/Decline indicator of 50 most active stocks.
d. Index composed of 500 most active stocks.
6. When an advisor is writing an investment related article,
a. He is usually more bullish.
b. He tries to give crystal clear picture.
c. He usually gives a vague picture.
d. He usually creates more fear than greed.
7. Which of the following do not have any net long or short positions?
a. Arbitragers
b. Small speculators
c. Large speculators
d. Positional traders
8. Soya Foods has rallied to a new all-time high. However, in reality, the fundamentals of the
company do not support the current market price. Which of the following is likely to be seen?
a. Insider buying.
b. Insider accumulation.
c. Insider selling.
d. Open market selling.
9. When the bulls and the bears have comparable strength, what is the common action taken by the
intelligent traders?
a. They increase the frequency of trading
b. They reduce the frequency of trading.
c. They refrain from trading.
d. They take investment positions.
10. Which of the following DOES NOT get reflected in the price chart?
a. Trades in Futures markets
b. Buying of shares in the Secondary market
c. Buying of shares in the Primary market
d. Selling of shares in the Cash market
11. which of the following does not fall in the same group as the other three?
a. Gambling tendencies
b. Desire to earn money
c. Thrill seeking attitude
d. Getting excitement
12. What is the importance of undecided traders?
a. They do not know what is happening in the markets
b. They speed up the market movements
c. They cannot decide whether to buy or sell
d. They are not sure whether to buy or sell.
13. How does the money get into the markets?
a. Because improved earnings increase the price of stocks.
b. The overall economy decides the available liquidity
c. Government actions responsible for money flow
d. Greed of traders chasing the price.
14. Which important step is often taken by the traders in order to survive the uncertainty and fear in
the markets?
a. Systematic studies
b. Disciplined approach
c. Remain isolated
d. Joining group of traders
15. What is the main function of charts?
a. Predicting the changes in trends
b. Deciding entry levels and stop losses
c. Predicting psychology of masses
d. Maximising profits in a trade
16. Which of the following is usually short lived?
a. Bull market
b. bear market
c. Short covering rallies
d. Periods of flat markets.
17. Which of the following prices is often termed as professional’s opinion about the price?
a. Open
b. Close
c. High
d. Low
18. When the signals in different time frames do not agree with each other, it indicates-
a. Market is changing the direction.
b. Market is witnessing either profit booking or short covering
c. Market is in chaotic condition
d. Longer time frame signals would soon revert and match themselves with shorter time frame.
19. _____ is regarded as the better theory applicable to markets.
a. Nature’s Law
b. Random walk theory
c. Efficient Market Theory
d. Neither of these three.
20. Which of the following statements is WRONG?
a. An individual trader feels safer in a group
b. Institutional trades have great advantage over individual traders.
c. When employees of a trading institution start trading individually, they usually become successful.
d. Crowd thinking is usually more primitive.
21. The structure of typical impulse wave may be represented as-
a. 5-3-5-3-5
b. 3-5-3-5-3
c. 5-3-3-5-3-3
d. 3-5-3-3-5-3
22. When a bull market gets truncated,
a. Bottom of wave 4 overlaps with top of wave 1.
b. Low of wave 5 fails to cross low of wave 3.
c. A sideways corrective wave is observed
d. Top of wave 5 fails to cross top of wave 3.
23. In the following diagram, waves have been labelled.

What can best describe wave (1) given in this diagram?

a. It is a leading diagonal in bear market
b. It is a complex zig-zag correction.
c. It is a corrective diagonal.
d. It is a sharp correction in a bull market.
24. About a zigzag, which of the following statements is WRONG?
a. Wave B never goes beyond the start of wave A
b. Wave C almost always goes beyond the end of wave A
c. If wave C is truncated, it fails to go beyond the end of wave A
d. Wave C almost always equals wave B in length.
25. Which of the following is NOT a type of triangle?
a. Leading triangle
b. Barrier triangle
c. Contracting triangle
d. Expanding triangle
26. Which of the following waves can be traded with maximum advantage?
a. 1,3,5
b. 1,3,A,C
c. 2,4,B
d. 3,5,A,C
27. The chartist lists some of the following attitudes of traders- i. Failing to take losses, ii. Being
overly fearful at market bottoms and overly optimistic at tops iii. Failing to take responsibility of your
own money iv. Not following disciplined strategy. Which if these are mainly responsible for
reducing the returns?
a. i, ii, iii and iv.
b. i, ii and iii
c. i, iii and iv
d. ii, iii and iv.
28. Four statement are given below.
i. Most of the times, the crowd is right, except at the turning points.
ii. Reducing interest rates are favourable for stocks.
iii. Very serious economic issues should be largely irrelevant to a great operator
iv. There exists a direct relation between public psychology and liquidity.
Which of these statement(s) are WRONG?
a. Only iv
b. ii and iv
c. i, ii and iv
d. all are correct
29. A study revealed that average P/E for frontline stocks bought by investors in 2017 was 17,
whereas in 2018, investors were buying the same stocks even at a P/E of 23. What can be said about
future market condition?
a. As investors are ready to buy at higher P/E, the market direction remains up.
b. Though investors are buying at higher P/E, market direction may reverse soon.
c. Buying by investors at higher P/E indicates they are more optimistic about the markets. Nothing
concrete can be said about the direction only with this much information.
d. Investors may buy stocks at any P/E ratio. Market direction is always independent of it.
30. What is the main reason for a trader failing to make money?
a. Lack of smartness and knowledge
b. Lack of hard work
c. Lack of desire
d. Lack of discipline
31. When a great majority of investors have the identical view about the market,
a. Market usually moves in that direction.
b. Market usually moves very fast in that direction.
c. Market usually changes direction opposing that direction.
d. Nothing can be said about the market direction.
32. Jerry divided today’s price by the price 10 days ago and subtracted 1 from it. What is Jerry
measuring?
a. Chaikin Money Flow Index
b. Momentum
c. Breadth
d. Stochastic
33. Which are more important sets of external indicators?
a. Monetary and sentiment
b. Sentiment and trend
c. Trend and direction
d. Direction and finance
34. When economy grows far faster than liquidity,
a. Markets move sideways till the later catches up
b. Bear market begins
c. Bull market begins
d. We get a frantic bull run till liquidity increases.
35. Four statements are given here related to debt. Identify the CORRECT ones.
1. It can be positive if used for productive investment.
2. It can actually harm the stock market.
3. It is a short term measure, and can affect future investment and demand.
4. As it increases, it produces less GDP growth.
The correct statements are-
a. 1 & 2
b. 1, 3 & 4
c. 2 & 3
d. 2 & 4
36. In October 2014, William observed that the stock of Timson Pharma had fallen by 5 % in two
months, whereas Hornet pharma had fallen by 8 %. He took the ratio of the change between the two in
the same period. What is he determining?
a. Relative strength
b. Comparative ratio
c. Beta of the stocks
d. Sharpe Ratio
37. Which of the following statements about relative strength are WRONG?
a. It moves in trends
b. It can be used to compare two assets
c. It is plotted by noting the change in price of a stock over time.
d. It can be plotted between any two assets.
38. Marisa found seven values – 121, 128, 129, 120, 119, 127, 131. What is the median of these?
a. 125
b. 127
c. 126
d. 124
39. Which of the following statements is WRONG?
a. Mode for a set of data cannot be the highest or lowest number in that set.
b. Mode is the number that appears maximum number of times in a set
c. Median of a set of numbers may not be a member of that set.
d. Mean of a set of numbers cannot be higher than the highest number or lower than the lowest
number.
40. Nikki is stuck while determining the median for the data- 123.4, 125.7, 129.5, 122.8, 124.7,
133.5, 127.8, 129.5, 130.5, 128.7, 129.5, 132.8. What would be the correct value?
a. 129.5.
b. 128.2.
c. 129.1.
d. 128.9.
41. Accuracy _________ in a set of observations if the number of data points in the set is small.
a. Decreases
b. Increases
c. Remains unchanged
d. Fluctuates throughout
42. Geometric mean is given by-

a. (a1 x a2 x a3 x a4 …. X an)1/n.

b.

