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Forex > High School > Flashcards

High School Flashcards

1
Q

How do you classify a market scenario in which the price is moving in one direction?

A

Trending

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2
Q

In an uptrend, the price usually forms…

A

Higher highs and higher lows

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3
Q

True or false. The more liquid a currency pair, the more volatility we can expect.

A

True

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4
Q

Which indicator is used to determine the strength of a trend?
a. ADX
b. Stochastics
c, Fibonacci tool

A

ADX

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5
Q

If the price bounces between a specific low price and a particular high price, what type of market scenario is seen?

A

Ranging

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6
Q

True or false. The lower the value of ADX, the stronger the trend.

A

False

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7
Q

What do contracting Bollinger bands indicate?

A

Low volatility

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8
Q

Which of the following pair groups are good for range-bound strategies?

A

Currency crosses

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9
Q

What type of price behavior is characterized as a temporary movement against the established trend?

A

Retracement

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10
Q

True or false. Reversals can occur anytime.

A

True

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11
Q

When there is a significant change in fundamentals, which among the following can take place?

A

Reversal

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12
Q

Which among the following can be used in identifying retracements?
a, Fibonacci tool
b. Pivot Points
c, Both

A

Both

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13
Q

How can you protect yourself against sudden reversals?

A

By placing stops

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14
Q

Why do breakouts fail?

A

A smart minority with bigger position sizes is making money off the majority

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15
Q

What occurs when price breaks out of consolidation or trading range?

A

Breakout

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16
Q

Which strategy tends to work well when trading breakouts?

A

Jump in when volatility is low

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17
Q

Which of the following is NOT a good measure of volatility?

a. Moving averages
b. Fibonacci
c. Bollinger Bands

A

Fibonacci

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18
Q

Volatility is on the rise when Bollinger Bands contract.

A

Lie!

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19
Q

How do you fade a breakout?

A

Trade the opposite direction of the breakout

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20
Q

What occurs when price breaks an important level, but doesn’t continue moving in the same direction?

A

False breakout

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21
Q

A ______ breakout is the reversal of price action after breaking consolidation.

A

Reversal

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22
Q

______ are generally bullish patterns that signal a breakout to the upside.

A

Ascending triangles

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23
Q

How do you fade trendline breaks?

A

Jump in when price pops back inside

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24
Q

Which of the following is a good tool to confirm a breakout?

a. AUD
b. RSI
c. KFC
d. CPI

A

RSI

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25
Q

If MACD begins to decrease even when the trend is continuing…

a. There’s a good chance that momentum is also decreasing and the trend could reverse
b. There’s something wrong with your parameters
c. There’s a good chance that the trend will continue

A

There’s a good chance that momentum is also decreasing and the trend could reverse

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26
Q

When ATR is falling…

a. Volatility is increasing
b. Justin Beiber is singing
c. Volatility is decreasing

A

Volatility is decreasing

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27
Q

Where are potential fakeouts usually found?

A

At support and resistance levels

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28
Q

A symmetrical triangle suggests a breakout in which direction?

A

Either direction

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29
Q

Fading breakouts get better results in what type of market?

A

Range-bound market

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30
Q

Why do false breakouts occur with the head and shoulders pattern?

A

Traders usually put their stop loss too close to the neckline

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31
Q

What is fundamental analysis?

A

The study and use of economic, political, and environmental reports to forecast future price action

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32
Q

Which of the following is NOT a fundamental event?

a. Barrack Obama becomes the President of the U.S.
b. Oil prices rise due to supply reduction
c. An important resistance level is broken

A

An important resistance level is broken

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33
Q

Is the market’s anticipation for an economic indicator more important than the actual economic results?

A

They’re both equally important

34
Q

What does RBNZ mean?

A

Reserve Bank of New Zealand

35
Q

What is the difference between the interest rates of two currencies called?

