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day trading > chapter 5 > Flashcards

chapter 5 Flashcards

1
Q

WHAT IS THE MAIN TOOL OF TECH ANALYSIS?

A

CHARTS ( PRICE CHARTS)

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2
Q

WHAT IS THE PURPOSE OF A PRICE CHART?

A

TO SUMMERIZE HISTORICAL PRICE DATA IN A GRAPHICAL representation WAY.

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3
Q

WHO ARE THE BULLS AND THE BEARS REFERRING TO.

A

BUYERS AND SELLERS.

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4
Q

T OR F: BY LOOKING AT PAST PRICES WE CAN DETERMINE ( PROBABILITY ) WHAT FUTURE PRICES MAY BE. ALSO, EXPLAIN WHY THAT IS .

A

TRUE.PRICE IS DRIVEN BY PEOPLE AND PEOPLE ARE HABITUAL IN NATURE.

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5
Q

WHAT DOES A DOJI CANDLE MEAN?

A

Indecision

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6
Q

WHY DOES A DOJI CANDLE MEAN INDECISION?

A

BECAUSE THE STOCK PRICE OPENS AND CLOSES IN THE SAME PLACE.

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7
Q

1.WHAT IS SIDEWAYS OSCILATION? 2.WHEN DOES IT OCCOUR? 3.WHAT IS THE RESULT?

A

WHEN A PRICE MOVES SIDEWAYS IN BETWEEN A RANGE OF PRICES.TENDS TO HAPPEN WHEN A TREND LINE IS BROKEN.WHEN THE PRICE BREAKS OUT OF RANGE IT WILL CONTINUE THE DIRECTION IT WAS GOING BEFORE OR THE OPPOSITE DIRECTION OR CONTINUE SIDEWAYS.

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8
Q

WHAT IS TSR ?

A

TREND/ SUPPORT/ RESISTANCE

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9
Q

WHAT ARE TWO TYPES OF PATTERNS FOUND ON PRICE CHARTS?

A

CONTINUATION PATTERNS AND REVERSAL PATTERNS.

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10
Q

WHAT DOES INDEX MEAN?

A

AN INDEX IS AN INDICATOR OR MEASURE OF SOMETHING. IN FINANCE, IT TYPICALLY REFERS TO A STATISTICAL MEASURE OF CHANGE IN A SECURITIES MARKET. IN THE CASE OF FINANCIAL MARKETS, STOCK AND BOND MARKET INDEXES CONSIST OF A HYPOTHETICAL PORTFOLIO OF SECURITIES REPRESENTING A PARTICULAR MARKET OR A SEGMENT OF IT.

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11
Q

WHAT ARE THE BASIC TYPES OF PATTERNS

A
  1. RECTANGLE
  2. FLAG
  3. TRIANGLE
  4. DOUBLE TOP AND DOUBLE BOTTOMS.
  5. HEAD AND SHOULDERS.
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12
Q

HOW IS A RECTANGLE FORMED. DESCRIBE IT?

A

BY PRICE MOVING SIDEWAYS BETWEEN RESISTANCE AND SUPPORT.

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13
Q

WHAT DIRECTION DO RECTANGLES TEND TO BREAKOUT FROM?

A

IN THE DIRECTION OF THE ORIGINAL TREND.

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14
Q

AFTER A RECTANGLE BREAKS OUT, HOW DO I TRADE IT.

A

CAN GO LONG ( IF PRICE IS IN AN UPTREND) OR SHORT THE PATTERN( IF PRICE IS IN A DOWN TREND)

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15
Q

DESCRIBE A FLAG PATTERN?

A

RECTANGLE ON A SLOPE IN THE OPPOSITE DIRECTION OF THE TREND.

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16
Q

AFTER PRICE BREAKS OUT OF A FLAG PATTERN, WHAT DIRECTION DOES IT GO?

A

THE SAME DIRECTION IT WAS GOING IN BEFORE IT ENTERED THE PATTERN.