c.
d. (Mean - Median)/Standard deviation.
43. Peakedness of the clustered data is termed as-
a. Skewness
b. Kurtosis
c. Gaussian Curve
d. Bel Mont Curve
44. The relationship of price movement of a stock to that of the index is commonly represented by-
a. alpha
b. beta
c. gamma
d. delta
45. 28 day cycle typically has about ___ trading days.
a. 28
b. 20
c. 14
d. 28-30
46. What is the need of high ethical standards?
a. This maintains an environment of trust among people.
b. So the analyst would not be accused of misconduct.
c. This helps government to implement the laws better.
d. So the wrongdoers can be exposed easily.
47. Ahmed is responsible for handling portfolio of Mrs. Smith, an old lady living on returns on her
investments. Mrs. Smith has no knowledge of derivatives markets, and has a portfolio mainly of
stocks, mutual funds and bonds. She has instructed the investment company in writing that she wishes
to keep only those instruments in her portfolio. Ahmed found a good intraday trading opportunity in
Dow Futures and phoned Mrs. Smith to ask her permission to trade in futures. She told him, “I do not
understand what you are talking about, but you do whatever is good for my portfolio”. Ahmed traded
in Dow Futures and the trade was proven to be profitable. He exited the position on the same day.
Which of the following statements best describes the situation?
a. Ahmed as violated the ethics as the trade was not advisable considering the condition of the client
and instruction given for the account.
b. Had Ahmed obtained a written consent from Mrs. Smith, then the action would have been ethical.
c. Ahmed’s decision made profit for the client. So there is no violation.
d. As the trade was closed before the day end, in reality there was no real danger to the value of
portfolio. Hence his action is justified.
48. Sheikh Jaffer has invested 10 million dollars with Konita Investments. His instructions are the
fund should be invested only in businesses which his religion permits. His religion forbids the
consumption of alcohol. William, a junior analyst realised that the account holds some equity in a
company that bottles alcoholic beverages. However, William himself is not handling the portfolio of
Sheikh Jaffer. What should William do?
a. As William is not directly associated with the portfolio, he should neglect the matter.
b. As the company just bottles the beverages and not manufacture it, there is no violation of religious
beliefs.
c. William should disassociate himself immediately and quit his job if required.
d. William should bring this matter to the notice of his supervisor immediately.
49. Otto Hoffman looked at the chart of DJII and said, “The market has no strength left to move higher.
It is forming long upper shadows on candlestick charts. Looks like it would slide from here”. What
can be said about this sentence as per Efficient Market Hypothesis?
a. The market may not be going higher, so it is logical that it should correct.
b. When market is forming long upper shadows, it is the sign of market fatigue.
c. The remark is not justified and is not true.
d. Unless there is strong evidence of reversal, Otto should not go short in the market.
50. According to Burton and Shah, what can cause a sustained bubble in stock markets?
a. Efficient market hypothesis
b. Use of technical analysis
c. Inflationary measures
d. Use of indicators while analysing the security
51. According to Shiller Model, which of the following statements is CORRECT?
a. Stock prices are forecastable but dividend movements are not.
b. Dividend movements as well as stock prices are forecastable.
c. Neither dividend movements nor stock prices ae forecastable.
d. Dividend movements are forecastable but stock prices are not.
52. According to Efficient market Hypothesis, what is ultimately responsible for change in price of an
asset?
a. Change in information about the asset
b. Large orders to company
c. Increased profits
d. Higher dividend
53. Though investors prefer higher returns from portfolio, they do not want high variance in returns.
This is termed as-
a. Risk aversion
b. Consistency in portfolio
c. Systematic investing
d. Efficient Investing
54. Milton found a fungible asset. However, the two underlying forms were at different prices He
sold more expensive one and bought the cheaper one. How would the action of Milton be best
described?
a. Arbitration
b. Fungibility trading
c. Shuffling of investments
d. Reallocation of funds
55. ________ indicator has three parallel lines.
a. Andrew’s Pitchfork
b. William’s % R
c. Stochastic
d. ADX
56. Which of the following indicators uses traded volume in its calculation?
a. Stochastic
b. Money flow index
c. Price Rate of Change (Price ROC)
d. Andrew’s Pitchfork
57. Moving average of advance-decline line is also called-
a. Chaikin oscillator
b. McClellan oscillator
c. William’s % R
d. Bollinger Band
58. Product of Typical Price and Volume is used for the calculation of-
a. Money flow index
b. McClellan Oscillator
c. Relative Strength Index
d. Relative Strength
59. Yuri is using on-balance volume as an indicator. Which of the following is the correct statement
about it?
a. It is the ratio of number of puts to number of calls that are still open.
b. It is the product of typical price and volume
c. It is the ratio of today’s volume to volume N day ago.
d. It is the sum of all volumes, positive and negative, over the period of time.
60. Amy found that the stock price of OBV Technologies was falling, but the open interest in futures
for this stock was increasing. What conclusion can she draw from this observation?
a. The stock is likely to continue falling. Short positions may be initiated.
b. The stock is likely to reverse soon. She should be long.
c. Fall may stop soon, so short positions should be closed. However, buying is not advised.
d. More data would be required. Only change in open interest and price cannot indicate the possible
direction.
61. Parabolic SAR is the best used for-
a. Determining the support and resistance
b. Determining the trailing Stop Loss levels.
c. Determining the strength of the stock relative to other.
d. Determining the targets
62. Which of the following observations indicate a stronger bullish signal?
a. Peak above zero shown by Price ROC
b. Peak below zero shown by Price ROC
c. Low above zero shown by price ROC
d. Low below zero shown by price ROC.
63. Relative strength may be best defined as-
a. Ratio of price of one stock to the other.
b. Difference between the price of one stock to the other.
c. Ratio of change in price of one stock to the other.
d. Difference between the change in price of one stock to the other.
64. Which of the following is often used for determining overbought and oversold conditions?
a. Relative strength
b. Rate of change
c. MACD
d. None of these.
65. Williams % R typically moves between______ without reaching overbought or oversold.
a. -20 to -80.
b. 20 to 80.
c. 30 to 70.
d. -30 to -70.
66. In weighted moving average-
a. Recent data is given more weightage
b. Older data is given more weightage
c. Older data is eliminated completely from calculation.
d. Recent data is eliminated completely from calculation.
67. The square root of par variance swap rate over a 30 day period for an index is termed as-
a. Volatility Index (VIX)
b. Swap Ratio
c. Variance Integral
d. Put-call ratio
68. When VIX for an index is 17 %, it means in the next one year, the index may move equal to or less
than _____% up or down in the next year.
a. 50 %
b. 33 %
c. 61.8 %
d. 68 %,
69. Commonly the target for flag formation is-
a. Same as height of flag pole.
b. Same as width of flag
c. Half the height of flag pole
d. Double the width of flag.
70. Flags and pennants show ______ type of move towards the target after the breakout.
a. Slow and sluggish
b. Very fast and almost vertical
c. Zig-zag
d. Initially fast but slowing as the target approaches
71. Success rate for Head and Shoulder formation is-
a. 40-60 %
b. 60-70 %
c. >80 %
d. >90 %
72. Gayle found that Genomic Biosciences chart had given a head and shoulder breakout, but the
volume at the breakout was very thin. What action would you suggest?
a. Usually head and shoulder formation breakouts are with thin volumes. The sell signal should be
followed.
b. Thin volume indicates the pattern is likely to fail. No position is advised.
c. This volumes usually pick up later. However, the targets are curtailed to half.
d. Thin volume breakouts are usually accompanied by delayed moves. So, though the targets would be
achieved, time taken is likely to be longer.
73. For an ascending triangle, the breakout is typically witnessed-
a. At half distance from the beginning to apex
b. At the apex
c. At about two-third distance from the beginning to apex
d. Usually beyond three-fourth distance from the beginning to the apex
74. Chloe observed inverted head and shoulder formation in Neon Lighting stock. It had given a
breakout at 35. The lowest point of the head was at 28 and the neckline was at 37. What would be the
target for this formation?
a. 44
b. 46
c. 42
d. 48
75. Identify the major pattern in the chart given below spread throughout the chart.

a. Head and shoulder top

b. Descending triangle (Bearish Reversal)
c. Downward sloping channel
d. Rectangle
76. Which of the following is the sign of strongest bearish reversal?
a. Bearish harami
b. Bearish engulfing
c. Dark Cloud Cover
d. Piercing Line
77. Identify the pattern marked with a circle in the following chart.

