[CMA] Chartered Market Analyst Practice Exam
1. Which of the following best describes the primary assumption behind technical analysis?
A. Future price movements are dictated by a company’s fundamentals alone.
B. Price patterns tend to repeat themselves, reflecting investor psychology.
C. Economic forecasts accurately predict market turning points.
D. Markets are fully efficient and cannot be timed.
Answer: B
Explanation: Technical analysis is based on the idea that price and volume trends repeat
themselves because market psychology tends to exhibit recurring patterns.
2. Charles Dow is best known for:
A. Modern portfolio theory.
B. Inventing the first electronic trading system.
C. Developing the foundation of technical analysis via his Dow Theory.
D. Championing the concept of random walk in stock prices.
Answer: C
Explanation: Charles Dow’s Dow Theory laid the groundwork for many principles of modern
technical analysis, including the use of averages and trends.
3. According to Dow Theory, a major trend is confirmed when:
A. The Dow Jones Industrial Average and Dow Jones Transportation Average move in the same
direction.
B. Volume is increasing while price moves sideways.
C. Market sentiment indicators reach extreme bullish levels.
D. Fundamental valuation metrics remain constant across sectors.
Answer: A
Explanation: A main principle of Dow Theory is that both averages (Industrials and
Transportation) must confirm each other’s movement for a primary trend to be valid.
4. Which of the following statements is not consistent with classical technical analysis?
A. Market action discounts everything.
B. Prices move in trends.
C. Fundamental factors are irrelevant to price movement.
D. History tends to repeat itself.
, [CMA] Chartered Market Analyst Practice Exam
Answer: C
Explanation: Technical analysts do consider that all fundamental factors are reflected in price.
They do not typically dismiss fundamentals as irrelevant; rather, they assume that the market
already discounts them.
5. The concept of “market action discounts everything” implies:
A. Only company earnings are relevant for stock prices.
B. Chart patterns have no predictive value.
C. All known information is reflected in the current price.
D. Market sentiment does not influence price.
Answer: C
Explanation: Technical analysts assume that all relevant information—economic, political,
psychological—is already factored into the current market price.
6. One key difference between early “chartists” of the 19th century and modern technical
analysts is:
A. Early chartists used fundamental metrics in their studies.
B. Early chartists had no concept of trends.
C. Modern analysts integrate computerized tools and statistical methods.
D. Modern analysts do not use volume data.
Answer: C
Explanation: While the fundamental principles remain similar (e.g., looking for repeating
patterns), today’s technical analysts commonly use advanced software, indicators, and
computational techniques.
7. Edward and Magee are famous for their work titled:
A. Security Analysis
B. Technical Analysis of Stock Trends
C. The Intelligent Investor
D. Irrational Exuberance
Answer: B
Explanation: Robert D. Edwards and John Magee co-authored the seminal book “Technical
Analysis of Stock Trends,” which is a cornerstone text for chart pattern analysis.
, [CMA] Chartered Market Analyst Practice Exam
8. Which statement best captures the significance of the “random walk” controversy to technical
analysis?
A. It supports the idea that price movements are completely predictable.
B. It suggests that prices move randomly, challenging predictability by technical methods.
C. It endorses the use of elaborate chart patterns.
D. It originates from behavioral finance data.
Answer: B
Explanation: The random walk hypothesis posits that future price movements cannot be
predicted from past data alone, thus challenging the basis of technical analysis.
9. Ralph Nelson Elliott contributed to technical analysis by introducing:
A. Mean reversion trading.
B. Elliott Wave Theory, focusing on wave patterns in market trends.
C. Point & figure charting.
D. Candlestick charting.
Answer: B
Explanation: Elliott Wave Theory is a form of technical analysis that relies on wave patterns in
price movements to predict future price direction.
10. Which of the following best describes the modern view of technical analysis among market
practitioners?
A. It is universally accepted and never disputed.
B. It is still considered a fringe discipline with little institutional usage.
C. It has become widely integrated with quantitative and behavioral finance.
D. It has been fully replaced by fundamental analysis.
Answer: C
Explanation: Technical analysis is commonly employed alongside quantitative models and
behavioral research in institutional settings to enhance market timing and risk management.