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17
Q

WHEN A FLAG IS FORMING, WE HAVE NO IDEAL WEATHER IT WILL BE (BLANK) OR (BLANK)?

A

FLAG OR A NEW TREND IN ANOTHER DIRECTION.

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18
Q

HOW DO WE ESTIMATE HOW FAR THE PRICE WILL TRAVEL DURING A FLAG PATTERN?

A

WHEN THE PRICE BREAKS OUT OF THE PATTERN, IT WILL OFTEN TRAVEL THE SAME DISTANCE AS THE FLAG POLL.

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19
Q

WHAT ARE THE TWO PARTS OF THE FLAG ?

A

THE FLAG POLE AND THE FLAG.

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20
Q

IS A TRIANGLE A REVERSAL OR A CONTINUATION PATTERN OR BOTH?

A

THEY CAN BE BOTH.

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21
Q

WHAT ARE THE THREE TYPES OF TRIANGLES?

A
  1. ASCENDING TRIANGLE
  2. DECENDING TRIANGLE
  3. SYMETRICAL TRIANGLE
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22
Q

HOW ARE TRIANGLES FORMED ?DESCRIBE THEM?

A

THE BUYERS ARE PULLING THE PRICE UP WHILE THE SELLERS ARE PULLING PRICE DOWN.THOSE PUSHES AND PULLS BECOME SMALLER AS TIME GOES BY RESULTING IN PRICE BREAKING OUT OF TRIANGLE PATTERN

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23
Q

WHAT IS THE DIFFERENCE BETWEEN A RECTANGLE AND A TRIANGLE PATTERN?

A

A RECTANGLE ONLY HAS TWO TYPES OF LINES: SUPPORT AND RESISTANCE LINES. A TRIANGLE CONTAINS SUPPORT,RESISTANCE , AND TREND LINES.

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24
Q

DESCRIBE AN ASCENDING TRIANGLE( DESCRIBE THE LINES THAT MAKE IT UP)?

A

TOP LINE IS STRAIGHT/ HORIZONTAL. THE BOTTOM LINE IS TREND LINE.

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25
Q

DESCRIBE AN DESCENDING TRIANGLE( THE LINES THAT MAKE IT UP)?

A

THE BOTTOM LINE IS STRAIGHT/ HORIZONTAL. THE TOP LINE IS A TREND LINE.

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26
Q

DESCRIBE A SYMMETRICAL TRIANGLE( THE LINES THAT FORM IT)?

A

BOTH LINES ARE TREND LINES.

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27
Q

IN A TRIANGLE PATTERN, WHERE SHOULD THE BREAKOUT OCCUR ?

A

BREAK OUT SHOULD OCCUR THREE QUARTERS OF THE WAY ALONG THE TRIANGLE .IF IT OCCURS AFTER THAT , IT IS NOT VALID.

28
Q

WHAT DIRECTION. IS A ASCENDING TRIANGLE LIKLY TO BREAK OUT INTO?

A

UP SIDE

29
Q

WHAT DIRECTION IS A DESCENDING TRIANGLE LIKLY TO BREAK OUT IN?

A

DOWN SIDE

30
Q

WHAT DIRECTION IS A SYMMETRICAL TRIANGLE LIKLLY TO BREAK INTO?

A

THE DIRECTION OF THE ORIGINAL TREND

31
Q

HOW FAR WILL PRICE GO WHEN IT BREAKS OUT OF TRIANGLE

A

THE TOP OF TRIANGLE TO THE BOTTOM OF IT .

32
Q

WHEN DRAWING ANY TYPE OF PATTERN OR LINE ON A CHART, WHAT MAKES A GOOD LINE GOOD?

A

THE AMOUNT OF TIMES PRICE BOUNCES OFF IT WITHOUT CROSSING.

33
Q

IS A DOUBLE TOP AND DOUBLE BOTTOM CONTINUATIONS PATTERNS OR REVERSALS PATTERNS?

A

REVERSAL PATTERN

34
Q

DESCRIBE THE DOUBLE TOP AND DOUBLE BOTTOM PATTERN?