a. Gap
b. Dark cloud cover
c. Engulfing Line
d. Window
78. Government borrows money in three different ways. Which of the following is NOT the method in
which government borrows money from public?
a. Bonds
b. Bills
c. Notes
d. Equity
79. The form of government debt that is of the shortest duration is-
a. Bills
b. Notes
c. Bonds
d. Equity
80. What reflects the performance of financial markets as a whole?
a. Equity
b. Indices
c. Commodities
d. Realty
81. Bid means-
a. The price offered by the buyer
b. The price demanded by the seller
c. The price difference between the highest offering buyer and the lowest demanding seller
d. The price at which the trade takes place.
82. Returns without any adjustments are termed as-
a. Justified returns
b. Nominal returns
c. Plain returns
d. Absolute returns
83. Companies that are the most exposed to economic risks are termed as-
a. Micro-finance companies
b. Cyclicals
c. Risky assets
d. Hard assets
84. Monetary tightening indicates-
a. Decreasing spending
b. Increasing taxes
c. Decreasing interest rates
d. Increasing interest rates
85. In early 2016, Indian Rupee slipped to a new low against the US dollar. In order to reduce the
magnitude of fall, what action is expected from Reserve Bank of India, the national central bank in
India?
a. Reserve Bank of India may lower the interest rates.
b. Reserve Bank in India may buy US dollars.
c. Reserve Bank of India may sell US dollars.
d. Reserve Bank of India may increase the interest rates.
86. Which of the following action CANNOT be done by a central bank in order to stabilise their own
currency?
a. Pegging the currency
b. Controlling the supply of foreign currency
c. Devaluing their own currency.
d. Devaluing the foreign currencies in their country.
87. Steve wants to borrow money from a bank to buy a car. Which risk would the bank face?
a. Debit risk
b. Credit risk
c. Market risk
d. Currency risk
88. Government needs short term funds, for the period of less than one year. Which action would be
taken by the central banks?
a. Selling treasury notes
b. Selling Government bonds
c. Selling treasury bills
d. Selling all three, bonds, notes and bills.
89. The Government is offering 4 % on its bills. Corporates are offering 6 %. The difference in rates
is termed as-
a. additional premium
b. rate spread
c. advantage rates
d. preference rates
90. ______ is projected annual return on a bond, based on current price and future interest payment.
a. Yield
b. Returns
c. Dividend
d. Interest
91. What are TIPS bonds?
a. They are protected against market risk.
b. They are protected against default risk
c. They are protected against inflation risk
d. They are protected against currency risk
92. It was observed that the economy is shrinking. What would be the relation between prices of
bonds for 1 year and 10 year periods?
a. 1 year bond will be more expensive.
b. 10 year bond will be more expensive
c. Both would be equally priced
d. There is no relation between economy and price of bonds of different tenures.
93. Moody’s gives credit ratings to different establishments. Which is the minimum credit rating for a
country to be considered the credit risk as small?
a. AAA
b. Baa3
c. Bbb-
d. Abb2
94. Arena Industries wants to sell some instruments in order to generate funds. However, they are
expecting to buy it back as and when sufficient funds are available. Which of the following should
they sell?
a. Putable bonds
b. Callable bonds
c. Notes
d. Debentures
95. Which of the following contains all the companies are in the category called Defensives?
a. Commodity, energy, technology, health care.
b. Commodity, technology, media, home makers
c. Health care, telephone, utility, food and beverages.
d. Retailers, consumer staples, telephone, technology.
96. Cap rate depends on __________________________
a. Rental income
b. Rental income as well as lost interest on investment
c. Rental income and taxes
d. Rental income as well as expenses towards maintenance and repair costs.
97. Which of the following indices focuses on small cap companies?
a. DJIA
b. S & P
c. Nasdaq
d. Russel 2000
98. Which of the following statements is WRONG about subjective methods of analysis?
a. They are never crystal clear.
b. Ambiguity remains in their interpretations.
c. They are useful in computerised trading systems.
d. Different analysts may come across different conclusions with subjective rules.
99. Which civilization is first suspected to use the methods in technical analysis?
a. Japanese
b. Indus
c. Egyptian
d. Babylonian
100. Candlestick charting was first applied on-
a. Tokyo stock exchange
b. Dojima Rice Exchange
c. Kobe Commodity exchange
d. Fukushima Commodity exchange
101. According to Charles Dow, the secondary price movement typically lasts between-
a. 2-5 days
b. 10-60 days
c. 100-150 days
d. 6 months to one year.
102. Wykoff Method uses-
a. Bar charts and candlestick charts
b. Candlestick charts and point and figure charts
c. Bar charts and point and figure charts
d. Any two different types of charts
103. Market crises result due to too much imagination. This concept was first put forward by-
a. Samuel Nelson
b. Robert Rhea
c. Richard Wyckoff
d. William Hamilton
104. ‘Low priced stocks often undergo significant advances in the third and final phase of a major
bull market’. This observation was put forward by-
a. Brown
b. Goetzmann
c. Russel
d. Rhea
105. According to Robert Rhea, what is the role of volume at the turning points of major market
moves?
a. Market turns are always accompanied by thin volumes
b. Market turns are always accompanied by heavy volumes.
c. There is heavy volume at the end of a bull market and thin volume at the end of a bear market.
d. There is thin volume at the end of a bull market and heavy volume at the end of a bear market.
106. Who of the following are legally allowed to speculate in the futures markets using inside
information?
a. Large institutional Investors.
b. Foreign Investors
c. Hedgers
d. Arbitragers
107. When 50 day moving average indicator is used for determining the overall direction of the
markets, it is usually plotted as-
a. Percentage of stocks closing above 50 days moving average
b. Number of stocks closing above 50 days moving average.
c. Ratio of the number of stocks closing above to the number of stocks closing below the 50 days
moving average.
d. Difference between the number of stocks closing above to the number of stocks closing below the
50 days moving average.
108. Which of the following is NOT a type of flat ?
a. Regular
b. Expanding
c. Extended
d. Running.
109. Which of the following statements about the pennant formation is WRONG?
a. A pennant is formed at the half way mark of the entire move.
b. Pennant typically takes from a few days up to 3 weeks for formation.
c. Targets for pennants are similar to that of flags.
d. It is a major reversal pattern.
110. Match the correct options from A,B,C and D with 1,2,3,4.
A. Flag1. Bearish reversal
B. Inverted Head and shoulder2. Continuation pattern
C. Ascending triangle3. Bullish reversal
D. Top formation 4. Bullish continuation
Choose the correct option matching the correct pairs from above.
a. A-1, B- 3, C-4, D-2
b. A-2, B- 1, C-4, D-3
c. A-2, B- 3, C-4, D-1
d. A-3, B- 2, C-4, D-1
111. Tulip Bulb Mania is associated with the years-
a. in 1550s, Amsterdam
b. in 1630s, Amsterdam
c. in 1740s, Paris
d. in 1830s, Norway
112. Dow’s ideas and observations were first popularised by-
a. Samuel Nelson.
b. Edward Jones
c. R.N.Elliott
d. William Hamilton
113. The first averages used by Charles Dow had ______ stocks.
a. 30
b. 20
c. 11
d. 8
114. Which of the following indices is sector specific?
a. DJIA
b. S & P
c. Nasdaq
d. Russel 2000
115. Which of the following indices is a market capital weighted index?
a. DJIA
b. S & P
c. Nasdaq
d. Russels 2000
116. Which of the following is NOT CORRECT about trend following model according to Burton and
Shah?
a. It can result in overoptiomism or overpessimism.
b. It can lead to higher or lower demand than the fundamentals justify.
c. In the longer run, this method cannot be used for profitable trades.
d. It can lead to creation and sustaining the bubbles
117. What is the reason for bubble formation according to Abreu-Brunnermeier Model?
a. Efficient market Hypothesis
b. Herd mentality
c. Overbought and oversold conditions.
d. Discounting mechanism of markets
118. _______ compares today’s close with the range for N days.
a. Stochastic
b. Relative strength index
c. McClellan Oscillator
d. Chaikin Money Flow Index
119. Given below are A, B, C & D, four indicators and i, ii, iii & iv as their properties. Match the
correct indicator with its properties.
A. Chaikin Money flow indexi. Market breadth indicator
B. McClellan Oscillatorii. Comparison between closing price and day’s range
C. ARMS indexiii. Measures overall volatility
D. Average True Rangeiv. Number of advancing & declining stocks and their volume.
The correct pairs are-
a. A- 2, B- 1, C- 4, D-3
b. A- 3, B- 2, C- 1, D- 4
c. A-4, B- 3, C – 2, D – 1
d. A – 2, B – 1, C – 4, D – 3
120. Which of the following may be regarded as the best leading indicator?
a. New High – New Low
b. Moving Average Convergence Divergence
c. Price Rate of Change
d. Parabolic Stop and Reversal
Answers to paper 2
1. New High New Low index can be obtained from-
1. b. Subtracting the number of new lows from the number of new highs. (New high/new low (NH-
NL) index can be obtained from the difference between NH and NL). (Chapter 6-9, General Market
Indicators)
2. Which observation about NH-NL Line is NOT used for predicting the future direction of the
markets?
2. d. Number of stocks that have not moved. (Chapter 6-9, General Market Indicators)
3. Merlin saw that the NH-NL was moving sharply up, but the market was flat over the last few days.
What action would you suggest?
3. c. NH-NL is a leading indicator. It is going up means the market may soon rally. Profit should be
booked in short positions. (Chapter 6-9, General Market Indicators)
4. What is the major drawback of 50 day moving average indicator?
4. b. It cannot differentiate between a short term correction and a major reversal. (Chapter 6-9,
General Market Indicators)
5. Which of the following describes the Most Active Stocks Indicator on New York Stock Exchange?
5. a. An advance-decline indicator of 15 most active stocks. (Chapter 6-9, General Market
Indicators)
6. When an advisor is writing an investment related article,
6. c. he usually gives a vague picture. (Chapter 6-9, General Market Indicators)
7. Which of the following do not have any net long or short positions?
7. a. Arbitragers. (Chapter 6-9, General Market Indicators)
8. Soya Foods has rallied to a new all-time high. However, in reality, the fundamentals of the
company do not support the current market price. Which of the following is likely to be seen?
8. c. Insider selling. (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
9. When the bulls and the bears have comparable strength, what is the common action taken by the
intelligent traders?
9. c. They refrain from trading. (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
10. Which of the following DOES NOT get reflected in the price chart?
10. c. Buying of shares in the Primary market(Chapter 6-9, General Market Indicators, 27-38, Mass
Psychology)
11. which of the following does not fall in the same group as the other three?
11. b. Desire to earn money (It is rational reason, whereas the others are irrational reasons for
trading). (27-38, Mass Psychology)
12. What is the importance of undecided traders?
12. b. They speed up the market movements (Chapter 6-9, General Market Indicators, 27-38, Mass
Psychology)
13. How does the money get into the markets?
13. d. Greed of traders chasing the price (Chapter 6-9, General Market Indicators, 27-38, Mass
Psychology)
14. Which important step is often taken by the traders in order to survive the uncertainty and fear in
the markets?
14.d. Joining group of traders (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
15. What is the main function of charts?
15. c. Predicting psychology of masses (Chapter 6-9, General Market Indicators, 27-38, Mass
Psychology)
16. Which of the following is usually short lived?
16. c. Short covering rallies (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
17. Which of the following prices is often termed as professional’s opinion about the price?
17. b. Close (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
18. When the signals in different time frames do not agree with each other, it indicates-
18. c. Market is in chaotic condition (Chapter 6-9, General Market Indicators, 27-38, Mass
Psychology)
19. _____ is regarded as the better theory applicable to markets.
19. d. Neither of these three (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
20. Which of the following statements is WRONG?
20. c. When employees of a trading institution start trading individually, they usually become
successful. (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
21. The structure of typical impulse wave may be represented as-
21. a. 5-3-5-3-5(Chapters 39-40. Elliott Wave Theory)
22. When a bull market gets truncated,
22. d. Top of wave 5 fails to cross top of wave 3(Chapters 39-40. Elliott Wave Theory)
23. In the following diagram, waves have been labelled.
23. a. It is a leading diagonal in bear market (Chapters 39-40. Elliott Wave Theory)
24. About a zigzag, which of the following statements is WRONG?
24. d. Wave C almost always equals wave B in length (Chapters 39-40. Elliott Wave Theory)
25. Which of the following is NOT a type of triangle?
25. a. Leading triangle (Chapters 39-40. Elliott Wave Theory)
26. Which of the following waves can be traded with maximum advantage?
26. d. 3,5,A,C (Chapters 39-40. Elliott Wave Theory)
27. The chartist lists some of the following attitudes of traders- i. Failing to take losses, ii. Being
overly fearful at market bottoms and overly optimistic at tops iii. Failing to take responsibility of your
own money iv. Not following disciplined strategy. Which if these are mainly responsible for
reducing the returns?
27. a. i, ii, iii and iv. (Chapter 25-26, Being right or making money).
28. Four statement are given below.
28. a. Only iv (Chapter 25-26, Being right or making money).
29. A study revealed that average P/E for frontline stocks bought by investors in 2017 was 17,
whereas in 2018, investors were buying the same stocks even at a P/E of 23. What can be said about
future market condition?
29. c. Buying by investors at higher P/E indicates they are more optimistic about the markets. Nothing
concrete can be said about the direction only with this much information. (Chapter 25-26, Being right
or making money).
30. What is the main reason for a trader failing to make money?
30. d. Lack of discipline (Chapter 25-26, Being right or making money).
31. When a great majority of investors have the identical view about the market,
31. c. Market usually changes direction opposing that direction (Chapter 25-26, Being right or making
money).
32. Jerry divided today’s price by the price 10 days ago and subtracted 1 from it. What is Jerry
measuring?
32. b. Momentum (Chapter 25-26, Being right or making money).
33. Which are more important sets of external indicators?
33. a. Monetary and sentiment (Chapter 25-26, Being right or making money).
34. When economy grows far faster than liquidity,
34. b. Bear market begins. (Chapter 25-26, Being right or making money).
35. Four statements are given here related to debt. Identify the CORRECT ones.
35. b. 1, 3 & 4. (Chapter 25-26, Being right or making money).
36. In October 2014, William observed that the stock of Timson Pharma had fallen by 5 % in two
months, whereas Hornet pharma had fallen by 8 %. He took the ratio of the change between the two in
the same period. What is he determining?
36. a. Relative Strength(Chapter 54)
37. Which of the following statements about relative strength are WRONG?
37. c. It is plotted by noting the change in price of a stock over time. (It is plotted by noting the ratio
of price of two assets over time. It cannot be plotted for a single asset. It has to be comparison
between the two) (Chapter 54)
38. Marisa found seven values – 121, 128, 129, 120, 119, 127, 131. What is the median of these?
38. b. 127
39. Which of the following statements is WRONG?
39. a. Mode for a set of data cannot be the highest or lowest number in that set.
40. Nikki is stuck while determining the median for the data- 123.4, 125.7, 129.5, 122.8, 124.7,
133.5, 127.8, 129.5, 130.5, 128.7, 129.5, 132.8. What would be the correct value?
40. c. 129.1
41. Accuracy _________ in a set of observations if the number of data points in the set is small.
41. a. Decreases
42. Geometric mean is given by-

42. a. (a1 x a2 x a3 x a4 …. X an)1/n.

