Chartered Market Technician (CMT) Practice Exam
1. What is the primary purpose of technical analysis in financial markets?
A) Forecasting economic policies
B) Analyzing historical price and volume data
C) Evaluating company management
D) Predicting governmental regulations
Answer: B
Explanation: Technical analysis focuses on historical price and volume data to help predict future market
trends.
2. Which of the following best defines technical analysis?
A) An approach that evaluates economic indicators
B) A method that studies past market data to forecast price movements
C) A technique to assess corporate financial statements
D) A strategy based on political news
Answer: B
Explanation: Technical analysis involves studying historical market data, primarily price and volume, to
identify trends and forecast future movements.
3. Who is recognized as one of the founding figures of technical analysis?
A) Benjamin Graham
B) Charles Dow
C) John Maynard Keynes
D) Warren Buffett
Answer: B
Explanation: Charles Dow, known for the Dow Theory, is widely regarded as a pioneer in technical
analysis.
4. What is one key benefit of using technical analysis?
A) It guarantees accurate predictions of market movements
B) It helps identify patterns and trends in price data
C) It provides detailed company fundamentals
D) It eliminates all trading risks
Answer: B
Explanation: Technical analysis is valuable for identifying patterns and trends that can inform trading
decisions, though it does not guarantee accuracy.
5. How has technical analysis evolved over time?
A) It has remained unchanged since its inception
B) It has incorporated advanced statistical and computer techniques
C) It now focuses solely on fundamental data
D) It rejects modern technology in favor of traditional methods
,Answer: B
Explanation: Technical analysis has evolved by integrating advanced statistical methods, computer
algorithms, and software tools to analyze market data more efficiently.
6. What is a core principle of technical analysis?
A) Markets always follow a random path
B) Prices reflect all known information
C) Company earnings drive market prices exclusively
D) Government policies are the main factor in price movements
Answer: B
Explanation: One core principle is that market prices reflect all available information, making historical
price data a reliable basis for forecasting.
7. In technical analysis, what does the term “trend” refer to?
A) A short-term fluctuation in stock prices
B) The general direction in which a market is moving over time
C) A temporary market anomaly
D) A government-imposed market regulation
Answer: B
Explanation: A trend is the general direction in which a market or asset is moving over a longer period,
either upward, downward, or sideways.
8. Which of the following is NOT a benefit of technical analysis?
A) Helps with timing market entries and exits
B) Provides clear predictions of economic cycles
C) Identifies recurring price patterns
D) Assists in risk management
Answer: B
Explanation: While technical analysis helps in timing trades and managing risk, it does not specifically
predict broad economic cycles.
9. How does technical analysis differ from fundamental analysis?
A) It relies solely on company earnings data
B) It focuses on price trends rather than intrinsic value
C) It only considers macroeconomic factors
D) It exclusively uses expert opinions
Answer: B
Explanation: Technical analysis concentrates on price movements and trends, whereas fundamental
analysis examines a company’s intrinsic value and economic fundamentals.
10. Which asset classes can be analyzed using technical analysis?
A) Only stocks and bonds
B) Stocks, forex, commodities, and cryptocurrencies
,C) Only commodities and real estate
D) Only mutual funds
Answer: B
Explanation: Technical analysis is versatile and applicable to various asset classes including stocks, forex,
commodities, and cryptocurrencies.
11. What does the “chart” represent in technical analysis?
A) A record of economic forecasts
B) A visual representation of historical price movements
C) A company’s annual performance report
D) A summary of political events
Answer: B
Explanation: Charts visually display historical price movements and trading volume, which are essential
in technical analysis.
12. Which of the following is a common type of chart used in technical analysis?
A) Pie chart
B) Candlestick chart
C) Bar graph of sales
D) Organizational chart
Answer: B
Explanation: Candlestick charts are a popular type of chart that provides detailed information about
price movements within a specified time period.
