(CFTe LI) Certified Financial Technician Level Practice Exam
Question 1: Which of the following best defines technical analysis?
Options:
A) The study of a company's financial statements.
B) The evaluation of securities based on historical price and volume data.
C) The analysis of macroeconomic fundamentals.
D) The determination of intrinsic value via cash flow models.
Answer: B
Explanation: Technical analysis focuses on historical price and volume data to forecast future market
movements.
Question 2: What is the primary purpose of technical analysis?
Options:
A) To assess a company’s management quality.
B) To predict future price movements through historical trends.
C) To analyze government policies affecting the market.
D) To calculate dividend yields.
Answer: B
Explanation: The main goal is to forecast future price movements by studying historical price and
volume trends.
Question 3: Which of the following is a limitation of technical analysis?
Options:
A) It ignores historical price data.
B) It requires analysis of large amounts of fundamental data.
C) It may generate false signals during highly volatile periods.
D) It is too focused on the macroeconomic environment.
Answer: C
Explanation: Technical analysis can sometimes provide false signals, especially in turbulent or low-
liquidity markets.
Question 4: In technical analysis, what is the significance of volume data?
Options:
A) It confirms trends by showing the strength of price movements.
B) It represents the company’s earnings.
C) It measures investor sentiment through social media.
D) It is irrelevant to price movement analysis.
Answer: A
Explanation: Volume data is used to confirm the strength and validity of price trends.
Question 5: How does technical analysis differ from fundamental analysis?
Options:
A) It focuses on macroeconomic indicators only.
B) It studies qualitative company data.
C) It uses historical price and volume rather than company earnings and assets.
,D) It relies solely on interest rate trends.
Answer: C
Explanation: Technical analysis relies on price and volume patterns, while fundamental analysis focuses
on intrinsic company data.
Question 6: Which era is most associated with the early development of technical analysis?
Options:
A) The Renaissance period.
B) The early 1900s with Charles Dow’s contributions.
C) The digital revolution of the 1990s.
D) The Industrial Revolution.
Answer: B
Explanation: Charles Dow’s work in the early 20th century laid the foundation for modern technical
analysis.
Question 7: What does a logarithmic price scale represent in charting?
Options:
A) Equal price changes on a linear scale.
B) Percentage changes are equally spaced.
C) Time intervals are distorted.
D) Volume is displayed on a separate axis.
Answer: B
Explanation: A logarithmic scale spaces prices based on percentage changes rather than absolute
differences.
Question 8: Which advantage is most commonly cited for using technical analysis?
Options:
A) It provides guaranteed profits.
B) It helps identify trends and market timing opportunities.
C) It eliminates all market risk.
D) It predicts exact future prices.
Answer: B
Explanation: Technical analysis is valued for helping traders identify trends and timing entry and exit
points.
Question 9: Which of the following is an example of a chart used in technical analysis?
Options:
A) Income statement.
B) Bar chart.
C) Balance sheet.
D) Cash flow graph.
Answer: B
Explanation: Bar charts, along with line and candlestick charts, are standard in technical analysis.
Question 10: What is a key benefit of using candlestick charts?
Options:
A) They ignore intraday fluctuations.
,B) They display open, high, low, and close prices visually.
C) They eliminate the need for volume data.
D) They are easier for fundamental analysis.
Answer: B
Explanation: Candlestick charts present a comprehensive view of price action (open, high, low, and
close) in a single graphic.
Question 11: Which statement best describes the historical evolution of technical analysis?
Options:
A) It began with the invention of computers in the 1980s.
B) It evolved from early tape reading and charting practices in the 1800s and 1900s.
C) It was developed solely by academic economists.
D) It originated from fundamental analysis methods.
Answer: B
Explanation: Technical analysis has roots in the 1800s and 1900s when traders began to use charts and
tape readings to interpret market data.
Question 12: How does technical analysis view the market?
Options:
A) As a random walk with no predictable patterns.
B) As a system where historical price patterns tend to repeat.
C) As completely driven by government policy.
D) As solely influenced by investor sentiment on social media.
Answer: B
Explanation: Technical analysis is based on the belief that historical price patterns tend to repeat over
time.
Question 13: Which factor is considered a limitation when applying technical analysis in emerging
markets?