43. Peakedness of the clustered data is termed as-

43. b. Kurtosis
44. The relationship of price movement of a stock to that of the index is commonly represented by-
44. b. beta.
45. 28 day cycle typically has about ___ trading days.
45. b. 20 (It has 28 calendar days, which approximates to about 20 trading days).
46. What is the need of high ethical standards?
46. a. This maintains an environment of trust among people.
47. Ahmed is responsible for handling portfolio of Mrs. Smith, an old lady living on returns on her
investments. Mrs. Smith has no knowledge of derivatives markets, and has a portfolio mainly of
stocks, mutual funds and bonds. She has instructed the investment company in writing that she wishes
to keep only those instruments in her portfolio. Ahmed found a good intraday trading opportunity in
Dow Futures and phoned Mrs. Smith to ask her permission to trade in futures. She told him, “I do not
understand what you are talking about, but you do whatever is good for my portfolio”. Ahmed traded
in Dow Futures and the trade was proven to be profitable. He exited the position on the same day.
Which of the following statements best describes the situation?
47. a. Ahmed has violated the ethics as the trade was not advisable considering the condition of the
client and instruction given for the account.
48. Sheikh Jaffer has invested 10 million dollars with Konita Investments. His instructions are the
fund should be invested only in businesses which his religion permits. His religion forbids the
consumption of alcohol. William, a junior analyst realised that the account holds some equity in a
company that bottles alcoholic beverages. However, William himself is not handling the portfolio of
Sheikh Jaffer. What should William do?
48. d. William should bring this matter to the notice of his supervisor immediately.
49. Otto Hoffman looked at the chart of DJII and said, “The market has no strength left to move higher.
It is forming long upper shadows on candlestick charts. Looks like it would slide from here”. What
can be said about this sentence as per Efficient Market Hypothesis?
49. c. The remark is not justified and is not true. (Burton and Shah, Chapter 7, Page 65)
50. According to Burton and Shah, what can cause a sustained bubble in stock markets?
50. b. Use of technical analysis (Burton and Shah, Chapter 7, Page 67)
51. According to Shiller Model, which of the following statements is CORRECT?
51. d. Dividend movements are forecastable but stock prices are not. (Burton and Shah Chapter 7,
Page 72.
52. According to Efficient market Hypothesis, what is ultimately responsible for change in price of an
asset?
52. Change in information about the asset (Burton and Shah, Chapter 1, Page 6)
53. Though investors prefer higher returns from portfolio, they do not want high variance in returns.
This is termed as-
53. a. Risk aversion (Burton and Shah, Chapter 2, Page 15)
54. Milton found a fungible asset. However, the two underlying forms were at different prices He
sold more expensive one and bought the cheaper one. How would the action of Milton be best
described?
54. Arbitration. (Burton and Shah, Chapter 4)
55. ________ indicator has three parallel lines.
55. a. Andrew’s Pitchfork
56. Which of the following indicators uses traded volume in its calculation?
56.b. Money flow index
57. Moving average of advance-decline line is also called-
57. a. Chaikin Oscillator
58. Product of Typical Price and Volume is used for the calculation of-
58. a. Money flow index.
59. Yuri is using on-balance volume as an indicator. Which of the following is the correct statement
about it?
59. d. It is the sum of all volumes, positive and negative, over the period of time.
60. Amy found that the stock price of OBV Technologies was falling, but the open interest in futures
for this stock was increasing. What conclusion can she draw from this observation?
60. a. The stock is likely to continue falling. Short positions may be initiated .
61. Parabolic SAR is the best used for-
61. b. Determining the trailing stop loss levels.
62. Which of the following observations indicate a stronger bullish signal?
62. c. Low above zero shown by price ROC.
63. Relative strength may be best defined as-
63. c. Ratio of change in price of one stock to the other.
64. Which of the following is often used for determining overbought and oversold conditions?
64. d. None of these. (Relative strength index is used for determining overbought and oversold. Not
relative strength).
65. Williams % R typically moves between______ without reaching overbought or oversold.
65. a. -20 to -80.
66. In weighted moving average-
66. a. Recent data is given more weightage.
67. The square root of par variance swap rate over a 30 day period for an index is termed as-
67. a. Volatility index (VIX). (This is the definition of VIX).
68. When VIX for an index is 17 %, it means in the next one year, the index may move equal to or less
than _____% up or down in the next year.
68. d. 68 %.
69. Commonly the target for flag formation is-
69. a. Same as the height of flag pole.
70. Flags and pennants show ______ type of move towards the target after the breakout.
70. b. very fast and almost vertical.
71. Success rate for Head and Shoulder formation is-
71. c. > 80 %
72. Gayle found that Genomic Biosciences chart had given a head and shoulder breakout, but the
volume at the breakout was very thin. What action would you suggest?
72. b. Thin volume indicates the pattern is likely to fail. No position is advised.
73. For an ascending triangle, the breakout is typically witnessed-
73. c. At about two-third distance from the beginning to apex
74. Chloe observed inverted head and shoulder formation in Neon Lighting stock. It had given a
breakout at 35. The lowest point of the head was at 28 and the neckline was at 37. What would be the
target for this formation?
74. a. 44.
75. Identify the major pattern in the chart given below spread throughout the chart.
75. b. Descending triangle (Bearish Reversal)

Resistance line is sloping down, support line is flat. It is NOT a head and shoulder top.
76. Which of the following is the sign of strongest bearish reversal?
76. b. Bearish Engulfing.
77. Identify the pattern marked with a circle in the following chart.
77. d. Window (In candlestick patterns, a gap is called as window. So, the answer gap is wrong).
78. Government borrows money in three different ways. Which of the following is NOT the method in
which government borrows money from public?
78. d. equity
79. The form of government debt that is of the shortest duration is-
79. a. bills.
80. What reflects the performance of financial markets as a whole?
80. b. Indices
81. Bid means-
81. a. The price offered by the buyer.
82. Returns without any adjustments are termed as-
82. b. Nominal returns
83. Companies that are the most exposed to economic risks are termed as-
83. b. Cyclicals.
84. Monetary tightening indicates-
84. d. Increasing interest rates (This decreases the liquidity, i.e. funds available in the system).
85. In early 2016, Indian Rupee slipped to a new low against the US dollar. In order to reduce the
magnitude of fall, what action is expected from Reserve Bank of India, the national central bank in
India?
85. c. Reserve Bank of India may sell US dollars. (Increased supply of US Dollars in the market
would lower its price).
86. Which of the following action CANNOT be done by a central bank in order to stabilise their own
currency?
86. b. Pegging of the currency
87. Steve wants to borrow money from a bank to buy a car. Which risk would the bank face?
87. b. Credit risk
88. Government needs short term funds, for the period of less than one year. Which action would be
taken by the central banks?
88. c. selling treasury bills. (Treasury bills are securities that the government sells to borrow funds
for durations less than a year).
89. The Government is offering 4 % on its bills. Corporates are offering 6 %. The difference in rates
is termed as-
89. b. rate spread
90. ______ is projected annual return on a bond, based on current price and future interest payment.
90. a. Yield.
91. What are TIPS bonds?
91. c. They are protected against inflation. (TIPS stands for Treasury Inflation Protected Securities).
92. It was observed that the economy is shrinking. What would be the relation between prices of
bonds for 1 year and 10 year periods?
92. b. 10 year bond will be more expensive (Longer period bonds have lower yield in a shrinking
economy compared to short term bonds. However, price and yield are inversely related).
93. Moody’s gives credit ratings to different establishments. Which is the minimum credit rating for a
country to be considered the credit risk as small?
93. b. Baa3
94. Arena Industries wants to sell some instruments in order to generate funds. However, they are
expecting to buy it back as and when sufficient funds are available. Which of the following should
they sell?
94.b. Callable bonds. (Callable bonds- Company has option to buy them back before maturity.
Putable bonds- investors can sell them back to company before maturity. Convertible bonds-
Investors can swap debt for equity).
95. Which of the following contains all the companies are in the category called Defensives?
95. c. Health care, telephone, utility, food and beverages.
96. Cap rate depends on __________________________
96. d. Rental income as well as expenses towards maintenance and repair costs.
97. Which of the following indices focuses on small cap companies?
97. d. Russel 2000
98. Which of the following statements is WRONG about subjective methods of analysis?
98. c. They are useful in computerised trading systems.
99. Which civilization is first suspected to use the methods in technical analysis?
99. d. Babylonian(Chapter 1-5- History of technical analysis)
100. Candlestick charting was first applied on-
100. b. Dojima Rice Exchange(Chapter 1-5- History of technical analysis)
101. According to Charles Dow, the secondary price movement typically lasts between-
101. b. 10-60 days. (Chapter 1-5- History of technical analysis)
102. Wykoff Method uses-
102. c. Bar charts and point and figure charts. (Chapter 1-5- History of technical analysis)
103. Market crises result due to too much imagination. This concept was first put forward by-
103. d. William Hamilton. (Chapter 1-5- History of technical analysis)
104. ‘Low priced stocks often undergo significant advances in the third and final phase of a major
bull market’. This observation was put forward by-
104. c. Russell. (Chapter 1-5- History of technical analysis)
105. According to Robert Rhea, what is the role of volume at the turning points of major market
moves?
105. c. There is heavy volume at the end of a bull market and thin volume at the end of a bear market.
(Chapter 1-5- History of technical analysis)
106. Who of the following are legally allowed to speculate in the futures markets using inside
information?
106. c. Hedgers. (Chapter 6-9, General Market Indicators)
107. When 50 day moving average indicator is used for determining the overall direction of the
markets, it is usually plotted as-
107. a. Percentage of stocks closing above 50 days moving average (Chapter 6-9, General Market
Indicators)
108. Which of the following is NOT a type of flat ?
108. c. Extended (Chapters 39-40. Elliott Wave Theory)
109. Which of the following statements about the pennant formation is WRONG?
109.d. It is a major reversal pattern.
110. Match the correct options from A,B,C and D with 1,2,3,4.
A. Flag1. Bearish reversal
 B. Inverted Head and shoulder2. Continuation pattern
C. Ascending triangle3. Bullish reversal
D. Top formation 4. Bullish continuation
Choose the correct option matching the correct pairs from above.
110. c. A-2, B- 3, C-4, D-1
111. Tulip Bulb Mania is associated with the years-
111. b. in 1630s, Amsterdam. (Chapter 1-5- History of technical analysis)
112. Dow’s ideas and observations were first popularised by-
112. a. Samuel Nelson. (Chapter 1-5- History of technical analysis)
113. The first averages used by Charles Dow had ______ stocks.
113. c. 11. (Chapter 1-5- History of technical analysis)
114. Which of the following indices is sector specific?
114. c. Nasdaq
115. Which of the following indices is a market capital weighted index?
115. c. Nasdaq
116. Which of the following is NOT CORRECT about trend following model according to Burton and
Shah?
116. c. In the longer run, this method cannot be used for profitable trades. (Burton and Shah, Chapter
7, Page 65-68)
117. What is the reason for bubble formation according to Abreu-Brunnermeier Model?
117. b. Herd Mentality (Burton and Shah, Chapter 7, Page 75)
118. _______ compares today’s close with the range for N days.
118. a. Stochastic
119. Given below are A, B, C & D, four indicators and i, ii, iii & iv as their properties. Match the
correct indicator with its properties.
119. a. A- 2, B- 1, C- 4, D-3
120. Which of the following may be regarded as the best leading indicator?
120.a. New High-New Low. (Chapter 6-9, General Market Indicators)
Level 1 Question Paper 3
1. When NH-NL=0, it means-
a. Low volume day.
b. Day of expiry of FNO contracts
c. Day of uncertainty
d. Day of extreme values.
2. Leila observed that NH-NL line was negative for nearly 5 months. Then it slowly moved in
positive territory. What would be the most appropriate conclusion from this observation?
a. The market has bottomed out. She should go long in the markets.
b. The market is likely to retest the lows. She should wait and watch.
c. The market has topped out. She should exit the markets
d. Market has formed a bottom, but it is only a short term bottom and may break in future. So, no long
term buying is advised.
3. Which of the following statements is CORRECT?
a. Greed lasts longer than the fear
b. Fear lasts longer than the greed.
c. Greed and fear are equally lasting.
d. Nothing can be said as a general statement about the reed and the fear.
4. Esther is using NH-NL line for determining the entry level in the markets. She observed three things
about the indicator. Which of these is NOT required while taking decisions about the future trend of
the markets?
a. Positive or negative value of the indicator
b. Slope of the indicator
c. Divergences between the indicator and the market prices.
d. All of the above three are essential.
5. The Chinese market is in a downtrend. Bulls have also in consensus that the fall is likely to
continue. What would be the most appropriate action in this scenario?
a. Markets may fall sharply. One should initiate short positions.
b. Market may not fall sharply. One may hold short positions, but not increase them.
c. Market ay rally sharply. One should be long.
d. Market fall may stop soon. One should liquidate short positions and wait for long signals.
6. Which of the following do NOT have a position limit?
a. Large institutional Investors.
b. Foreign Investors
c. Hedgers
d. Arbitragers
7. According to the laws of Securities and Exchange Commission (SEC), if a person holds more than
___ % stocks of a single company, he has to report any buying or selling into the same stock to SEC.
a. 1 %
b. 5 %
c. 7 %
d. 10 %
8. ____ is the price the buyer is ready to offer whereas ____ is the price the seller is demanding.
a. Bid, ask
b. Ask, bid
c. Quote, Offer
d. Offer, quote
9. Insider trading cannot be eliminated because-
a. Insiders usually pass the information to others.
b. Insiders do not reveal the positions taken by them.
c. Insiders cannot be identified in the market crowd
d. Insiders are permitted to trade without using inside information.
10. Desire to earn money from stock trading is classified as-
a. Rational reason
b. Irrational reason
c. Speculative reason
d. Thrill seeking behaviour
11. What are the types of traders?
a. Buyers
b. Sellers
c. Buyers as well as sellers
d. Buyers, sellers and undecided
12. What does a chart pattern correctly indicate?
a. Mass psychology
b. Perfect entry point
c. Accurate target
d. Entry as well as exit point
13. To be a successful trader, you ______________________________
a. Change your trading plan as the need of time may demand
b. Should not change your trading plan when the position is open
c. Keep a close eye on the open position to exit as soon as you feel the tide turning.
d. Change your trading plan only if some other parameter opposes the opening of a position.
14. When the buyers are slightly more optimistic than the sellers,
a. Markets move up slowly
b. Markets tend to show volatile nature
c. Markets can witness longer periods of inaction and sudden rallies.
d. Markets become very cautious and tend to remain absolutely flat.
15. Which of the following defines bearish divergence?
a. Stock makes a new high but indicator makes a new low
b. Stock makes a higher high but indicator makes a lower high
c. Stock makes a new low but indicator makes a new high
d. Both stock and indicator make a low, but indicator low is lower than stock low.
16. Japanese candlesticks give more importance to –
a. Opening price
b. Closing price
c. Difference between high and low
d. Difference between open and close.
17. If a support or resistance holds for longer time or multiple tests, it indicates-
a. It is usually very strong and likely to hold, but loses strength slowly if becomes very old.
b. It is weakening and would soon give up.
c. Nothing. It has no relation with time or number of times it has got tested.
d. Usually it will hold for a further one test, before giving up.