B. Comparison Between Technical and Fundamental Analysis
11. Fundamental analysis primarily focuses on:
A. Analyzing price trends and patterns.
B. Forecasting market sentiment through surveys.
, [CMA] Chartered Market Analyst Practice Exam
C. Examining a company’s financial statements, economic factors, and industry outlook.
D. Studying candlestick patterns to predict short-term movements.
Answer: C
Explanation: Fundamental analysis aims to determine a security’s intrinsic value by assessing
factors like earnings, revenue growth, economic indicators, and competitive positioning.
12. A key advantage of technical analysis over fundamental analysis is:
A. Its ability to provide exact future price levels.
B. Its focus on chart patterns can offer shorter-term entry and exit signals.
C. Its complete disregard of any financial data.
D. Its reliance solely on market efficiency.
Answer: B
Explanation: Technical analysis often focuses on identifying trends, momentum, and turning
points, which can help traders with short-term timing decisions.
13. One criticism of fundamental analysis that leads some practitioners to use technical analysis
is:
A. Fundamental data are never accurate.
B. Valuation metrics are quick to adjust to market changes.
C. Timely entry and exit points are often difficult to gauge using fundamentals alone.
D. The economic environment rarely changes, making fundamental analysis less useful.
Answer: C
Explanation: While fundamental analysis determines value, it does not always help traders
decide when to buy or sell. Technical analysis can provide more precise timing cues.
14. Which statement is true regarding the compatibility of technical and fundamental analysis?
A. They are mutually exclusive approaches that cannot be combined.
B. Technical analysis invalidates fundamental analysis in trending markets.
C. Both approaches can be integrated; fundamentals can suggest what to buy, and technicals can
suggest when to buy.
D. Using both leads to constant conflict in trading decisions.
Answer: C
Explanation: Many analysts combine both approaches, leveraging fundamentals for identifying
value (or overvaluation) and technicals for timing entries/exits.
1. Which of the following best describes the primary assumption behind technical analysis?
A. Future price movements are dictated by a company’s fundamentals alone.
B. Price patterns tend to repeat themselves, reflecting investor psychology.
C. Economic forecasts accurately predict market turning points.
D. Markets are fully efficient and cannot be timed.
Answer: B
Explanation: Technical analysis is based on the idea that price and volume trends repeat
themselves because market psychology tends to exhibit recurring patterns.
2. Charles Dow is best known for:
A. Modern portfolio theory.
B. Inventing the first electronic trading system.
C. Developing the foundation of technical analysis via his Dow Theory.
D. Championing the concept of random walk in stock prices.
Answer: C
Explanation: Charles Dow’s Dow Theory laid the groundwork for many principles of modern
technical analysis, including the use of averages and trends.
3. According to Dow Theory, a major trend is confirmed when:
A. The Dow Jones Industrial Average and Dow Jones Transportation Average move in the same
direction.
B. Volume is increasing while price moves sideways.
C. Market sentiment indicators reach extreme bullish levels.
D. Fundamental valuation metrics remain constant across sectors.
Answer: A
Explanation: A main principle of Dow Theory is that both averages (Industrials and
Transportation) must confirm each other’s movement for a primary trend to be valid.
4. Which of the following statements is not consistent with classical technical analysis?
A. Market action discounts everything.
B. Prices move in trends.
C. Fundamental factors are irrelevant to price movement.
D. History tends to repeat itself.
, [CMA] Chartered Market Analyst Practice Exam
Answer: C
Explanation: Technical analysts do consider that all fundamental factors are reflected in price.
They do not typically dismiss fundamentals as irrelevant; rather, they assume that the market
already discounts them.
5. The concept of “market action discounts everything” implies:
A. Only company earnings are relevant for stock prices.
B. Chart patterns have no predictive value.
C. All known information is reflected in the current price.
D. Market sentiment does not influence price.
Answer: C
Explanation: Technical analysts assume that all relevant information—economic, political,
psychological—is already factored into the current market price.