Options:
A) High liquidity and stability.
B) Frequent data inaccuracies and low trading volumes.
C) Excessive government regulation.
D) Overabundance of fundamental data.
Answer: B
Explanation: Emerging markets may have issues like low volume and less reliable data, making technical
analysis more challenging.
Question 14: What role do charts play in technical analysis?
Options:
A) They are used to predict economic recessions.
B) They help visualize price trends and patterns over time.
C) They are solely for recording past data.
D) They replace the need for any statistical analysis.
Answer: B
, Explanation: Charts are the primary tool for visualizing and analyzing price trends and patterns in
technical analysis.
Question 15: Which of the following best explains the concept of “trend” in technical analysis?
Options:
A) A random fluctuation in prices.
B) A persistent directional movement of prices over time.
C) A temporary market anomaly.
D) A reflection of investor moods without any pattern.
Answer: B
Explanation: A trend represents a sustained directional movement in the market, either upward,
downward, or sideways.
Question 16: What is a common criticism of technical analysis?
Options:
A) It relies too much on economic fundamentals.
B) Its predictions are always 100% accurate.
C) It can be subjective and dependent on the analyst’s interpretation.
D) It completely ignores price data.
Answer: C
Explanation: Critics argue that technical analysis can be subjective, as interpretations of chart patterns
and indicators may vary between analysts.
Question 17: Which of the following best explains “support” in technical analysis?
Options:
A) The highest price level reached in a period.
B) A price level where demand is strong enough to prevent further decline.
C) The point where a trend reverses upward.
D) A price level that indicates market overbought conditions.
Answer: B
Explanation: Support is a price level where buying interest is strong enough to overcome selling pressure
and prevent further decline.
Question 18: Which technical analysis tool is most useful for identifying overbought or oversold
conditions?
Options:
A) Moving averages.
B) Relative Strength Index (RSI).
C) Trendlines.
D) Volume charts.
Answer: B
Explanation: The RSI is a momentum oscillator that helps identify conditions where a security may be
overbought or oversold.
Question 19: What does the term “chart pattern” refer to in technical analysis?
Options:
A) A fixed indicator used to calculate moving averages.
Question 1: Which of the following best defines technical analysis?
Options:
A) The study of a company's financial statements.
B) The evaluation of securities based on historical price and volume data.
C) The analysis of macroeconomic fundamentals.
D) The determination of intrinsic value via cash flow models.
Answer: B
Explanation: Technical analysis focuses on historical price and volume data to forecast future market
movements.
Question 2: What is the primary purpose of technical analysis?
Options:
A) To assess a company’s management quality.
B) To predict future price movements through historical trends.
C) To analyze government policies affecting the market.
D) To calculate dividend yields.
Answer: B
Explanation: The main goal is to forecast future price movements by studying historical price and
volume trends.
Question 3: Which of the following is a limitation of technical analysis?
Options:
A) It ignores historical price data.
B) It requires analysis of large amounts of fundamental data.
C) It may generate false signals during highly volatile periods.
D) It is too focused on the macroeconomic environment.
Answer: C
Explanation: Technical analysis can sometimes provide false signals, especially in turbulent or low-
liquidity markets.
Question 4: In technical analysis, what is the significance of volume data?
Options:
A) It confirms trends by showing the strength of price movements.
B) It represents the company’s earnings.
C) It measures investor sentiment through social media.
D) It is irrelevant to price movement analysis.
Answer: A
Explanation: Volume data is used to confirm the strength and validity of price trends.
Question 5: How does technical analysis differ from fundamental analysis?
Options:
A) It focuses on macroeconomic indicators only.
B) It studies qualitative company data.
C) It uses historical price and volume rather than company earnings and assets.
,D) It relies solely on interest rate trends.
Answer: C
Explanation: Technical analysis relies on price and volume patterns, while fundamental analysis focuses
on intrinsic company data.
Question 6: Which era is most associated with the early development of technical analysis?
Options:
A) The Renaissance period.
B) The early 1900s with Charles Dow’s contributions.
C) The digital revolution of the 1990s.
D) The Industrial Revolution.
Answer: B
Explanation: Charles Dow’s work in the early 20th century laid the foundation for modern technical
analysis.
