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Quizzes > Quizzes for Business > Finance

Master the Technical Analysis Knowledge Quiz

Assess Your Market Trend Analysis Abilities Today

Difficulty: Moderate
Questions: 20
Learning OutcomesStudy Material
Colorful paper art displaying questions for a Technical Analysis Knowledge Quiz

Are you ready to assess your chart pattern and indicator skills with the Technical Analysis Knowledge Quiz? This interactive assessment is ideal for traders and students seeking deeper market trend insights and chart reading proficiency. Joanna Weib invites you to explore related tests, such as the Fundamental Analysis Knowledge Quiz or dive into the Technical Fundamentals Knowledge Test for broader skill-building. Everything can be freely modified in our editor, so educators can adapt questions to their curriculum. Browse more quizzes and start honing your technical analysis skills today.

What is a support level in technical analysis?
A line connecting successive lower highs.
A price level where buying interest prevents price falling further.
The highest price reached before a reversal.
A price level where selling pressure is strong.
A support level is a price area where demand is strong enough to halt a decline and often leads to a rebound. Traders watch these levels to anticipate where buyers may step in. It is identified by past price action holding at that level.
Which candlestick pattern typically indicates a bullish reversal at the bottom of a downtrend?
Doji.
Shooting star.
Hammer.
Hanging man.
A hammer candlestick has a long lower shadow and small body appearing after a decline, signaling buyer support. It suggests that sellers pushed price down but buyers regained control. This pattern often precedes a bullish reversal.
An RSI reading above 70 is generally considered:
Neutral.
Oversold.
Overbought.
Trending strongly downward.
The Relative Strength Index (RSI) measures momentum on a 0 - 100 scale, with readings above 70 indicating overbought conditions. Overbought suggests the asset may be due for a correction. Traders use this level to look for potential sell signals.
In an uptrend, a trend line is drawn by connecting which points on the price chart?
Two or more successive swing highs.
Two or more successive swing lows.
The highest high and the lowest low.
Candle bodies only.
An uptrend line is drawn by connecting two or more higher swing lows, showing rising support. This line helps traders gauge the strength of the uptrend. Price should respect this line until the trend changes.
Which chart pattern is commonly viewed as a continuation signal?
Head and shoulders.
Bull flag.
Double top.
Morning star.
A bull flag pattern forms after a sharp price rise followed by a shallow channel downward, indicating consolidation. It often resolves with another leg higher in the prevailing trend. Traders view this as a continuation signal.
A classic head and shoulders top pattern consists of:
Three peaks, with the middle peak higher than the other two.
A series of higher highs.
Two equal highs and one lower low.
Three troughs, with the middle trough lower than sides.
A head and shoulders top has three peaks: two shoulders at similar heights with a taller head in the middle. It signals a potential trend reversal from bullish to bearish. The neckline connecting the two troughs is a key breakout level.
To confirm a breakout above resistance, traders typically look for:
Increasing trading volume on breakout.
Decreasing trading volume on breakout.
RSI crossing below 30.
MACD histogram shrinking.
A true breakout is often accompanied by rising volume, showing increased participation. Higher volume supports the conviction that price can continue beyond resistance. Low volume breakouts are prone to false signals.
On a MACD indicator, a buy signal is generated when:
The MACD histogram turns negative.
The MACD line crosses below the signal line.
The MACD and signal line overlap briefly.
The MACD line crosses above the signal line.
A bullish MACD crossover occurs when the MACD line moves above its signal line, indicating rising upward momentum. Traders use this signal to confirm a shift toward buying pressure. It is more reliable when aligned with overall trend.
When drawing support and resistance levels across multiple timeframes, a key benefit is:
Generating false signals due to noise.
Eliminating all trading risk.
Ensuring one-hour timeframes always outrank daily.
Identifying consensus levels where large institutions trade.
Higher timeframe levels often reflect significant institutional activity and provide strong support or resistance. Confirming levels across timeframes adds weight to trading decisions. This approach reduces the likelihood of trading noise.
A double top pattern signals:
Strengthening bullish momentum.
Potential reversal from an uptrend to downtrend.
A period of consolidation without trend change.
Potential continuation of an uptrend.
A double top forms when price peaks twice at a similar level and fails to break higher, suggesting exhaustion of buyers. A break below the intervening trough confirms the reversal. It indicates a shift from bullish to bearish bias.
How can the Average True Range (ATR) be used in risk management?
To set volatility-adjusted stop-loss levels.
To determine Fibonacci retracement levels.
To calculate the moving average.
As a measure of trend direction.
ATR measures market volatility by averaging true ranges over time, helping traders size stops. Placing stop-loss at a multiple of ATR accounts for normal price swings. This method adapts to changing volatility.
