CMT Level 1 Sample Questions – Answer Sheet

1. b. violates the standard against misleading advertising.

2. d. in violation as the statements made about the simulated results were inaccurate and
misleading.
3. a. not in violation of the Code.
4. a. not in violation of the Code.
5. a. violates the Code with respect to acting on the basis of inside information.
6. b. in violation both with respect to the client contact information and with respect to the
trading model.
7. d. in violation of the Code with respect to both the methodology and the security
purchase.
8. b. in violation with respect to both Wingo and Pinto’s work.
9. c. in violation of the Code with respect to disclosing client information, but not with
respect to the priority of transactions.
10. b. in violation as the statement is inaccurate and misleading.
11. d. Increase the delay in taking action after a trade signal is given.
12. c. Cover shorts when prices reverse and go below the center of the band
13. b. Selection of trend speed
14. d. a simple moving average system.
15. d. an exponential smoothing system.

16. c. a linear regression slope system.

17. b. an N-day breakout system.
18. d. slope or momentum.
19. a. Trident index
20. d. Oscillators
21. c. It is more volatile than simple measures of momentum.
22. a. As a timing tool
23. d. Phase-a measure of separation between the top and bottom of a wave (cycle)
24. b. Remove price trend
25. a. The support line now becomes a resistance line.
26. c. a wider range of price movement.
27. a. Width of the pattern added to the breakout level.
28. a. Total volume
29. a. Volume rising and open interest rising equals trend reversal.
30. a. Open interest increases during a trending period
31. b. In the final stages of a bull market

32. a. It is a breadth momentum oscillator

33. c. Remove volume associated with large price moves
34. d. Price level of the lowest box (for up counts) of the base + (number of columns of the
base X reversal size)
35. b. Price level of the lowest box (for up counts) + (number of boxes in the reversal column
X reversal size)
36. a. below average year during first year of president’s term, strongest returns during the
pre-election year or in the election year
37. b. As long as players still have money to invest, their optimism will drive prices higher
38. d. Specific geometric patterns and angles have unique characteristics for the prediction
of price turning points.
39. c. minus the risk-free interest rate) divided by the standard deviation of returns.
40. c. is a plot of the highest possible returns obtainable over a series of risk levels.
41. c. used to compare actual returns to expected returns.
42. a. 30
Calculated as follows:
Height of the formation = (top of the head – neckline) = 96 - 63 =33 Minimum price objective =
(neckline – height of the formation) = 63 – 33 = 30

43. b. Subtract the distance from the highest peak from the low of the reaction
44. a. The base distance added to the breakout point
45. a. The distance from the beginning of the sharp trend to the first reversal and adding it to
the breakout price
46. c. appears to work poorly because price seems to divorce itself from economics.
47. b. In an uptrend volume normally precedes price
48. c. Declining open interest in an uptrend is bearish
49. d. When call volume exceeds put volume, this has bullish future implications for the
market
50. b. long-term charts allow for a better assessment of the price trend.

51. c. price crossing its moving average, not by a reversal in direction of the moving
average.
52. d. The first crossover in a triple crossover system during an upside reversal is when the
shortest-term moving average crosses above both of the other two averages
53. c. Moving averages are likely to provide more valid trade signals in trending markets
54. b. remains in one half of their range for long periods.
55. c. Prices tend to be closer to the upper end of the trading range during an uptrend
56. a. MACD is useful in trending markets as it is unbounded
57. a. Downside breakout of a bearish triangle generates a sell signal
58. a. Stop losses should be placed below the last column of Os in an uptrend
59. c. occurs most often when price passes through a prior support or resistance level.
60. a. Expect a difference in the next expression of a similar wave
61. b. The two types of simple corrective processes are zig-zags and flats
62. d. waves can be expanded into longer waves and subdivided into shorter waves.
63. a. market action is governed by the Golden Ratio.
64. a. Wave four should never enter the price territory of wave one
65. c. Seasonal, presidential, Kondratieff
66. d. October, November and January
67. c. decreases the number of days in the calculation whenever price reaches a new high.
68. d. Directional movement index
69. a. total amount risked on any single trade should not exceed 5% of equity.
70. a. another term for the average.
71. d. Placing protective stops at the breakeven levels as size increases
72. c. The U.S. dollar generally moves inversely to commodity prices
73. a. Relative strength analysis allows for identification of the strongest and weakest
sectors
74. c. bottoms and double tops can be continuation patterns.
75. a. will lead to a stronger price move.
76. c. can be either bullish or bearish reversal patterns.
77. c. need not be confirmed by other indicators
78. c. requires bearish confirmation.
79. b. There is heavy volume on the second day of the engulfing pattern
80. b. Heavy volume at the opening of the second day indicates a buying climax
81. b. It is a bearish reversal pattern
82. b. Three black crows
83. d. The real bodies of the second and third candles fail to overlap
84. c. There is light volume on the first candle and heavy volume on the last candle of the
pattern.
85. d. The lack of arising window makes the pattern more bearish
86. b. The pattern requires confirmation.
87. a. It contains a spinning top
88. b. the same high price
89. b. A short belt-hold line has more significance than along belt-hold line
90. b. The three candles should close at or near their lows
91. d. If the second or third candle show signs of weakening it is called a stalled pattern
92. a. They are short-term continuation patterns
93. c. It occurs when the shadows of two consecutive candles do not overlap
94. b. Each pattern consists of three candles
95. c. The opening price of the second candle equals the opening price of the first candle
96. b. Tweezers
97. c. Windows
98. a. the square root of the variance.
99. d. leveraging and pyramiding.
100. c. Consolidation, Maturity, Decay.
101. b. General news reflects slowly unfolding economic and financial trends not yet
discounted by the markets
102. d. When everyone thinks alike, everyone is likely to be wrong
103. c. Make a decision as to how many columns to average.
104. b. bottom reversal pattern consisting of three candles.
105. b. has a doji in the middle position.
106. a. ideally has a doji as second candle.
107. c. opposite colored candles have the same close.
108. b. dark cloud cover.
109. d. Low VIX levels
110. a. TRIN
111. b. Inside day
112. a. January Effect.
113. b. left translation.
114. c. measure deviations of price within two standard deviations of the range.
115. c. The Martingale betting system.
116. c. Herrick Payoff Index.
117. b. scale to logarithmic.
118. a. An oscillator
119. d. maximum cumulative drawdown.
120. c. McClellan Oscillator.
121. c. sentiment indicators.
122. a. most investors will act rationally.
123. c. Throwback
124. d. If MACD has had a positive value for more than12periods, it is predictive of a reversal
Reading
125. d. It examines the most recent closing price as a percentage of the price range over a
window of time.
126. b. Equivolume chart.
127. b. fulcrums.
128. c. Divide the current prices by a moving average of those prices.