A

Interest rate differential

36
Q

An increase in interest rates…

a. Usually leads to faster economic growth
b. Usually leads to slower economic growth
c. Usually leads to faster inflation

A

Usually leads to slower economic growth

37
Q

Monetary policy that aims to reduce the money supply in the economy

a. Expansionary monetary policy
b. Restrictive monetary policy
c. Restrictive monetary policy

A

Restrictive monetary policy

38
Q

Monetary policy that aims to increase the money supply in the economy is called?

A

Expansionary monetary policy

39
Q

What is the main goal of a monetary policy?

A

Maintain price stability and economic growth

40
Q

Central bankers are “hawkish” when

A

They favor the need for higher interest rates

41
Q

Central bankers are “dovish” when

A

They favor the need for lower interest rates

42
Q

Why is the economic outlook important in fundamental analysis?

A

Consumers spend more when they anticipate strong economic growth

43
Q

A trade deficit happens when

A

Imports exceed exports

44
Q

What is a consensus?

A

A relative agreement on upcoming economic forecast

45
Q

What is a good way to prepare for a release of an economic report?

A

Think of different scenarios and be prepared to react to different market reaction.

46
Q

In forex lingo, what is a “cross?”

A

A currency pair that doesn’t involve USD

47
Q

Which among the following is NOT a cross-currency pair?

a. EUR/JPY
a. GBP/CHF
c. USD/SGD

A

USD/SGD

48
Q

In calculating for the cross rate of AUD/JPY, what would be its ‘legs’ that you would have to look at?

a. AUD/USD and USD/JPY
b. AUD/USD and EUR/JPY
c. EUR/JPY and AUD/USD

A

AUD/USD and USD/JPY

49
Q

Over ___ of the transactions in the forex market involve the U.S. dollar.

A

90%

50
Q

Why is the dollar the reserve currency of the world?

A

It’s because most agricultural and industrial commodities are priced in dollars.

51
Q

Which of the following is an advantage of cross currency trading?

a. Cross pairs have lower spreads
b. Crosses are more liquid than the majors
c. Crosses give you more trading opportunities by not limiting you to a pro- or anti-dollar stance

A

Crosses give you more trading opportunities by not limiting you to a pro- or anti-dollar stance

52
Q

What country has the largest economy in the world?

A

United States

53
Q

Why are crosses more likely to present cleaner trends and ranges than the majors?

A

They are not susceptible to ‘spikes’ that may come with U.S. news reports

54
Q

Selling currencies whose country has a lower interest rate against currencies whose country has a higher interest rate is called ____

A

Carry trade

55
Q

Currency crosses offer many pairs with high _______, which are prime for the kind of trades referred to in the previous question.

A

Interest rate differentials

56
Q

Obscure crosses are currency pairs that don’t include which currencies?

A

USD, EUR and JPY

57
Q

Trading obscure crosses usually require which of the following?

A

Wider stops

58
Q

Which among of the following is NOT a downside to trading obscure crosses?

a. They are volatile
b. They are liquid
c. They have wider spreads

A

They are liquid

59
Q

Let’s say that positive economic data that came out from the U.K. and the U.S. economy also printed impressive economic reports. Which of the following is the best way for you to make the most of this opportunity?

a. Buy GBP/USD because U.S. data is no match for British figures!
b. Sell GBP/USD because the dollar wins no matter what!
c. Find a fundamentally-weaker currency to trade against the pound.

A

Find a fundamentally-weaker currency to trade against the pound.

60
Q

True or false. Currency crosses allow you to match the currency of the best performing economy against that of the weakest economy without having to deal with the U.S. dollar.

A

True

61
Q

Which of the following statements is TRUE?

a. Creating synthetic pairs instead of just trading crosses directly allows you to save on margin.
b. Institutional traders use synthetic pairs more often than retail traders.
c. In order to create a synthetic GBP/CHF, you can sell GBP/USD and buy USD/CHF.

A

Institutional traders use synthetic pairs more often than retail traders.

