Test

Test Your Knowledge

Note from The PitMaster: Take a test, check your skills! How do you measure up? Are you ready to trade? Don't cheat, the answers are at the bottom. 10 questions - should we grade on the curve?

The PitMaster's Quiz: Level 1.

1. In which way is technical analysis the same or similar in both futures and stocks?

        a.     Price Structure.
        b.    Margin requirements.
        c.    Timing.
        d.    None of the above.

2. The average length of a minor trend is:

        a.    Less than 3 weeks.
        b.    A month or more.
        c.    About 3 months.
        d.    Under 6 months.

3. In the following chart, which point(s) is (are) best described as a buy signal?

I. A,C, and E. II. B1 and B2. III. D.

chart1.gif (2258 bytes)

        a.    I only.
        b.    II only.
        c.    II and III only.
        d.    III only.

4. The horizontal tic to the right of a price bar represents the:

        a.    Average price for the day.
        b.    Closing price.
        c.    Opening price.
        d.    Cumulative average price.

5. Which statement best defines volume?

        a.    The total number of outstanding contracts held by market participants at the close.
        b.    The total amount of trading activity in that commodity for the day.
        c.    The total amount of trading activity in the commodities market in general.
        d.    The total amount of trading activity as reflected in the Commodity Research Bureau Index.

6. Which statement best defines open interest?

7. Which statements are true?

        I.    High open interest reflects high liquidity.
        II.    High open interest reflects heavy trading.
        III.    Buying and selling on high open interest are easier than on low open interest.

        a.    I only.
        b.    I and II only.
        c.    I and III only.
        d.    I, II, and III.

8. At a support level:

          a.    Buying pressure overcomes selling pressure.
          b.    Selling pressure overcomes buying pressure.
          c.    Buying and selling pressures stay equal.
          d.    Prices turn downward.

9. In the chart below, what do you call the area between the red lines?

chart2.gif (790 bytes)

        a.    Support zone.
        b.    Resistance area.
        c.    Trading range.
        d.    Retracement range.

10. In the chart below, which red lines represent support levels?

chart3.gif (1591 bytes)

        a.    A and C.
        b.    B and D.
        c.    A and B.
        d.    C and D.

Answers:

These questions were taken from John J. Murphy's book, "Technical Analysis of the Futures Markets, A Comprehensive Guide." You can find it in The PitMaster's Bookstore. (John J. Murphy was the Senior Commodity Trading Advisor for Merrill Lynch.) Pick up a copy of his book, it is excellent! It continues on where Ken left off.

1.    d.    See pages 6-7 and 13-17
2.    a.    See page 26
3.    b.    See page 31
4.    b.    See page 41
5.    b.    See page 44
6.    a.    See page 44
7.    c.    See page 45
8.    a.    See page 59
9.    c.    See page 55
10. b.    See page 61

John J. Murphy's book is over 550 pages. As you can see, we only went to page 60. (And we skipped over a lot of information!) Watch for more quizzes for deeper in depth coverage! Can you keep up?