13. What distinguishes a candlestick chart from a line chart?
A) Candlestick charts show only closing prices
B) Candlestick charts display open, high, low, and close prices
C) Line charts include volume data
D) Line charts provide detailed trading signals
Answer: B
Explanation: Unlike line charts, candlestick charts display four price points—open, high, low, and close—
offering a more comprehensive view of market action.
14. What does the “head and shoulders” pattern indicate in technical analysis?
A) A strong uptrend continuation
B) A potential reversal from an uptrend to a downtrend
C) Market consolidation
D) Increased volatility without trend change
Answer: B
Explanation: The head and shoulders pattern is typically seen as a signal that an uptrend may be
reversing into a downtrend.
15. Which technical analysis tool is primarily used to identify potential support and resistance levels?
A) Moving averages
, B) Price trend lines
C) Dividend yield analysis
D) Earnings reports
Answer: B
Explanation: Trend lines help identify areas where prices may find support or resistance based on
historical movements.
16. What is the significance of volume in technical analysis?
A) It determines a company’s market share
B) It confirms the strength of a price movement
C) It is used only in fundamental analysis
D) It predicts government policies
Answer: B
Explanation: Volume analysis is important because it can confirm the strength of a price trend or signal
potential reversals.
17. Which period is most associated with the early development of technical analysis?
A) The 1980s
B) The early 1900s
C) The 1960s
D) The 2000s
Answer: B
Explanation: The early 1900s saw significant contributions to technical analysis, particularly through the
work of pioneers like Charles Dow.
18. Which of the following is an example of a reversal pattern?
A) Triangle
B) Flag
C) Head and shoulders
D) Rectangle
Answer: C
Explanation: The head and shoulders pattern is considered a reversal pattern, indicating that a trend
may be about to reverse.
19. What is the importance of identifying chart patterns in technical analysis?
A) They provide insights into company management
B) They help traders anticipate future price movements
C) They indicate macroeconomic conditions
D) They determine dividend payouts
Answer: B
Explanation: Chart patterns assist traders by offering clues about potential future price movements,
which can be used to make informed trading decisions.
1. What is the primary purpose of technical analysis in financial markets?
A) Forecasting economic policies
B) Analyzing historical price and volume data
C) Evaluating company management
D) Predicting governmental regulations
Answer: B
Explanation: Technical analysis focuses on historical price and volume data to help predict future market
trends.
2. Which of the following best defines technical analysis?
A) An approach that evaluates economic indicators
B) A method that studies past market data to forecast price movements
C) A technique to assess corporate financial statements
D) A strategy based on political news
Answer: B
Explanation: Technical analysis involves studying historical market data, primarily price and volume, to
identify trends and forecast future movements.
3. Who is recognized as one of the founding figures of technical analysis?
A) Benjamin Graham
B) Charles Dow
C) John Maynard Keynes
D) Warren Buffett
Answer: B
Explanation: Charles Dow, known for the Dow Theory, is widely regarded as a pioneer in technical
analysis.
4. What is one key benefit of using technical analysis?
A) It guarantees accurate predictions of market movements
B) It helps identify patterns and trends in price data
C) It provides detailed company fundamentals
D) It eliminates all trading risks
Answer: B
Explanation: Technical analysis is valuable for identifying patterns and trends that can inform trading
decisions, though it does not guarantee accuracy.
5. How has technical analysis evolved over time?
A) It has remained unchanged since its inception
B) It has incorporated advanced statistical and computer techniques
C) It now focuses solely on fundamental data
D) It rejects modern technology in favor of traditional methods
,Answer: B
Explanation: Technical analysis has evolved by integrating advanced statistical methods, computer
algorithms, and software tools to analyze market data more efficiently.
6. What is a core principle of technical analysis?
A) Markets always follow a random path
B) Prices reflect all known information
C) Company earnings drive market prices exclusively
D) Government policies are the main factor in price movements
Answer: B
Explanation: One core principle is that market prices reflect all available information, making historical
price data a reliable basis for forecasting.