18. Eva noticed that AgroTech stock had a support at 35. It dipped to 34 on 1st June 2015, and closed
at 34.3. On 2nd June, it recovered to close at 36. What should she do?
a. She should be wary of a fall.
b. No definite conclusion can be drawn from this observation.
c. It appears to be the case of a false breakout. She should buy the stock.
d. The stock has given a breakout and slight pull back only confirms it. She should short sell
19. High profits earned by institutional investors can be correlated to which factor?
a. Complex trading models
b. Computerised trading systems
c. Higher ability to bear losses
d. Sources of rapid information.
20. What is the essential condition for a proper trading plan?
a. It must be written plan, followed to the word.
b. It must have ideally five to seven parameters.
c. It must have bullish as well as bearish signals
d. There should be no place for even a single false signal.
21. In a double extension,
a. Out of 1,3,and 5, any two are extended
b. Wave 2 and 4 are extended
c. Wave 3 & 5 are usually extended
d. Any two waves out of 1,2,3,4 & 5 get extended.
22. In a typical diagonal, the number of sub-waves observed is-
a. 3-3-3-3-3
b. 5-3-5-3-5
c. 3-5-3-5-3
d. 1-2-3-4-5
23. A zigzag is _____ type of structure
a. 5-5-5
b. 3-3-3
c. 5-3-5
d 3-5-3
24. How is a running flat best described?
a. Wave B ends beyond the start of wave A, but wave C fails to reach end of wave A.
b. Wave B ends before the start of wave A but wave C exceeds the end of wave A
c. Wave B ends before the start of wave A and wave C ends before the end of wave A
d. Wave B exceeds beyond the start of wave A and wave C exceeds the end of wave A.
25. When two or more Fibonacci projections indicate approximately same level, it is called as-
a. Fibonacci group
b. Cluster
c. Multiples
d. Convergence
26. If you want to be a successful trader, you should-
a. Be rigid to your views
b. Maintain strict isolation
c. Be flexible with you opinions
d. Seek opinion of others before finalising your views.
27. Nearly all of great traders agree that-
a. You should never go wrong with your analysis
b. You may go wrong, but stick to your positions. Sooner or later, tide will turn in your favour.
c. Never enter the position that can land into losses.
d. You can never avoid losses completely. Manage your risk and minimise the losses.
28. What are the reasons for popular forecasts going frequently wrong?
a. Because there is direct relation between mass psychology and liquidity.
b. Because there is inverse relation between mass psychology and liquidity.
c. Because there is no relation between mass psychology and liquidity
d. Because the relation between mass psychology and liquidity is not predictable.
29. How can one avoid biases and offer an objective standard of decision making?
a. Mathematical modelling
b. Neglecting the market noise
c. Control of one’s emotions.
d. Proper money management.
30. Which of the following is NOT always essential while developing a model with variety of
indicators?
a. Error free, reliable data inputs
b. Intraday as well as end of the day data
c. regular updatation
d. data revision and adjustments
31. Which of the following is an external indicator for equities?
a. Market breadth
b. Momentum
c. Interest Rates
d. Market trend
32. Increase in interest rates would usually-
a. Does not affect the stock markets
b. Adversely affect the stock markets
c. Favourably affect the stock markets
d. Initially favour the stock markets but in the longer run affect adversely.
33. High interest rates would-
a. Favour the bond market but harm the equities market
b. Favour both, bond and equities market
c. Harm the bond market but favour the equities market
d. Harm both bond and equities markets.
34. Which of the following statements is WRONG?
a. Crowd is always wrong at the extremes
b. Crowd is always wrong most of the time.
c. Crowd is always correct most of the time.
d. Crowd cannot judge the market turnaround
35. Which of the following is the NOT very important input for developing any model for trading into
stocks?
a. Which sector is being studied
b. Timely receipt of data
c. Error free data
d. Relevance of data
36. What is the MAIN use of moving averages in analysis?
a. To reduce the short term fluctuations
b. To generate buy and sell signals
c. To determine the targets
d. To determine the stop losses.
37. Myra observed that 50 days moving average for Homemade Foods had risen by more than 5 %
and was sloping up. The conclusion she can draw from this is-
a. The stock is in a medium term uptrend and can be bought.
b. If the move continues till 10 % then the buy signal would be generated.
c. The move may be nearing completion and buying is not warranted.
d. Nothing concrete can be said with only this much information.
38. An indicator that gives very few signals-
a. Is more reliable.
b. Should be used with caution
c. Almost never goes wrong
d. Cannot be used at all.
39. What is the main use of models for trading?
a. Generation of signals.
b. Bringing discipline to trading
c. Increasing the profit margins
d. Using computers for trading.
40. 50 days moving average was below 200 days moving average. However, it was observed that in
September 2013, it came above 200 days moving average. This phenomenon is the best described as-
a. Moving average crossover
b. Death cross
c. Golden cross
d. Buy signal.
41. Stephanie uses breadth as an indicator in her studies. She observed that the volume in Streetsmart
Ventures was 1.1 million and stock had closed higher than its opening price. What information she
gets from this data?
a. Demand was 1.1 million.
b. Supply was 1.1 million.
c. There was a demand for 1.1 million and supply of same volume.
d. There may be more demand or supply but in 1.1 million shares, the bid-ask prices were agreed
upon.
42. When margin debt is bullish and rising,
a. Upside is limited - Market is about to top out.
b. Market is about to bottom out
c. Market has already bottomed out
d. Market has already topped out
43. What is the relation between interest rates and stock prices?
a. Interest rates start falling before the stocks peak.
b. Stocks peak before the interest rates peak
c. Interest rates start rising before the stocks peak
d. Interest rates and stocks almost always bottom out together.
44. How is relative strength of an asset best defined?
a. It is how strong is the move in the price of the asset
b. It is the comparison of the change in price of one asset with another.
c. It is the resistance to change in price, opposite to the main trend
d. It is the ratio of price of one asset with price of another.
45. Simran is studying the movement of Tata Chemicals against the index Nifty. She found that when
Tata Chemicals has increased by 10 %, Nifty has increased by 8 %. What conclusion would be
correct in this situation?
a. Tata chemicals is in a strong uptrend, and so is Nifty.
b. Trend cannot be determined just with this much information.
c. Tata chemicals has more relative strength than Nifty
d. Tata chemicals is a good buying opportunity
46. ___________________is obtained by dividing the price of one underlying against the other over
a period of time.
a. Relative strength index
b. Moving average convergence divergence
c. Rate of Change
d. None of these
47. Which of the following statements is WRONG?
a. Relative strength shows distinct trends and trendline can be drawn for it.
b. Relative strength is used to compare two assets against each other.
c. Relative strength cannot be determined with a single stock
d. Relative strength is determined by equation RS = (Price of a stock + 1)/(Price of another stock + 1)
48. Harry wrote- Relative strength is overbought when above 70 and oversold when below 30. What
can you say about this statement?
a. It is a correct statement.
b. Overbought is above 80 and oversold is below 20.
c. There is no overbought or oversold level for relative strength.
d. The stock with higher relative strength always goes up.
49. Determine the median for the set - 5.4, 5.5, 5.2, 5.3, 5.7, 5.6
a. 5.45
b. 5.5
c. 5.4
d. 5.55
50. Abha found that HCL technologies was experiencing a selling at a level. She found that five
consecutive days, the stock made a high of 1000.50, 1002.65, 999.75, 1000.20, 998.90. She decided
to buy the stock only if it closes above the median. What is the median of these values?
a. 1000.20
b. 1000.40
c. 1002.65
d. 998.90
51. Determine the number of modes for the following set of data
1, 3, 1, 2, 4, 2, 9, 4, 1, 5, 6, 6, 3, 4, 2, 7, 8.
a. 1
b. 2
c. 3
d. 4
52. Only one of the following four statements is correct. Identify the CORRECT statement.
a. A set of observations may not have a mode.
b. Mean of a set of numbers has to be a member of that set of numbers
c. Median may or may not be determinable.
d. Mode cannot be the highest value in a set of numbers.
53. When the observations are over a wide range of prices for a particular stock, which of the
following methods is adopted?
a. Use of regular graph paper.
b. Dividing all values by a fixed number in order to make the graph compact
c. Plotting different graphs over different price scales and then combining them
d. using logarithmic scale on Y axis.
54. Which of the following log papers is NOT applicable while plotting the charts?
a. Regular graph paper
b. Analog graph paper
c. Semilog graph paper
d. Ratio scale log paper
55. Which of the following statements is CORRECT?
a. Higher standard deviation is observed if a set of observations has very high number of data points.
b. When the standard deviation is high, the possibility of finding an average that represents it
decreases.
c. Standard deviation is a reciprocal of sum of deviations from the mean.
d. Square root of standard deviation gives the average mean deviation of all data points.
56. When only representative set of data points is available, the accuracy is generally-
a. Very high
b. low.
c. directly proportional to the number of data points.
d. Inversely proportional to the number of data points.
57. Harmonic mean is the reciprocal of-

a. (a1 x a2 x a3 x a4 …. X an)1/n.

b.

c.
d. (Mean - Median)/Standard deviation.
58. Skewness is calculated by equation-

a. (a1 x a2 x a3 x a4 …. X an)1/n.
b.

