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Question 1. Which of the following best describes the Dow Theory primary trend? A) Daily price fluctuations B) Long‑term market direction lasting years C) Weekly market cycles D) Intraday noise Answer: B Explanation: The primary trend in Dow Theory refers to the long‑term market direction, usually persisting for months to years, unlike secondary or minor trends. Question 2. According to the three core premises of technical analysis, which statement is correct? A) Prices reflect only fundamental information. B) Prices move randomly without trends. C) Market action discounts everything. D) History does not repeat itself. Answer: C Explanation: The first premise states that all known information is already reflected in price, so market action discounts everything. Question 3. Which data type provides the most granular intra‑day information? A) Daily OHLC B) Weekly close C) Tick data D) Monthly adjusted close
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Answer: C Explanation: Tick data records each individual trade, offering the highest granularity compared with minute, hourly, or daily aggregates. Question 4. In an OHLC bar, the “high” price represents: A) The opening price of the day. B) The maximum price reached during the period. C) The closing price of the period. D) The average of open and close. Answer: B Explanation: The high is the highest price traded within the bar’s time interval. Question 5. When adjusting historical price data for a 2‑for‑1 stock split, the adjusted close should be: A) Multiplied by 2. B) Divided by 2. C) Increased by 50 %. D) Left unchanged. Answer: B Explanation: A 2‑for‑1 split halves the price; therefore historical prices are divided by 2 to maintain continuity. Question 6. In a candlestick chart, a long lower shadow indicates:
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Answer: A Explanation: The arithmetic mean is affected heavily by extreme values (outliers) because it incorporates every observation. Question 9. For a normally distributed asset, a Z‑score of – 2 indicates: A) The price is two standard deviations above the mean. B) The price is two standard deviations below the mean. C) The price equals the mean. D) The price is in the 95th percentile. Answer: B Explanation: A Z‑score of – 2 means the observation lies two standard deviations below the distribution’s mean. Question 10. The covariance between two assets is positive. This implies: A) The assets move in opposite directions. B) No relationship exists. C) The assets tend to move together. D) One asset is risk‑free. Answer: C Explanation: Positive covariance indicates that when one asset’s return rises, the other’s tends to rise as well. Question 11. A Simple Moving Average (SMA) of 10 periods is calculated by: A) Summing the last 10 closing prices and dividing by 10.
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B) Giving more weight to recent prices. C) Using exponential weighting. D) Averaging the high and low of each period. Answer: A Explanation: SMA is a straight arithmetic average of the last n observations, giving equal weight to each. Question 12. The “Golden Cross” occurs when: A) The 50‑day SMA crosses below the 200‑day SMA. B) The 200‑day SMA crosses above the 50‑day SMA. C) The 50‑day SMA crosses above the 200‑day SMA. D) The 10‑day EMA crosses the 20‑day EMA. Answer: C Explanation: A Golden Cross is a bullish signal where a short‑term average (50‑day SMA) moves above a long‑term average (200‑day SMA). Question 13. In MACD calculation, the MACD line is: A) 12‑day EMA minus 26‑day EMA. B) 26‑day EMA minus 12‑day EMA. C) Signal line minus histogram. D) 9‑day SMA of the price. Answer: A
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C) Average true range. D) Volume weighted price. Answer: A Explanation: +DI captures the strength of upward directional movement, while – DI captures downward movement. Question 17. The Relative Strength Index (RSI) is considered overbought when it exceeds: A) 30 B) 50 C) 70 D) 90 Answer: C Explanation: RSI values above 70 typically signal overbought conditions, suggesting a possible pullback. Question 18. A bearish RSI divergence is identified when: A) Price makes higher highs and RSI makes lower highs. B) Price makes lower lows and RSI makes higher lows. C) Both price and RSI make higher highs. D) Both price and RSI make lower lows. Answer: A Explanation: When price rises to new highs but RSI fails to reach new highs, a bearish divergence may signal a forthcoming decline.
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Question 19. The Stochastic %K line is calculated using: A) (Close‑Low) / (High‑Low) × 100 over the look‑back period. B) (High‑Low) / (Close‑Low) × 100. C) EMA of closing prices. D) Simple moving average of %D. Answer: A Explanation: %K measures the current close relative to the recent high‑low range, scaled to 0 ‑100. Question 20. In the Stochastic oscillator, a “%K crossing above %D” in the oversold region suggests: A) A sell signal. B) A buy signal. C) Trend reversal to the downside. D) No actionable information. Answer: B Explanation: The crossover of %K above %D in the oversold zone (below 20) is a bullish entry signal. Question 21. The Rate of Change (ROC) indicator primarily measures: A) Volatility. B) Momentum as a percentage change over a period. C) Trend strength.
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Explanation: Touching the lower band followed by a move upward suggests the price may be oversold and poised for a bounce. Question 24. A “Bollinger Squeeze” indicates: A) High volatility and strong trend. B) Low volatility that may precede a breakout. C) Market consolidation with no future moves. D) Immediate price reversal. Answer: B Explanation: A squeeze occurs when the bands contract tightly, reflecting low volatility; historically, this often precedes a sharp breakout. Question 25. The True Range (TR) for a given day is the greatest of: A) High‑Low, High‑Previous Close, Previous Close‑Low. B) High‑Low, High‑Current Close, Current Close‑Low. C) High‑Low, |High‑Previous Close|, |Low‑Previous Close|. D) High‑Low, High‑Open, Open‑Low. Answer: C Explanation: TR takes the maximum of three values: current high‑low range, absolute difference between current high and previous close, and absolute difference between current low and previous close. Question 26. The Average True Range (ATR) is best used to: A) Identify overbought/oversold levels.
