Elementary Flashcards
In a bull market, a ____ level is an area that price has difficulty breaking through to the downside.
Support
When price breaks through a resistance level, it could potentially become…
A support level
How many tops or bottoms does it take to confirm a trend line?
Three
When drawing trend lines, you should…
Never force them to fit the market
Describe a market’s behavior when a pair is trading within a channel?
Price trades within two parallel trend lines,
A descending channel is characterized by…
Lower highs and lower lows
Generally, the ___ of a channel is considered to be a ____ zone.
Bottom, Buy
When trading off support and resistance levels, you generally should…
Wait for price to bounce off the support/resistance level as confirmation that it is holding
When trading the break of support or resistance levels, the conservative way would be to…
Wait for price to retest the broken support/resistance zone then buy/sell
What do you call a candlestick pattern that has long upper and lower shadows and small real bodies?
Spinning Top
Who “discovered” the secret technique of candle stick trading?
Steve Nison
What would a candlestick with a white body represent?
Price closed above the open
What do long black candlesticks indicate?
Sellers were in control
What do you call a candlestick pattern that has a long lower shadow, with no upper shadow and price closing at its open price?
Dragonfly Doji
What do you call a candlestick pattern that closes significantly below its opening price and has no shadows?
Black Marubozu
A ____ is a bullish reversal pattern that forms during a down trend. It is characterized by a long lower shadow and normally has a white body.
Hammer
Which of the following is NOT a recognition criteria of a hanging man?
a. A long upper shadow that is about two or three times the length of the real body
b. The real body is at the upper end of the trading range
c. Little or no upper shadow
A long upper shadow that is about two or three times the length of the real body
What do you call a two candlestick pattern that indicates a strong down move may be coming?
Bearish engulfing
What do you call a two candlestick pattern that signals a reversal to the upside may happen?
Tweezer bottom
A ____ candlestick formation is a trend-reversal pattern that is found at the bottom of a downtrend. It has the following characteristics: The first candlestick is characterized by a strong bearish candlestick. The second candlestick should have a smaller body that reaches the midway point of the first candle. Third candlestick’s close should be above the high of the first candlestick
Three inside up
A Swing High is a candlestick with…
At least two lower highs on both the left and right of itself
Which of the following is not a Fibonacci retracement level?
a. 0.212
b. 0.382
c. 0.618
0.212
When the market is on an uptrend, you would ideally…
Go long (or buy) on a retracement at a Fibonacci support level
The Fibonacci retracement tool works best when the market is…
Trending
Fibonacci levels give you a _____ probability of success, but they _____work.
Higher, Don’t always
The Fibonacci tool should…
Be used in combination with other tools
One of the best ways of using the Fibonacci tool is…
To determine potential support and resistance levels
The Fibonacci tool goes well with…
Trend line analysis
True or False: You can use the Fibonacci tool to help you find potential entry points.
True
If it seems that price is stalling on a Fib level, chances are that other traders…
May have put some orders at this level
If a Fib Stick forms right below or right above a Fib level, you can just enter a trade at market price since you now have more confirmation that level could be…
Holding
In an uptrend, the general idea is to _____on a _____trade at a Fibonacci Price Extension Level.
Take profits, Long
In a downtrend, the general idea is to _____ on a _____ trade at a Fibonacci Price Extension Level.
Take profits, Short
True or False: As much as possible, you should rely solely on Fib levels as support and resistance points as the basis for stop loss placement.
False
With wider stops, and without reducing your position size, you may incur…
Larger losses
What are the two major types of moving averages?
simple and exponential
To make a moving average smoother, you should get the average closing prices over…
a longer time period
The longer the period you use for the SMAs, the __ it is to react to price movement.
slower
True or False: With the use of SMAs, we can tell whether a pair is trending up, trending down, or just ranging.
True
One problem with simple moving averages is that they…
are susceptible to spikes
EMA stands for…
Exponential Moving Average
EMAs give ___ weight to the most recent periods.
more
Which type of moving average displays a smooth chart which eliminates most fakeouts?
SMA
Which type of moving average is quick-moving and is good at showing recent price swings?
EMA
You get a clearer signal of whether the pair is trending up or down if you plot…
two or more moving averages
When the pair is in an uptrend, the faster moving average should be…
above the slower moving average
When moving averages cross over one another, it could be a sign that…
the trend is about to change soon
Crossover systems work best in…
trending markets
Moving averages can be described as “dynamic” support and resistance levels because they…
move according to recent price action
Plotting different types of moving averages helps you see..
both long-term and short-term movement
Bollinger bands can be used to measure the market’s ___ in such a way that when the market is “loud” the bands expand and when the market is “quiet,” they contract.
volatility
The idea behind the Bollinger bounce is that price tends to…
return to the middle of the bands
What does MACD stand for?
Moving Average Convergence Divergence
What do the two lines of MACD represent?
the moving average of the DIFFERENCE between the price moving averages
When a ____ occurs, the fast line starts to move away from the slower line, indicating that a new trend has formed.
crossover
What do Parabolic SAR dots indicate?
potential reversals
Which of the following is the proper way of trading using the Parabolic SAR?
Sell when Parabolic SAR is above price
Parabolic SAR is best used in ____ markets.
Trending
What market condition does Stochastic indicate?
overbought and oversold conditions in the market
Using Stochastic, traders usually sell when the lines are in which range?
80-100
Using Stochastic, traders usually buy when the lines are in which range?
0-20
What does RSI stand for?
Relative Strength Index
What is the baseline figure for RSI used to confirm trend formations?
50
Typically, RSI readings below ___ indicate that the pair is oversold, while RSI readings over __ indicate that it is overbought.
30,70
Typically, traders use the ADX (Average Directional Index) to determine what?
the strength of the current trend
What levels do ADX Fluctuate between?
ADX readings above 50 signal a strong trend.
We illustrated ways that you can use the ADX. Which among the following is NOT one of them?
a. ADX can be used to confirm if the pair will continue in its current trend or not.
b. ADX can be used to determine when one should close a trade early.
c. ADX tells you when a pair is overbought or oversold.
c. ADX tells you when a pair is overbought or oversold
What does Ichimoku Kinko Hyo mean?
A glance at a chart in equilibrium
As we’ve said, Ichimoku Kinko Hyo is a 3-in-1 indicator. Which among the following does it NOT measure?
the strength of a current trend
If you wanted to look at future price movement using the Ichimoku Kinko Hyo, which line would you look at?
Kijun Sen (blue line)
If a trader is using both RSI and MACD in trading, when should he sell?
RSI overbought and the MACD shows a downward crossover
True or False: The best thing for everyone to do is to use just one indicator so as to avoid analysis paralysis.
False. It’s better to combine indicators so they can filter each other’s imperfections.