A

THE PRICE MAKES A HIGH BUT FALLS BACK. IT TRIES TO MAKE A SECOND HIGH BUT FAILS TO BREAK ABOVE THE PREVIOUS ONE.

35
Q

FOR DOUBLE TOP AND DOUBLE BOTTOM PATTERNS: WHEN PRICE BREAKS THROUGH THE PATTERN, HOW FAR IS THE PRICE EXPECTED TO TRAVEL?

A

THE SAME HEIGHT OF THE PATTERN.

36
Q

WHAT ARE THE 4 MAIN TYPES OF ORDERS FOR PLACING TRADES/

A
  1. MARKET
  2. LIMIT ORDER
  3. STOP
  4. STOP LIMIT
37
Q

A LIMIT ORDER TO BUY WOULD NORMALLY BE PLACED WHERE?

A

BELOW THE CURRENT PRICE.

38
Q

A LIMIT ORDER TO SELL WOULD NORMALLY BE PLACED WHERE?

A

ABOVE THE CURRENT PRICE.

39
Q

WHAT IS A LIMIT ORDER?

A

ORDER TO BUY OR SELL A CERTAIN QUANTITY OF SHARES AT A SPECIFIC PRICE OR BETTER.

40
Q

ONCE A LIMIT ORDER IS PLACED, HOW LONG WILL IT SIT THERE.

A

UNTIL IT IS FILLED OR CANCELED.

41
Q

WHEN A ORDER IS PLACED AT AN EXCHANGE TO BY STOCK, IN WHAT ORDER ARE THEY FILLED.

A

PRICE ORDER THEN TIME ORDER.

42
Q

WHAT ARE THE BENEFITS OF USING A LIMIT ORDER

A
  1. WONT GET SLIPPAGE BECAUSE PRICE WILL BE FILLED AT SPECIFIC PRICE OR BETTER.
43
Q

GIVE AN EXAMPLE OF A BUY / LIMIT ORDER?

A

( FILL IN THE BLANK)

44
Q

GIVE AN EXAMPLE OF A SELLL/ LIMIT ORDER. ASSUME I ENTERED A TRADE AT 10.00 AND I BELIEVE THE PRICE WILL GO TO 15.00?

A

I WOULD SET A SELL/ LIMIT ORDER FOR THE PRICE I WISH TO EXIT THE STOCK AT( 15.00). WHEN THE PRICE IS REACHED, THE LIMIT ORDER WILL TURN INTO A MARKET ORDER AND BE SOLD.

45
Q

WHAT ARE THE DRAWBACKS OF USING A LIMIT ORDER?

A

THE ORDER MAY NEVER GET FILLED ( PRICE MAY NEVER GO HIGH OR LOW ENOUGH)

46
Q

WHAT TYPE OF ORDER SHOULD I USE TO ENTER A NEW TRADE WITH AND WHAT TYPE SHOULD I USE TO EXIT A NEW TRADE WITH?

A
  1. LIMIT ODER TO ENTER A NEW TRADE ( AND A STOP LOSE).

2. AND A MARKET ORDER TO EXIT.

47
Q

WHAT IS A STOP ORDER?

A

AN ORDER TO BUY OR SELL SHARES AT A SPECIFIC PRICE OR WORSE.

48
Q

WHEN A STOP ORDER IS PLACED, HOW LONG WIILL IT SIT THERE?

A

UNTIL IT IS FILLED OR CANCELED.

49
Q

WHERE WOULD A STOP ORDER TO BUY NORMALLY BE PLACED ?

A

ABOVE THE CURRENT PRICE.

50
Q

WHERE WOULD A STOP ORDER TO SELL NORMALLY BE PLACED ?

A

BELOW THE CURRENT PRICE.

51
Q

ONCE A STOP ORDER PRICE IS REACHED, WHAT HAPPENS TO A STOP ORDER?

A

IT BECOMES A MARKET ORDER.

52
Q

WHAT IS THE MOST COMMON USE OF A STOP ORDER?