6. One key difference between early “chartists” of the 19th century and modern technical
analysts is:
A. Early chartists used fundamental metrics in their studies.
B. Early chartists had no concept of trends.
C. Modern analysts integrate computerized tools and statistical methods.
D. Modern analysts do not use volume data.
Answer: C
Explanation: While the fundamental principles remain similar (e.g., looking for repeating
patterns), today’s technical analysts commonly use advanced software, indicators, and
computational techniques.
7. Edward and Magee are famous for their work titled:
A. Security Analysis
B. Technical Analysis of Stock Trends
C. The Intelligent Investor
D. Irrational Exuberance
Answer: B
Explanation: Robert D. Edwards and John Magee co-authored the seminal book “Technical
Analysis of Stock Trends,” which is a cornerstone text for chart pattern analysis.
, [CMA] Chartered Market Analyst Practice Exam
8. Which statement best captures the significance of the “random walk” controversy to technical
analysis?
A. It supports the idea that price movements are completely predictable.
B. It suggests that prices move randomly, challenging predictability by technical methods.
C. It endorses the use of elaborate chart patterns.
D. It originates from behavioral finance data.
Answer: B
Explanation: The random walk hypothesis posits that future price movements cannot be
predicted from past data alone, thus challenging the basis of technical analysis.
9. Ralph Nelson Elliott contributed to technical analysis by introducing:
A. Mean reversion trading.
B. Elliott Wave Theory, focusing on wave patterns in market trends.
C. Point & figure charting.
D. Candlestick charting.
Answer: B
Explanation: Elliott Wave Theory is a form of technical analysis that relies on wave patterns in
price movements to predict future price direction.
10. Which of the following best describes the modern view of technical analysis among market
practitioners?
A. It is universally accepted and never disputed.
B. It is still considered a fringe discipline with little institutional usage.
C. It has become widely integrated with quantitative and behavioral finance.
D. It has been fully replaced by fundamental analysis.
Answer: C
Explanation: Technical analysis is commonly employed alongside quantitative models and
behavioral research in institutional settings to enhance market timing and risk management.
B. Comparison Between Technical and Fundamental Analysis
11. Fundamental analysis primarily focuses on:
A. Analyzing price trends and patterns.
B. Forecasting market sentiment through surveys.
, [CMA] Chartered Market Analyst Practice Exam
C. Examining a company’s financial statements, economic factors, and industry outlook.
D. Studying candlestick patterns to predict short-term movements.
Answer: C
Explanation: Fundamental analysis aims to determine a security’s intrinsic value by assessing
factors like earnings, revenue growth, economic indicators, and competitive positioning.
12. A key advantage of technical analysis over fundamental analysis is:
A. Its ability to provide exact future price levels.
B. Its focus on chart patterns can offer shorter-term entry and exit signals.
C. Its complete disregard of any financial data.
D. Its reliance solely on market efficiency.
Answer: B
Explanation: Technical analysis often focuses on identifying trends, momentum, and turning
points, which can help traders with short-term timing decisions.
13. One criticism of fundamental analysis that leads some practitioners to use technical analysis
is:
A. Fundamental data are never accurate.
B. Valuation metrics are quick to adjust to market changes.
C. Timely entry and exit points are often difficult to gauge using fundamentals alone.
D. The economic environment rarely changes, making fundamental analysis less useful.
Answer: C
Explanation: While fundamental analysis determines value, it does not always help traders
decide when to buy or sell. Technical analysis can provide more precise timing cues.
14. Which statement is true regarding the compatibility of technical and fundamental analysis?
A. They are mutually exclusive approaches that cannot be combined.
B. Technical analysis invalidates fundamental analysis in trending markets.
C. Both approaches can be integrated; fundamentals can suggest what to buy, and technicals can
suggest when to buy.
D. Using both leads to constant conflict in trading decisions.
Answer: C
Explanation: Many analysts combine both approaches, leveraging fundamentals for identifying
value (or overvaluation) and technicals for timing entries/exits.