c.
d. (Mean - Median)/Standard deviation.
59. When future data can be predicted using the past data, the correlation is termed as-
a. Serial correlation
b. Progressive correlation
c. Regressive correlation
d. Non-linear correlation.
60. When there is no correlation between the price of stock and the market, the value of (beta) is-
a. Positive
b. Negative
c. Positive but very low
d. Zero
61. A cycle in price that takes place annually is termed as-
a. Annuity
b. Seasonality
c. Kondratiff Cycle
d. Presidential Cycle
62. The first step in order to determine the existence of any possible seasonality is-
a. Detrending
b. Trending
c. Averaging
d. Studying the price patterns
63. Which of the following should be last objective to any technical analyst as per the code of ethics?
a. Fairness to clients
b. Honesty
c. Self interest
d. Diligence
64. Highest dependency of an efficient capital market lies on-
a. Number of instruments available for trading
b. Trust of the participants about the market
c. Availability of hedging tools
d. Stricter laws by the government.
65. In the year 2014, the laws about insider trading were changed. John was not aware of this change.
He entered a trade, which was in compliance with the old law but violating the new laws. Which of
the following statements is correct according to the ethics?
a. As John was not aware of the change, he is not guilty.
b. As the law was changed, John is guilty of violation of insider trading.
c. Depending of which law is stricter, it would be decided whether John has violated the law or not.
d. John is not only violating the insider trading norms, but also violating the ethics as he is not well
conversant with the law.
66. Rahul was analysing the stock of May Flower Computers. He found the stock reports of the
company highly favourable and recommended ‘Buy’ for the stock. Later it was found out that the stock
reports published by the company were falsified and the data fraudulent. Which statement best
describes the action of Rahul?
a. He is violating the ethics by not analysing the stock properly.
b. He has not made sufficient attempt to find accurate information.
c. He has misrepresented the information
d. He is innocent and not violated any ethics.
67. Vedika uses a new oscillator developed by her to take investment decisions. She has back tested
her methods for last fifteen years and found that the method has a good success rate. She also
maintains proper records of her actions. She took a trade in stock of Ceylon Plantation using the same
technique. Unfortunately, there was a draught and the stock plummeted to half its value. What can be
said about her actions?
a. Her method is not an approved tool of analysis, and hence she is guilty of misconduct.
b. Unless the tool is accepted by other technical analysts, it has no authenticity. She is seriously guilty
under many sections of code of ethics.
c. If proper study is done and records maintained, then she is not guilty.
d. Any new tool should be first sent to the association for approval before it is employed. Her actions
are not in compliance with this cause.
68. Jim is a technical analyst working in a company. He is required to write a report daily about
which stocks the clients should buy or sell. The report is sent to the clients directly without editing.
Jim’s father used to invest in securities for long term. After his death, the portfolio was inherited by
Jim. In this portfolio, there is a significant size of equity of LT Supermarkets. During his analysis, Jim
found that the stock has given an upward breakout. What action should Jim take in this regard?
a. He should not advise this stock, as the increased demand will benefit him more than the clients.
b. He should advise buy on the stock, but not disclose his position as he has not acted on the current
advice before his clients.
c. He should advise buy on the stock but disclose in his report that he already holds the stock.
d. He should advise buy on the stock, but inform his employers in writing before sending the report
that he holds the stock by inheritance.
69. Wayne is Senior Investment Advisor with KLM Securities. He plays golf regularly with Mr.
Johnson, who is a senior executive with Jerome Fabrics. He also holds a good number of shares of
Jerome Fabrics. Wayne found that Jerome Fabrics is financially not sound enough, as indicated in its
financial statements. It is in an early stage of a downtrend. What would be the correct action by
Wayne in this scenario?
a. Inform Mr. Johnson that it would be better to get rid of the stock.
b. Give sell recommendation to his clients.
c. He should first alert the higher authorities about the falsified financial statements and then
disassociate himself from giving any recommendation on the stock.
d. He should have disassociated with his job long ago. At least now he should do it.
70. Bruce works in JKL Capital Management and handles a conservative portfolio for a client.
However, this particular portfolio always underperforms the rest as it lacks leveraging. In order to
show better performance, Bruce started trading in leveraged instruments in this account. Wilma is
close friend of Bruce but professionally she is working under Bruce. She came to know of this. What
action should Wilma take?
a. She should report the matter to the higher authorities.
b. She should keep her mouth shut. Any way Bruce is her senior.
c. She should talk to Bruce about this, as he is her senior any way.
d. She should get herself transferred to some other department as Ethics requires disassociation of
one in such a scenario.
71. Which form of technical analysis Burton and Shah call as the most popular form?
a. Charting
b. Retracements
c. Intermarket Analysis
d. Candlesticks.
72. What does Efficient Market Hypothesis say about Technical Analysis?
a. It is a soft science and has some flexibility.
b. It is a waste of time and money.
c. It is usually correct, but a lot of study is required
d. Only some tools of technical analysis can give correct predictions.
73. According to Burton and Shah, which of the following statements is WRONG about traders using
technical analysis for trading?
a. They pay little attention to fundamentals.
b. They consider prices to move in trends.
c. They tend to neglect bad news unless it is changing the pattern
d. They follow Efficient Market Hypothesis.
74. According to Abreu-Brunnermeier what is responsible for bursting of bubbles?
a. Herd mentality of traders
b. Technical traders
c. Arbitragers
d. Fund actions
75. According to Efficient Market Hypothesis, which of the following statements is CORRECT?
a. Stocks should be bought when they are cheap and sold when they are expensive.
b. Bottom fishing is the best way to get maximum profits.
c. The stocks are never cheap or expensive.
d. Future expectations drive the markets.
76. According to the definition of Efficient Market Hypothesis, which of the following has no value in
determining the prices of an asset?
a. Knowing the financials of the company.
b. Knowing dividends and returns.
c. Knowing past prices
d. Publicly known information.
77. What is beta of a stock?
a. The second derivative of returns from the stock.
b. The ratio of returns from stock to returns from market
c. The predictability of stock price
d. Ratio of price change of one stock to the other.
78. Samuel concluded that beta of a stock to market is the same as relative strength of the stock to the
market. What can be said about this statement?
a. He is correct.
b. Beta has no relation with the relative strength.
c. Beta is between stocks and relative strength is between stock and the index.
d. Beta is between stock and index whereas relative strength is between two stocks.
79. An asset is found to be fungible into a consumption good. Shleifer model calls such an asset as-
a. fungible asset
b. Unsafe asset
c. Safe asset
d. Consumable asset
80. An asset is found NOT to be fungible into a consumption good. Shleifer model calls such an asset
as-
a. Non-fungible asset
b. Unsafe asset
c. Safe asset
d. Non-consumable asset
81. ____________ is also known as TRIN meaning TRading INdex.
a. William’s % R
b. Arms Index
c. Andrew’s Pitchfork
d. McClellan Oscillator
82. Advance/Decline ratio is a __________________ indicator
a. Price velocity
b. Market width
c. Market breadth
d. Momentum
83. Average True Range (ATR) was developed by-
a. Fosback
b. J.Welles Wilder
c. Richard Arms
d. Dr. Alan Andrews
84. Bollinger bands measure _____________ in the markets.
a. Momentum
b. Breadth
c. Sentiment
d. Volatility
85. When prices move outside the upper Bollinger band,
a. The rally is likely to continue
b. The stock may go into sideways consolidation.
c. The prices may correct before continuation of the rally.
d. The trend may change soon and the stock may start falling.
86. When the stock closes above the mid point of the day’s range, according to Chaikin Money Flow
Index, the money is-
a. flowing in the system.
b. Flowing in the system from buyers and flowing out due to sellers.
c. Flowing in if volume has increased, flowing out if it has decreased.
d. flowing in due to Buyers, flowing out due to sellers and stagnated due to undecided players.
87. Commodity Channel Index can be used for-
a. Only commodities
b. Commodities and currency
c. Commodities and stocks
d. All types of underlying.
88. Which of the following is a momentum based indicator?
a. McClellan Summation Index
b. Money Flow Index
c. Bollinger Bands
d. Arms Index
89. Money flow index is based on-
a. Highest price of the day
b. Closing price of the day
c. Lowest price of the day
d. Typical price of the day
90. What is the typical relation between On Balance Volume (OBV) and the price?
a. OBV follows the price.
b. OBV leads the price
c. OBV accompanies the price. Then only the signals are considered valid.
d. OBV has no direct relation with the price.
91. Open Interest is the term used in-
a. Cash markets
b. Derivatives markets
c. Bond markets
d. Cash, derivatives as well as bond markets.
92. Albert plots the ratio of number of stocks making 52 week high to number of stocks making 52
week low as an indicator. Which of the following is the CORRECT statement about this indicator?
a. When the ratio is negative, the market is falling.
b. When the ratio is less than unity, the market is falling.
c. When the ratio is zero, the market is likely to bottom out soon.
d. The ratio can never be zero or one.
93. Parabolic SAR was developed by-
a. Joe Granville
b. J. Welles Wilder
c. Richard Arms
d. Tushar Chande
94. Volume in the markets is typically generated by-
a. Insiders
b. Informed players
c. Uninformed players.
d. Hedgers
95. When Positive Volume Index starts rising, it indicates-
a. Market may witness a strong rally.
b. Market may witness a sharp fall.
c. Market may change directions soon.
d. Market may remain flat for a long time.
96. Put call ratio indicator was developed by-
a. Martin Zweig
b. J. Welles Wilder.
c. Richard Arms.
d. Robert Shabacker
97. In the fall in global markets that took place in the year 2015-16, it was observed that when the
Chinese markets fell by 30 %, Indian markets fell by 20 %. What can be concluded from this
observation?
a. Chinese markets have more relative strength compared to Indian markets.
b. Both the markets have low relative strength as both are falling.
c. Indian markets have more relative strength compared to Chinese markets.
d. Chinese markets cannot be compared with Indian markets.
98. In stochastic,
a. % K and % D lines change directions at almost the same velocity.
b. % D line leads % K line while changing the directions.
c. % K line leads % D line while changing the directions.
d. % K and % D lines do not have any fixed relation as to change in directions.
99. MACD was developed by-
a. J. Welles Wilder
b. Martin Zweig
c. Gerard Appel
d. Richard Arms
100. According to _________________ stock prices reflect all the publicly available information.
a. Dow theory
b. Efficient Market Hypothesis
c. Elliott wave theory
d. Fibonacci Theory
101. Volatility Index (VIX) is typically plotted as-
a. Absolute Value
b. Percentage
c. Fraction
d. Either of these three
102. Option premium DOES NOT depend on which of the following?
a. Current Market Price
b. Strike price
c. Lot size of option contract
d. Implied Volatility
103. In the flag formation, the volume______ from left to right
a. Increases
b. Decreases
c. Remains almost constant
d. Remains very high
104. Pennants are bound by-
a. Two converging lines
b. Two diverging lines
c. Two parallel lines
d. Either two parallel lines, two diverging lines or converging lines
105. William found that Xrbia Infotech stock had formed a head and shoulder formation, but the
neckline was very steep. Which of the following statements is CORRECT about this?
a. Breakout from this formation has higher probability of reaching the target.
b. Breakout from this formation has low probability of reaching the target.
c. Probability of a pullback is low if the neckline is steep.
d. Head and shoulder necklines have to be horizontal and cannot be sloping.
106. For a classic head and shoulder formation, what can be said about the size of the left shoulder
and the right shoulder?
a. They are nearly of the same size.
b. Left shoulder is usually bigger than the right shoulder.
c. Right shoulder is usually bigger than the left shoulder.
d. Any one shoulder has to be bigger than the other.
107. See the chart given below.