7. In technical analysis, what does the term “trend” refer to?
A) A short-term fluctuation in stock prices
B) The general direction in which a market is moving over time
C) A temporary market anomaly
D) A government-imposed market regulation
Answer: B
Explanation: A trend is the general direction in which a market or asset is moving over a longer period,
either upward, downward, or sideways.
8. Which of the following is NOT a benefit of technical analysis?
A) Helps with timing market entries and exits
B) Provides clear predictions of economic cycles
C) Identifies recurring price patterns
D) Assists in risk management
Answer: B
Explanation: While technical analysis helps in timing trades and managing risk, it does not specifically
predict broad economic cycles.
9. How does technical analysis differ from fundamental analysis?
A) It relies solely on company earnings data
B) It focuses on price trends rather than intrinsic value
C) It only considers macroeconomic factors
D) It exclusively uses expert opinions
Answer: B
Explanation: Technical analysis concentrates on price movements and trends, whereas fundamental
analysis examines a company’s intrinsic value and economic fundamentals.
10. Which asset classes can be analyzed using technical analysis?
A) Only stocks and bonds
B) Stocks, forex, commodities, and cryptocurrencies
,C) Only commodities and real estate
D) Only mutual funds
Answer: B
Explanation: Technical analysis is versatile and applicable to various asset classes including stocks, forex,
commodities, and cryptocurrencies.
11. What does the “chart” represent in technical analysis?
A) A record of economic forecasts
B) A visual representation of historical price movements
C) A company’s annual performance report
D) A summary of political events
Answer: B
Explanation: Charts visually display historical price movements and trading volume, which are essential
in technical analysis.
12. Which of the following is a common type of chart used in technical analysis?
A) Pie chart
B) Candlestick chart
C) Bar graph of sales
D) Organizational chart
Answer: B
Explanation: Candlestick charts are a popular type of chart that provides detailed information about
price movements within a specified time period.
13. What distinguishes a candlestick chart from a line chart?
A) Candlestick charts show only closing prices
B) Candlestick charts display open, high, low, and close prices
C) Line charts include volume data
D) Line charts provide detailed trading signals
Answer: B
Explanation: Unlike line charts, candlestick charts display four price points—open, high, low, and close—
offering a more comprehensive view of market action.
14. What does the “head and shoulders” pattern indicate in technical analysis?
A) A strong uptrend continuation
B) A potential reversal from an uptrend to a downtrend
C) Market consolidation
D) Increased volatility without trend change
Answer: B
Explanation: The head and shoulders pattern is typically seen as a signal that an uptrend may be
reversing into a downtrend.
15. Which technical analysis tool is primarily used to identify potential support and resistance levels?
A) Moving averages
, B) Price trend lines
C) Dividend yield analysis
D) Earnings reports
Answer: B
Explanation: Trend lines help identify areas where prices may find support or resistance based on
historical movements.
16. What is the significance of volume in technical analysis?
A) It determines a company’s market share
B) It confirms the strength of a price movement
C) It is used only in fundamental analysis
D) It predicts government policies
Answer: B
Explanation: Volume analysis is important because it can confirm the strength of a price trend or signal
potential reversals.
17. Which period is most associated with the early development of technical analysis?
A) The 1980s
B) The early 1900s
C) The 1960s
D) The 2000s
Answer: B
Explanation: The early 1900s saw significant contributions to technical analysis, particularly through the
work of pioneers like Charles Dow.
18. Which of the following is an example of a reversal pattern?
A) Triangle
B) Flag
C) Head and shoulders
D) Rectangle
Answer: C
Explanation: The head and shoulders pattern is considered a reversal pattern, indicating that a trend
may be about to reverse.
19. What is the importance of identifying chart patterns in technical analysis?
A) They provide insights into company management
B) They help traders anticipate future price movements
C) They indicate macroeconomic conditions
D) They determine dividend payouts
Answer: B
Explanation: Chart patterns assist traders by offering clues about potential future price movements,
which can be used to make informed trading decisions.
