Freshman Year Flashcards by Lynne Newby

The combination of all the views, ideas, and opinions of all the participants in the market is known as the ?

Market sentiment

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It would be best to combine market sentiment analysis with ____ and ____ analysis.

a. Bullish and bearish
b. Technical and fundamental
c. Indicator and candlestick

Technical and fundamental

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What does COT stand for?

Commitment of Traders

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Who releases the COT report

CFTC

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In the COT report, this group refers to big businesses that use currency futures contracts to hedge against exchange rate fluctations.

Commercial

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When using COT report, under which exchange should you look for currency futures?

Chicago Mercantile Exchange

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Which of the three groups are most bullish at market bottoms and most bearish at market tops?

a. Hedgers
b. Large Speculators
c. Small Speculators

Hedgers

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Which of the three groups is most likely to sell on a downtrend and keep adding to their position until a reversal is in place?

a. Hedgers
b. Large Speculators
c. Small Speculators

Large Speculators

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Using the COT report is most useful when trying to spot a ?

a. Retracement
b. Trend
c. Reversal

Reversal

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If commercial positioning signals a reversal, speculative positioning indicates ____.

a. Trend direction
b. Market top or bottom
c. Hedging

Trend direction

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When speculators are at “extreme short” levels, chances are that ….

a. Price is at a market bottom.
b. Price is at a market top.
c. Commercials are also at an extreme short.

Price is at a market bottom.

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What is the formula needed to create your own COT indicator?

a. Difference = net position of commercials - net position of large speculators
b. Difference = net position of large speculators - net position of commercials
c. Difference = net position of large speculators + net position of commercials

Difference = net position of large speculators - net position of commercials

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What is the formula to get the percentage of speculative positions that are short?

a. # long contracts / (# long contracts + # short contracts)
b. # short contracts / (# long + # short contracts)
c. # short contracts /(# long - # short contracts)

short contracts / (# long + # short contracts)

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What best describes the % long formula?

a. This is the % of all speculative positions that are long contracts
b. This is the % of all commercial positions that are long contracts
c. This is the % of all speculative positions that are short contracts

This is the % of all speculative positions that are long contracts

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In the stock market, trading on information that has not yet been released to the public is more generally known as ____

Insider Trading

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Which of the following is an advantage of trading the news?

Potential strong price action

Slippage occurs when….

There is extreme volatility, causing you to get filled at a difference price.

Which of the following reports provides the most volatility in terms of pips moved?

a. NFP
b. CPI
c. Unemployment Claims

NFP

Which of the following pairs would probably give you the most “hiccups” when trading the news?a.

a. EUR/USD
b. USD/JPY
c. GBP/CAD

GBP/CAD

Before a news report is released, the common, forecasted figure for the report is known as the ____.

Consensus

True or False: Taking a non-directional bias means putting orders both above and below the current price?

True

Let’s say you want to trade the news on USD/JPY, and you have a bearish outlook on the pair. It has been trading within a tight range of 20 pips before the news, where should you put your stop loss point?

a. Just above the upper range levels
b. At market - you’re bearish on the dollar anyway
c. Just above the lower range levels

Just above the upper breakout point

When taking a straddle trade, where would you put your entry orders?

a. Buy orders above the upper breakout point and sell orders just below the lower breakout point
b. Sell orders above the upper breakout point and buy orders just below the lower breakout point
c. Put simultaneous buy & sell orders at market

Buy orders above the upper breakout point and sell orders just below the lower breakout point

True or False: When taking a straddle trade, you should always aim for 20 pips.

It depends on the range of the breakout points

True or False: One advantage of the non-directional bias approach is that it helps eliminates emotion

True

Let's say you want to trade the NFP report, and you're bearish on the dollar. You want to trade EUR/USD because it has been trading within a tight range of 20 pips just before the report. Where should you put your entry orders?

Just above the upper range levels

A carry trade involves borrowing an asset and paying interest at a relatively __ rate so that you can buy another asset and receive __ interest rate.

(low, a higher)

Let's say you borrowed $50,000 from the bank at an annual rate of 3.5%. Immediately after that, you used the money to buy yourself a nice little bond that pays 5.0% a year. How much would you profit in a year?

1.5% or $750

When you buy EUR/USD, you are basically…

selling U.S. dollars and buying euros

If you receive 4.75% from a long AUD position and pay 0.25% on a short CHF position, you have a… a. "negative carry" of 0.25% b. "negative carry" of 4.50% c. "positive carry" of 4.50%

"positive carry" of 4.50%

If you pay 3.00% on a short NZD position and receive 0.10% on a long JPY position, you have a… a. "negative carry" of 0.10% b. "negative carry" of 2.90% c. "positive carry" of 2.90%

"negative carry" of 2.90%

Carry trades do NOT work well when… a. risk appetite is strong b. risk aversion is low c. risk aversion is high

risk aversion is high

When economic conditions are uncertain, investors tend to retreat to…

safe haven currencies

You can make the most profit from a carry trade when a. the higher-yielding currency is trending higher against the lower-yielding currency b. the lower-yielding currency is trending higher against the higher-yielding currency c. the higher-yielding currency is trending lower against the lower-yielding currency

the higher-yielding currency is trending higher against the lower-yielding currency

Which of the following should you look for in a carry trade? a. no interest differential b. a low interest differential c. a high interest differential

a high interest differential

True or false: With a carry trade, you can profit even when the price of a currency pair is flat and stable.

True