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B) Set volatility‑adjusted stop‑loss distances. C) Determine market direction. D) Compute moving averages. Answer: B Explanation: ATR quantifies average volatility, making it suitable for sizing stop‑losses relative to recent price swings. Question 27. A Standard Deviation Channel plotted around a price series is intended to: A) Show support and resistance based on statistical variance. B) Indicate moving average crossovers. C) Measure market breadth. D) Provide volume‑weighted price levels. Answer: A Explanation: The channel uses mean ± k × standard deviation to delineate likely price bounds under the assumption of normal distribution. Question 28. The Parabolic SAR indicator is primarily used to: A) Measure momentum. B) Generate trailing stop‑loss levels and reversal points. C) Identify overbought conditions. D) Compute correlation. Answer: B
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B) Intraday traders to gauge the average price paid. C) Analysts to compute earnings forecasts. D) Central banks for policy decisions. Answer: B Explanation: VWAP provides the volume‑weighted average price for the trading day and serves as a benchmark for intraday trade execution. Question 32. The Accumulation/Distribution Line differs from OBV because it: A) Uses price range (high‑low) weighting rather than just close direction. B) Ignores volume entirely. C) Is calculated on weekly data only. D) Only applies to futures markets. Answer: A Explanation: The Acc/Dist line incorporates both volume and the location of the close within the bar’s range, offering a more nuanced money‑flow measure. Question 33. The Advance/Decline (A/D) Line is calculated by: A) Adding the number of advancing stocks and subtracting declining stocks each day. B) Summing the total market capitalization. C) Averaging the daily high‑low spreads. D) Computing the ratio of advancing to declining volume. Answer: A
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Explanation: A/D Line accumulates the net difference between advancing and declining issues, reflecting market breadth. Question 34. A rising A/D line while the major index falls indicates: A) Confirmation of the index decline. B) Divergence suggesting underlying strength in breadth. C) Market manipulation. D) No actionable insight. Answer: B Explanation: Positive breadth divergence (A/D rising while index falls) may signal that the downtrend lacks broad participation and could reverse. Question 35. In system design, “parameterization” refers to: A) Randomly selecting indicator values. B) Defining variable inputs (e.g., look‑back periods) that can be optimized. C) Using fixed, unchangeable rules. D) Ignoring market conditions. Answer: B Explanation: Parameterization allows a strategy’s key numbers (like MA periods) to be treated as inputs for testing and optimization. Question 36. Walk‑Forward Analysis primarily helps to: A) Reduce computational time. B) Test a model on data that was not used during the optimization phase.
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Question 39. The Profit Factor is calculated as: A) Gross profits divided by gross losses. B) Net profit divided by total trades. C) Average win divided by average loss. D) Total commissions divided by total turnover. Answer: A Explanation: Profit Factor = Gross Profits / Gross Losses; a value >1 indicates a profitable system. Question 40. A win rate of 40 % with an average payoff ratio of 2.5 suggests: A) The system is unprofitable. B) The system can be profitable despite a low win rate. C) The system has high transaction costs. D) The system should be abandoned. Answer: B Explanation: Even with a 40 % win rate, a payoff ratio of 2.5 means winners are, on average, 2. times larger than losers, potentially yielding net profit. Question 41. Maximum Drawdown (MDD) measures: A) The highest peak‑to‑trough loss during a period. B) The average daily return. C) The Sharpe ratio. D) The number of losing trades.
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Answer: A Explanation: MDD captures the largest cumulative loss from a portfolio’s highest point to its subsequent lowest point. Question 42. The Sharpe Ratio is defined as: A) (Average return – risk‑free rate) / standard deviation of returns. B) Total profit / total loss. C) Win rate / loss rate. D) Average win / average loss. Answer: A Explanation: Sharpe Ratio evaluates risk‑adjusted performance by comparing excess return to return volatility. Question 43. The Sortino Ratio differs from the Sharpe Ratio by: A) Using downside deviation instead of total standard deviation. B) Ignoring the risk‑free rate. C) Multiplying by the number of trades. D) Using profit factor as the numerator. Answer: A Explanation: Sortino focuses on downside risk, substituting standard deviation with downside deviation in the denominator. Question 44. When optimizing a strategy, “robustness testing” typically involves:
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Answer: B Explanation: Using lower‑frequency data (e.g., daily) reduces the number of simulated trades, thereby approximating lower transaction costs, though it may also miss intraday dynamics. Question 47. In a dual‑MA system (50‑day SMA and 200‑day SMA), a “Death Cross” signals: A) Bullish momentum. B) Bearish momentum. C) No change in trend. D) An upcoming high‑frequency trade. Answer: B Explanation: A Death Cross occurs when the short‑term SMA (50) falls below the long‑term SMA (200), indicating potential bearishness. Question 48. Which indicator explicitly incorporates volume into its calculation? A) RSI B) MACD C) ATR D) On‑Balance Volume (OBV) Answer: D Explanation: OBV adds or subtracts daily volume based on price direction, directly integrating volume information. Question 49. The “%D” line in the Stochastic oscillator is typically: A) A 3‑period SMA of %K.
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B) The raw %K value. C) The EMA of %K over 9 periods. D) The difference between %K and price. Answer: A Explanation: %D is commonly a 3‑period simple moving average of %K, smoothing the oscillator. Question 50. A “centerline crossover” in RSI (crossing 50) is interpreted as: A) A definitive buy signal. B) A definitive sell signal. C) A shift in momentum direction. D) An overbought condition. Answer: C Explanation: Crossing the 50 level suggests momentum is moving from bearish to bullish (or vice‑versa), but not necessarily an extreme condition. Question 51. In Bollinger Band analysis, a price closing above the upper band most often indicates: A) A strong continuation of the uptrend. B) A reversal to the downside. C) Low volatility. D) A guaranteed breakout. Answer: A