Question 7: What does a logarithmic price scale represent in charting?
Options:
A) Equal price changes on a linear scale.
B) Percentage changes are equally spaced.
C) Time intervals are distorted.
D) Volume is displayed on a separate axis.
Answer: B
Explanation: A logarithmic scale spaces prices based on percentage changes rather than absolute
differences.
Question 8: Which advantage is most commonly cited for using technical analysis?
Options:
A) It provides guaranteed profits.
B) It helps identify trends and market timing opportunities.
C) It eliminates all market risk.
D) It predicts exact future prices.
Answer: B
Explanation: Technical analysis is valued for helping traders identify trends and timing entry and exit
points.
Question 9: Which of the following is an example of a chart used in technical analysis?
Options:
A) Income statement.
B) Bar chart.
C) Balance sheet.
D) Cash flow graph.
Answer: B
Explanation: Bar charts, along with line and candlestick charts, are standard in technical analysis.
Question 10: What is a key benefit of using candlestick charts?
Options:
A) They ignore intraday fluctuations.
,B) They display open, high, low, and close prices visually.
C) They eliminate the need for volume data.
D) They are easier for fundamental analysis.
Answer: B
Explanation: Candlestick charts present a comprehensive view of price action (open, high, low, and
close) in a single graphic.
Question 11: Which statement best describes the historical evolution of technical analysis?
Options:
A) It began with the invention of computers in the 1980s.
B) It evolved from early tape reading and charting practices in the 1800s and 1900s.
C) It was developed solely by academic economists.
D) It originated from fundamental analysis methods.
Answer: B
Explanation: Technical analysis has roots in the 1800s and 1900s when traders began to use charts and
tape readings to interpret market data.
Question 12: How does technical analysis view the market?
Options:
A) As a random walk with no predictable patterns.
B) As a system where historical price patterns tend to repeat.
C) As completely driven by government policy.
D) As solely influenced by investor sentiment on social media.
Answer: B
Explanation: Technical analysis is based on the belief that historical price patterns tend to repeat over
time.
Question 13: Which factor is considered a limitation when applying technical analysis in emerging
markets?
Options:
A) High liquidity and stability.
B) Frequent data inaccuracies and low trading volumes.
C) Excessive government regulation.
D) Overabundance of fundamental data.
Answer: B
Explanation: Emerging markets may have issues like low volume and less reliable data, making technical
analysis more challenging.
Question 14: What role do charts play in technical analysis?
Options:
A) They are used to predict economic recessions.
B) They help visualize price trends and patterns over time.
C) They are solely for recording past data.
D) They replace the need for any statistical analysis.
Answer: B
, Explanation: Charts are the primary tool for visualizing and analyzing price trends and patterns in
technical analysis.
Question 15: Which of the following best explains the concept of “trend” in technical analysis?
Options:
A) A random fluctuation in prices.
B) A persistent directional movement of prices over time.
C) A temporary market anomaly.
D) A reflection of investor moods without any pattern.
Answer: B
Explanation: A trend represents a sustained directional movement in the market, either upward,
downward, or sideways.
Question 16: What is a common criticism of technical analysis?
Options:
A) It relies too much on economic fundamentals.
B) Its predictions are always 100% accurate.
C) It can be subjective and dependent on the analyst’s interpretation.
D) It completely ignores price data.
Answer: C
Explanation: Critics argue that technical analysis can be subjective, as interpretations of chart patterns
and indicators may vary between analysts.
Question 17: Which of the following best explains “support” in technical analysis?
Options:
A) The highest price level reached in a period.
B) A price level where demand is strong enough to prevent further decline.
C) The point where a trend reverses upward.
D) A price level that indicates market overbought conditions.
Answer: B
Explanation: Support is a price level where buying interest is strong enough to overcome selling pressure
and prevent further decline.
Question 18: Which technical analysis tool is most useful for identifying overbought or oversold
conditions?
Options:
A) Moving averages.
B) Relative Strength Index (RSI).
C) Trendlines.
D) Volume charts.
Answer: B
Explanation: The RSI is a momentum oscillator that helps identify conditions where a security may be
overbought or oversold.
Question 19: What does the term “chart pattern” refer to in technical analysis?
Options:
A) A fixed indicator used to calculate moving averages.