The line joining points A and B if the pattern formed is called as-
a. Trendline
b. Support line
c. Neckline
d. Resistance line
108. In an decending triangle,
a. Support line is horizontal, but resistance line is slanting
b. Support line is slanting, but the resistance line is horizontal.
c. Both the lines are horizontal.
d. Both the lines are slanting.
109. In island reversal,
a. There are two bullish gaps.
b. There is one bullish and one bearish gap
c. There are two bearish gaps
d. There are either two bullish or two bearish gaps
110. Typical borrowing by the government by selling bonds is for the period-
a. Shorter than 1 year
b. 1-5 years
c. 1-10 years
d. longer than 10 years.
111. Which of the following do NOT have a maturity period?
a. bills
b. bonds
c. notes
d. equity
112. Where are new assets sold to public?
a. Primary market
b. Secondary market
c. Futures market
d. Commodity market
113. Which of the following is NOT truly part of a ticker tape?
a. Volume
b. Last traded price
c. Uptick and downtick arrows
d. Time of refreshing the data
114. Which of the following is decided by the Federal Reserve (FED)?
a. Interest rates
b. Taxation rates
c. Government spending
d. All of these
115. Lothar has asked for a loan from a bank. He has the required amount available from his own
bank deposits and does not actually require a loan. His salary is also substantial and he does not
exactly need the bank loan. His banker realises this fact while going through the financial details of
Lothar. Which of the following would be the outcome?
a. Banker would not sanction the loan
b. Banker would convince Lothar that he does not need the loan.
c. Banker would immediately offer loan at lowered interest rates if possible.
d. banker would offer the loan, but demand more interest rates.
116. Currency in Zimbabwe was Dollar. Today, Zimbabwe Dollar has reduced in value so much that
the country is facing hyperinflation in the terms of its own currency. If the value of a currency is
decreasing (contracting) for a long period, which of the following actions by the central bank helps it
to revive?
a. Lowering the interest rates.
b. Increasing the interest rates.
c. Fixing its value with a stable currency.
d. Controlling government spending.
117. Which of the following has low market risk?
a. Bank deposits
b. Stocks
c. Commodities
d. Real Estate
118. In the case of inflationary scenario, which of the following should an investor hold?
a. Stocks
b. Bonds
c. Gold
d. Cash
119. When the interest rate is lowered by 10 basis points, how much is the actual effect in percentage
terms?
a. 1 % less on the principal deposit
b. 10 % less on the principal deposit
c. 0.1 % less on the principal deposit
d. 10% less compared to existing interest rate
120. Which of the following will have highest yield with least risk?
a. High price government bonds
b. Low priced government bonds
c. High priced corporate bonds
d. Low priced corporate bonds
Answers to Question Paper 3
1. When NH-NL=0, it means-
1. c. Day of uncertainty (neither the bulls nor the bears are in the command). (Chapter 6-9, General
Market Indicators)
2. Leila observed that NH-NL line was negative for nearly 5 months. Then it slowly moved in
positive territory. What would be the most appropriate conclusion from this observation?
2. a. The market has bottomed out. She should go long in the markets. (If NH-NL is negative for a few
months, and then moves above zero, it indicates that the stock market bottom is in place. A bull charge
may take place soon. One should buy at this level). (Chapter 6-9, General Market Indicators)
3. Which of the following statements is CORRECT?
3. a. Greed lasts longer than the fear. (Chapter 6-9, General Market Indicators)
4. Esther is using NH-NL line for determining the entry level in the markets. She observed three things
about the indicator. Which of these is NOT required while taking decisions about the future trend of
the markets?
4. d. All of the above three are essential. (Chapter 6-9, General Market Indicators)
5. The Chinese market is in a downtrend. Bulls have also in consensus that the fall is likely to
continue. What would be the most appropriate action in this scenario?
5. d. Market fall may stop soon. One should liquidate short positions and wait for long signals.
(Chapter 6-9, General Market Indicators)
6. Which of the following do NOT have a position limit?
6. c. Hedgers. (Chapter 6-9, General Market Indicators)
Psychology)
7. According to the laws of Securities and Exchange Commission (SEC), if a person holds more than
___ % stocks of a single company, he has to report any buying or selling into the same stock to SEC.
7. b. 5 %. (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
8. ____ is the price the buyer is ready to offer whereas ____ is the price the seller is demanding.
8. a. Bid, ask. (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
9. Insider trading cannot be eliminated because-
9. a. Insiders usually pass the information to others. (Chapter 6-9, General Market Indicators, 27-38,
Mass Psychology)
10. Desire to earn money from stock trading is classified as-
10. a. Rational reason. (Chapter 27-38, Mass Psychology)
11. What are the types of traders?
11. d. Buyers, sellers and undecided (Chapter 6-9, General Market Indicators, 27-38, Mass
Psychology)
12. What does a chart pattern correctly indicate?
12. a. Mass Psychology (27-38, Mass Psychology)
13. To be a successful trader, you ______________________________
13. b. Should not change your trading plan when the position is open (Chapter 6-9, General Market
Indicators, 27-38, Mass Psychology)
14. When the buyers are slightly more optimistic than the sellers,
14. a. Markets move up slowly (Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)
15. Which of the following defines bearish divergence?
15. b. Stock makes a higher high but indicator makes a lower high (Chapter 6-9, General Market
Indicators, 27-38, Mass Psychology)
16. Japanese candlesticks give more importance to –
16. d. Difference between open and close (Chapter 6-9, General Market Indicators, 27-38, Mass
Psychology)
17. If a support or resistance holds for longer time or multiple tests, it indicates-
17. a. It is usually very strong and likely to hold, but loses strength slowly if becomes very old
(Chapter 6-9, General Market Indicators, 27-38, Mass Psychology)

18. Eva noticed that AgroTech stock had a support at 35. It dipped to 34 on 1st June 2015, and closed
at 34.3. On 2nd June, it recovered to close at 36. What should she do?
18. c. It appears to be the case of a false breakout. She should buy the stock. (Chapter 6-9, General
Market Indicators, 27-38, Mass Psychology)
19. High profits earned by institutional investors can be correlated to which factor?
19. d. Sources of rapid information (Chapter 6-9, General Market Indicators, 27-38, Mass
Psychology)
20. What is the essential condition for a proper trading plan?
20. a. It must be a written plan, followed to the word. (Chapter 6-9, General Market Indicators, 27-
38, Mass Psychology)
21. In a double extension,
21. c. Wave 3 & 5 are usually extended (Chapters 39-40. Elliott Wave Theory)
22. In a typical diagonal, the number of sub-waves observed is-
22. a. 3-3-3-3-3 (Chapters 39-40. Elliott Wave Theory)
23. A zigzag is _____ type of structure
23. c. 5-3-5 (Chapters 39-40. Elliott Wave Theory)
24. How is a running flat best described?
24. a. Wave B ends beyond the start of wave A, but wave C fails to reach end of wave A. (Chapters
39-40. Elliott Wave Theory)
25. When two or more Fibonacci projections indicate approximately same level, it is called as-
25. b. Cluster (Chapters 39-40. Elliott Wave Theory)
26. If you want to be a successful trader, you should-
26. c. Be flexible with you opinions (Chapter 25-26, Being right or making money).
27. Nearly all of great traders agree that-
27. d. You can never avoid losses completely. Manage your risk and minimise the losses (Chapter 25-
26, Being right or making money).
28. What are the reasons for popular forecasts going frequently wrong?
28. b. Because there is inverse relation between mass psychology and liquidity. (Chapter 25-26,
Being right or making money).
29. How can one avoid biases and offer an objective standard of decision making?
29. a. Mathematical modelling (Chapter 25-26, Being right or making money).
30. Which of the following is NOT always essential while developing a model with variety of
indicators?
30. b. Intraday as well as end of the day data (All models do not ALWYS require both intra-day as
well as end of the day data) (Chapter 25-26, Being right or making money).
31. Which of the following is an external indicator for equities?
31. c. Interest Rates (Chapter 25-26, Being right or making money).
32. Increase in interest rates would usually-
32. b. Adversely affect the stock markets. (Chapter 25-26, Being right or making money).
33. High interest rates would-
33. a. Favour the bond market but harm the equities market (Chapter 25-26, Being right or making
money).
34. Which of the following statements is WRONG?
34. b. Crowd is always wrong most of the time. (Chapter 25-26, Being right or making money).
35. Which of the following is the NOT very important input for developing any model for trading into
stocks?
35. a. Which sector is being studied (Chapter 25-26, Being right or making money).
36. What is the MAIN use of moving averages in analysis?
36. a. To reduce the short term fluctuations (Note – Main use of moving averages is to smoothen the
values or reduce the noise. They may be used for generating signals, but that is not their main
function). (Chapter 25-26, Being right or making money).
37. Myra observed that 50 days moving average for Homemade Foods had risen by more than 5 %
and was sloping up. The conclusion she can draw from this is-
37. a. The stock is in a medium term uptrend and can be bought. (Chapter 25-26, Being right or
making money).
38. An indicator that gives very few signals-
38. b. Should be used with caution (Chapter 25-26, Being right or making money).
39. What is the main use of models for trading?
39. b. Bringing discipline to trading (Chapter 25-26, Being right or making money).
40. The 50 days moving average was below 200 days moving average. However, it was observed
that in September 2013, it came above 200 days moving average. This phenomenon is the best
described as-
40. c. Golden Cross (Chapter 25-26, Being right or making money).
41. Stephanie uses breadth as an indicator in her studies. She observed that the volume in Streetsmart
Ventures was 1.1 million and stock had closed higher than its opening price. What information she
gets from this data?
41. a. Demand was 1.1 million. (Chapter 25-26, Being right or making money).
42. When margin debt is bullish and rising,
42. a. Upside is limited - Market is about to top out. (Chapter 25-26, Being right or making money).
43. What is the relation between interest rates and stock prices?
43. c. Interest rates start rising before the stocks peak (Chapter 25-26, Being right or making money).
44. How is relative strength of an asset best defined?
44. b. It is the comparison of the change in price of one asset with another. (Chapter 54)
45. Simran is studying the movement of Tata Chemicals against the index Nifty. She found that when
Tata Chemicals has increased by 10 %, Nifty has increased by 8 %. What conclusion would be
correct in this situation?
45. c. Tata chemicals has more relative strength than Nifty (The most correct option is c). (Chapter
54)
46. ___________________is obtained by dividing the price of one underlying against the other over
a period of time.
46. d. None of these. (This is the definition of relative strength. Relative strength index is an entirely
different thing. Many times there is a confusion between the two. Remember, relative strength is
obtained by dividing the price of one underlying against the other. Always read wht is asked, relative
strength or relative strength index). (Chapter 54)
47. Which of the following statements is WRONG?
47. d. Relative strength is determined by equation RS = (Price of a stock + 1)/(Price of another stock
+ 1) (Chapter 54)
48. Harry wrote- Relative strength is overbought when above 70 and oversold when below 30. What
can you say about this statement?
48. c. There is no overbought or oversold level for relative strength. (Overbought and oversold are
for relative strength index. Not for relative strength). (Chapter 54)
49. Determine the median for the set - 5.4, 5.5, 5.2, 5.3, 5.7, 5.6
49. a. 5.45
50. Abha found that HCL technologies was experiencing a selling at a level. She found that five
consecutive days, the stock made a high of 1000.50, 1002.65, 999.75, 1000.20, 998.90. She decided
to buy the stock only if it closes above the median. What is the median of these values?
50. a. 1000.20
51. Determine the number of modes for the following set of data
1, 3, 1, 2, 4, 2, 9, 4, 1, 5, 6, 6, 3, 4, 2, 7, 8.
51. c. 3. (Numbers 1, 2 and 4 appear thrice each. All three are modes of this set. There can be more
than one modes for the same set of data).
52. Only one of the following four statements is correct. Identify the CORRECT statement.
52. a. A set of observations may not have a mode.
53. When the observations are over a wide range of prices for a particular stock, which of the
following methods is adopted?
53. d. using logarithmic scale on Y axis. (commonly called as semilog graph paper)
54. Which of the following log papers is NOT applicable while plotting the charts?
54. b. Analog graph paper (There is no graph paper of this type)
55. Which of the following statements is CORRECT?
55. b. When the standard deviation is high, the possibility of finding an average that represents it
decreases.
56. When only representative set of data points is available, the accuracy is generally-
56. b. Low.
57. Harmonic mean is the reciprocal of-