A

AS A EXIT.

53
Q

GIVE EXAMPLE OF A STOP ORDER TO BUY?

A

..

54
Q

GIVE AN EXAMPLE OF A STOP ORDER TO SELL( or to exit )?

A

..

55
Q

WHAT ARE THE STEPS TO THE ERBO PATTERN?

A
  1. AFTER THE FIRST 30 MINUTES, DRAW THE SUPPORT AND RESISTANCE LINES AND CHECK THE EMA.
  2. AFTER THE PRICE BREAKS EITHER SUPPORT OR RESISTANCE,LOOK AT THE TIME AND SALES SCREEN FOR CONFIRMATION AND CALCULATE RISK/REWARD.
  3. IF TIME AND SALE,CONFIRMATION, AND RISK/REWARD ARE CORRECT, BUY.
  4. IF PRICE TURNS AGAINST BACK INTO EARLY RANGE, SELL ( THE PATTERN HAS FAILED) OR EXIT AT EXIT PRICE.
56
Q

WHEN HAS AN ERBO PATTERN FAILED?

A

IF THE PRICE GOES BACK INTO THE EARLY RANGE , ITS A FAIL.

57
Q

(MONEY MANAGEMENT)

WHAT IS THE PURPOSE OF A MONEY MANAGEMENT SYSTEM IN DAY TRADING?

A

TO PRESERVE CAPITAL.

58
Q

(MONEY MANAGEMENT)

HOW DO I ACHIVE MY MONEY MANAGEMENT PLAN

A
  1. NEVER RISK MORE THAN A CERTAIN AMOUNT ON ANY SINGLE TRADE.
  2. NEVER LOSE MORE THAN A CERTAIN AMOUNT ON ANY SINGLE DAY,WEEK,MONTH.
59
Q

(MONEY MANAGEMENT)

IF I START OFF WITH 15,000 , EXPLAIN HOW I PRESERVE MY MONEY.

A

15K DIVIDED BY THE AMOUNT OF MONTHS THAT THE MONEY SHOULD LAST

60
Q

LIST THE STEPS TO DAY TRADING FROM START TO FINISH?

A
  1. LOOK AT ECONOMIC CALENDAR.
  2. CREATE WATCHLIST FROM NEWS STOCKS.
  3. CHECK MARKET SENTIMENT: CHECK THE FUTURES MARKET.CHECK OTHER INDICATOR.
  4. GO STOCK BY STOCK. CHECK FOR GAPPERS.

.LOG AND ANALYZE

61
Q

WHAT IS MARKET SENTIMENT?

A

THE OVERALL ATTITUDE OF INVESTORS TOWARDS A PARTICULAR SECURITY OR FINANCIAL MARKET.

62
Q

WHAT IS A GAP?

A

WHEN A STOCK OPENS HIGHER OR LOWER THAN IT CLOSED THE PREVIOUS SESSION/DAY.

63
Q

HOW DO I CHECK MARKET SENTIMENT?

A

…

64
Q

WHAT PERCENTAGE OF GAPS GET FILLED ?

A

ABOUT 70 %

65
Q

TRUE OR FALSE : IF A GAP OPEN PRICE IS WITHIN THE PREVIOUS DAYS TRADING RANGE THAN IT HAS A 85 PERCENT CHANCE OF BEING FILLED?

A

TRUE.

66
Q

WHAT TYPE OF NEWS ARTICLES AM I LOOKING FOR IN ORDER TI CREATE MY WATCHLIST?

A
  1. FINANCIAL RESULTS( BETTER OR WORSE RESULTS THAN EXPECTED).
  2. RAISING OR LOWERING GUIDANCE.
  3. UPGRADES AND DOWNGRADES.
  4. PHARMACEUTICALS.
  5. BOARD LEVEL CHANGES.
  6. MERGERS AND ACQUISITIONS.
67
Q

DESCRIBE HOW A RECTANGLE PATTERN IS FORMED?

A

PRICE IS MOVING BETWEEN SUPPORT AND RESISTANCE.

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