62
Q

What’s the primary reason for creating synthetic pairs?

A

Some trades are so high in volume that liquidity in the market is not enough to handle it.

63
Q

What is a “yard” in forex lingo?

A

One billion units of currency

64
Q

Which among the following currencies is the most traded currency next to the dollar?

A

EUR

65
Q

When trading the yen, which pair should you also keep tabs on as broken key levels on it usually spread to other yen pairs?

A

USD/JPY

66
Q

As of February 2010, which yen cross has had the highest volume?

A

EUR/JPY

67
Q

Which of the following statements is TRUE?

a. You should look at USD/CAD if you can’t decide whether you should buy GBP/USD or sell EUR/JPY.
b. You should look at GBP/CHF if you can’t decide whether you should buy EUR/GBP or sell EUR/CHF.
c. You should look at AUD/JPY if you can’t decide whether you should sell AUD/USD or buy USD/JPY.

A

You should look at AUD/JPY if you can’t decide whether you should sell AUD/USD or buy USD/JPY.

68
Q

Which of the following is an example of how crosses can help make better trading decisions with majors?

a. Currency crosses can provide clues about the relative strength of each major currency pair.
b. Currency crosses allow you to see how big the spread you will have to pay on the major pair you’re planning to trade.
c. Currency crosses tell you that you’re trade is going to lose fosho!

A

Currency crosses can provide clues about the relative strength of each major currency pair.

69
Q

True or false. Currency crosses may have an indirect effect on dollar pairs.

A

True

70
Q

Multiple time frame analysis is simply the process of looking at…

A

Same pair but on different time frames

71
Q

Who among the following traders is doing multiple time frame analysis?

a. Jessica who is looking at one-hour charts of EUR/GBP, EUR/USD and EUR/CHF
b. Megan who is checking out EUR/USD in the one-hour, four-hour, and daily charts
c. Angelina who is skimming through the yen pairs, trying to see which is the best to trade.

A

Megan who is checking out EUR/USD in the one-hour, four-hour, and daily charts

72
Q

True or false: A trader’s success or failure is not affected by timeframe/s on which he trades

A

False

73
Q

The time frame which you should trade should depend on:

a. Your only available time to trade
b. Only your capital
c. Your personality

A

c. Your personality

74
Q

If you’re a swing trader, which of the following will most probably not be one of your problems?

a. High transaction costs
b. The need to have a bigger account to ride longer term swings
c. Overnight risk

A

The need to have a bigger account to ride longer term swings

75
Q

Long term traders usually focus on what timeframes?

A

Daily and weekly charts

76
Q

Which among of the following personality traits is the most critical for a long term trader?

A

Patience because your trade may last for months or even years!

77
Q

GBP/USD formed a long-legged doji at the top of a descending channel in the 15-minute time frame. Also, Stochastic is indicating that the pair is already oversold, and the MACD lines just crossed over each other and look like they’re heading down. What should you do?

A

Checkout the higher time frames first and see how the pair looks before pulling the trigger.

78
Q

True or false: Support and resistance levels would likely hold in smaller timeframes than in larger ones.

A

False

79
Q

Which of the following statements is true?

a. A trend on a longer time frame has had more time to develop, which means that it will take a bigger market move for the pair to change course
b. The sure key to trading success is focusing only on the timeframe you’re comfortable with
c. Start off with the smallest time frame to see what’s going on

A

A trend on a longer time frame has had more time to develop, which means that it will take a bigger market move for the pair to change course

80
Q

_____ timeframes are ideally used in deciding where to best enter a trade.

A

Smaller

81
Q

What’s the most important thing to remember when you’re trying to figure out the best time frame combination for you

A

There should be enough time difference between them to see a difference in their movement

82
Q

Traders usually look at three time frames. If the larger time frame is used to determine trends and smaller time frame is for entry and exit points, what is the use of the other one?

A

It signals the medium term buy or selling bias

Forex (11 decks)

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