57. c.
58. Skewness is calculated by equation-
58. d. (Mean - Median)/Standard deviation.
59. When future data can be predicted using the past data, the correlation is termed as-
59. a. Serial correlation (Or Autocorrelation)
60. When there is no correlation between the price of stock and the market, the value of (beta) is-
60. Zero
61. A cycle in price that takes place annually is termed as-
61. b. Seasonality
62. The first step in order to determine the existence of any possible seasonality is-
62. a. detrending
63. Which of the following should be last objective to any technical analyst as per the code of ethics?
63. c. Self interest
64. Highest dependency of an efficient capital market lies on-
64. b. Trust of the participants about the market.
65. In the year 2014, the laws about insider trading were changed. John was not aware of this change.
He entered a trade, which was in compliance with the old law but violating the new laws. Which of
the following statements is correct according to the ethics?
65. d. John is not only violating the insider trading norms, but also violating the ethics as he is not
well conversant with the law.
66. Rahul was analysing the stock of May Flower Computers. He found the stock reports of the
company highly favourable and recommended ‘Buy’ for the stock. Later it was found out that the stock
reports published by the company were falsified and the data fraudulent. Which statement best
describes the action of Rahul?
66. d. He is innocent and not violated any ethics.
67. Vedika uses a new oscillator developed by her to take investment decisions. She has back tested
her methods for last fifteen years and found that the method has a good success rate. She also
maintains proper records of her actions. She took a trade in stock of Ceylon Plantation using the same
technique. Unfortunately, there was a draught and the stock plummeted to half its value. What can be
said about her actions?
67. c. If proper study is done and records maintained, then she is not guilty.
68. Jim is a technical analyst working in a company. He is required to write a report daily about
which stocks the clients should buy or sell. The report is sent to the clients directly without editing.
Jim’s father used to invest in securities for long term. After his death, the portfolio was inherited by
Jim. In this portfolio, there is a significant size of equity of LT Supermarkets. During his analysis, Jim
found that the stock has given an upward breakout. What action should Jim take in this regard?
68. d. He should advise buy on the stock, but inform his employers in writing before sending the
report that he holds the stock by inheritance.
69. Wayne is Senior Investment Advisor with KLM Securities. He plays golf regularly with Mr.
Johnson, who is a senior executive with Jerome Fabrics. He also holds a good number of shares of
Jerome Fabrics. Wayne found that Jerome Fabrics is financially not sound enough, as indicated in its
financial statements. It is in an early stage of a downtrend. What would be the correct action by
Wayne in this scenario?
69. c. He should first alert the higher authorities about the falsified financial statements and then
disassociate himself from giving any recommendation on the stock. (The question arises why not to
give sell recommendation? It is entirely possible that his recommendations may not remain unbiased.
As Mr. Johnson is his golf buddy, the relationship may very well jeopardise his neutrality. It is better
to inform and then get disassociated. He should inform his senior about his inability to give any
recommendation with reasons).
70. Bruce works in JKL Capital Management and handles a conservative portfolio for a client.
However, this particular portfolio always underperforms the rest as it lacks leveraging. In order to
show better performance, Bruce started trading in leveraged instruments in this account. Wilma is
close friend of Bruce but professionally she is working under Bruce. She came to know of this. What
action should Wilma take?
70. a. She should report the matter to the higher authorities.
71. Which form of technical analysis Burton and Shah call as the most popular form?
71. a. Charting (Burton and Shah, Chapter 7, Page 65)
72. What does Efficient Market Hypothesis say about Technical Analysis?
72. b. It is a waste of time and money. (Burton and Shah, Chapter 7, Page 67)
73. According to Burton and Shah, which of the following statements is WRONG about traders using
technical analysis for trading?
73. d. They follow Efficient Market Hypothesis (Burton and Shah, Chapter 7, Page 67)
74. According to Abreu-Brunnermeier what is responsible for bursting of bubbles?
74. Arbitragers (Burton and Shah, Chapter 7, Page 75-76)
75. According to Efficient Market Hypothesis, which of the following statements is CORRECT?
75. c. Stocks are never cheap or expensive. (Burton and Shah, Chapter 1, Page 6. Remember, we get
overpricing or underpricing of a stock because in reality EMH is not followed. According to EMH, if
truly all available information is really reflected exactly in price, there will be no place for the stock
being cheap or expensive)
76. According to the definition of Efficient Market Hypothesis, which of the following has no value in
determining the prices of an asset?
76. c. Knowing past prices (Burton and Shah, Chapter 1, Page 6)
77. What is beta of a stock?
77. b. The ratio of returns from stock to returns from market (Burton and Shah, Chapter 2, page 20).
78. Samuel concluded that beta of a stock to the market is the same as relative strength of the stock to
the market. What can be said about this statement?
78. a. He is correct. (if we see the definitions of the two, they are actually same when one is a stock
and other is the market or index. Beta is % change in stock price to % change in the market. Relative
strength is the ratio of change in price of one asset to change in price of other asset. However, if the
first is stock and the other is market, both become same)
79. An asset is found to be fungible into a consumption good. Shleifer model calls such an asset as-
79. c. Safe asset (Burton and Shah, Chapter 5, Page 44)
80. An asset is found NOT to be fungible into a consumption good. Shleifer model calls such an asset
as-
80. b. Unsafe asset (Burton and Shah, Chapter 5, Page 44)
81. ____________ is also known as TRIN meaning TRading INdex.
81. b. Arms Index
82. Advance/Decline ratio is a __________________ indicator
82. c. Market breadth
83. Average True Range (ATR) was developed by-
83.b. J.Welles Wilder.
84. Bollinger bands measure _____________ in the markets.
84.d. Volatility (Though volatility arises due to sentiment, Bollinger bands do not directly measure
sentiment. They measure volatility).
85. When prices move outside the upper Bollinger band,
85.a. The rally is likely to continue.
86. When the stock closes above the mid point of the day’s range, according to Chaikin Money Flow
Index, the money is-
86. a. Flowing in the system. (In Chaikin money flow index, when the stock closes above the mid
point of the range, the entire volume is treated as volume due to buyers, and money is considered to
be flowing in. When it closes below the mid point, it is considered due to sellers, and money is
flowing out).
87. Commodity Channel Index can be used for-
87. d. All types of underlying.
88. Which of the following is a momentum based indicator?
88. b. Money Flow Index
89. Money flow index uses-
89. d. Typical price of the day.
90. What is the typical relation between On Balance Volume (OBV) and the price?
90. b. OBV leads the price.
91. Open Interest is the term used in-
91. b. Derivatives markets.
92. Albert plots the ratio of number of stocks making 52 week high to number of stocks making 52
week low as an indicator. Which of the following is the CORRECT statement about this indicator?
92. c. When the ratio is zero, the market is likely to bottom out soon. (Ratio can be zero, when no
stock is making a new high. That indicates extreme bearishness, and a possible reversal soon. The
ratio cannot be negative).
93. Parabolic SAR was developed by-
93. b. J. Welles Wilder.
94. Volume in the markets is typically generated by-
94. c. Uninformed players.
95. When Positive Volume Index starts rising, it indicates-
95. c. Market may change directions soon.
96. Put call ratio indicator was developed by-
96. a. Martin Zweig
97. In the fall in global markets that took place in the year 2015-16, it was observed that when the
Chinese markets fell by 30 %, Indian markets fell by 20 %. What can be concluded from this
observation?
97. c. Indian markets have more relative strength compared to Chinese markets.
98. In stochastic,
98. c. % K line leads % D line while changing the directions. (% D line is average of %K. Naturally
it cannot lead).
99. MACD was developed by-
99. c. Gerard Appel.
100. According to _________________ stock prices reflect all the publicly available information.
100. b. Efficient Market Hypothesis
101. Volatility Index (VIX) is typically plotted as-
101. b. Percentage.
102. Option premium DOES NOT depend on which of the following?
102. c. Lot size of option contract
103. In the flag formation, the volume______ from left to right
103. b. decreases.
104. Pennants are bound by-
104. a. Two converging lines.
105. William found that Xrbia Infotech stock had formed a head and shoulder formation, but the
neckline was very steep. Which of the following statements is CORRECT about this?
105. b. Breakout from this formation has low probability of reaching the target.
106. For a classic head and shoulder formation, what can be said about the size of the left shoulder
and the right shoulder?
106. a. They are nearly of the same size.
107. See the chart given below.

The line joining points A and B if the pattern formed is called as-
107. c. Neckline.
108. In an decending triangle,
108. a. Support line is horizontal but the resistance line is slanting.
109. In island reversal,
109. b. There is one bullish and one bearish gap
110. Typical borrowing by the government by selling bonds is for the period-
110. d. longer than 10 years.
111. Which of the following do NOT have a maturity period?
111. d. equity
112. Where are new assets sold to public?
112. a. Primary market
113. Which of the following is NOT truly part of a ticker tape?
113. a. volume.
114. Which of the following is decided by the Federal Reserve (FED)?
114. a. Interest rates
115. Lothar has asked for a loan from a bank. He has the required amount available from his own
bank deposits and does not actually require a loan. His salary is also substantial and he does not
exactly need the bank loan. His banker realises this fact while going through the financial details of
Lothar. Which of the following would be the outcome?
115. c. Banker would immediately offer loan at lowered interest rates if possible. (Banker wants to
do business. Lower the need of loan, more is the credit rating. More secure becomes the loan. So
banker would want such a client, even if with lower returns).
116. Currency in Zimbabwe was Dollar. Today, Zimbabwe Dollar has reduced in value so much that
the country is facing hyperinflation in the terms of its own currency. If the value of a currency is
decreasing (contracting) for a long period, which of the following actions by the central bank helps it
to revive?
116. c. Fixing its value with a stable currency.
117. Which of the following has low market risk?
117. a. Bank deposits
118. In the case of inflationary scenario, which of the following should an investor hold?
118. c. Gold. (Gold in a natural hedge against inflation).
119. When the interest rate is lowered by 10 basis points, how much is the actual effect in percentage
terms?
119. c. 0.1 % less on the principal deposit
120. Which of the following will have highest yield with least risk?
120. b. Low priced government bonds.