A bullish divergence between price and the RSI indicates:
Price making lower lows, RSI making higher lows.
Price making higher highs, RSI making higher highs.
RSI above 70 and price below moving average.
Both price and RSI making lower lows.
Bullish divergence occurs when price records lower lows while RSI forms higher lows, suggesting weakening downside momentum. This pattern often precedes a trend reversal upward. Traders use it to anticipate potential buying opportunities.
A common method to confirm a trend is to use:
A moving average crossover, such as 50-day and 200-day.
A single moving average.
Price action alone.
Volume profile exclusively.
A moving average crossover system, like the 50-day crossing above the 200-day, signals a shift in trend direction. It smooths price data and reduces noise. Traders use this confirmation before entering positions.
A symmetrical triangle pattern typically indicates:
Immediate bearish breakout always.
Price consolidating with lower highs and higher lows.
A double bottom in formation.
Strong bullish reversal.
A symmetrical triangle forms as price makes converging lower highs and higher lows, reflecting indecision. It often resolves with a breakout in the prevailing trend direction. Volume typically contracts during formation.
Fibonacci retracement levels are used to identify:
Potential support and resistance levels during pullbacks.
Targets for trend continuation only.
Only stop-loss levels.
Exact price reversals guaranteed.
Fibonacci retracement lines mark potential reversal areas at key percentages (e.g., 38.2%, 61.8%) of a prior move. Traders use them to enter on pullbacks in a trend. They help anticipate where price might stall or reverse.
When calculating position size using a 2% risk rule and ATR-based stop-loss, you should:
Risk 2% per pip distance instead of account equity.
Risk 2% of the trading account on each dollar of ATR.
Always trade one standard lot regardless of ATR.
Risk 2% of account equity and set stop-loss at a multiple of ATR to determine position size.
The 2% rule limits risk to 2% of equity, and using ATR for stop placement ensures volatility-adjusted exits. Position size is then calculated so that distance to stop-loss equals a 2% value. This combines risk management with market conditions.
Volume Weighted Average Price (VWAP) is best described as:
A simple average of closing prices.
A momentum oscillator above 100.
The average price weighted by trading volume over a specified time period.
A pattern of volume spikes at resistance.
VWAP calculates the cumulative dollar volume divided by cumulative volume, providing an average price that accounts for trade size. Traders use VWAP to gauge institutional activity and fair value. It resets each trading session.
The Morning Star candlestick pattern consists of:
A hammer followed by a shooting star.
A bearish candle, a doji or small candle, then a bullish candle.
Three successive bullish candles.
A single long wicking candle.
The Morning Star is a three-candle pattern with a strong bearish candle, a small-bodied indecision candle, and a strong bullish candle. It signals a potential bullish reversal at market lows. The gap between candles increases pattern significance.
In risk management, the risk-reward ratio of 1:3 implies:
You aim to gain three times the amount you risk.
You should only trade three times a day.
You risk three times to gain one unit.
You risk and reward are equal.
A 1:3 risk-reward ratio means the potential reward is three times the amount risked on a trade. Traders use this ratio to ensure that profitable trades offset losses. It promotes disciplined entry and exit planning.
When backtesting a breakout strategy, a common pitfall is:
Accounting for realistic order fills.
Including drawdown metrics.
Using out-of-sample data.
Ignoring slippage and transaction costs.
Failing to include slippage and transaction costs can inflate backtest performance, making a strategy seem more profitable than in live trading. Realistic assumptions about execution are critical for reliable results. Ignoring these factors leads to curve-fitting.
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Learning Outcomes

  1. Analyse key chart patterns to anticipate market moves
  2. Identify support and resistance levels across timeframes
  3. Apply technical indicators to confirm trading signals
  4. Interpret trend lines and momentum indicators accurately
  5. Demonstrate understanding of candlestick formations
  6. Evaluate risk management techniques using technical analysis

Cheat Sheet

  1. Master Key Chart Patterns - Get to know classic formations like Head and Shoulders, Double Tops and Bottoms, and Triangles. These patterns are your trading compass, helping you spot trend reversals or continuations with a quick glance at the charts. Practice spotting them, and soon you'll decode market moves like a pro trader! Technical Analysis 101
    2. siegfund.com
  2. Identify Support and Resistance Levels - Learn to draw price floors (support) and ceilings (resistance) on your chart playground. These key levels guide entry and exit points, helping you set precise stop-losses and targets. When a resistance level breaks, get ready for an exciting trend twist as it turns into new support! Support & Resistance Wiki
    3. wikipedia.org
  3. Utilize Moving Averages - Smooth out the price noise with SMAs and EMAs to reveal clear trend directions - like a filter for price chaos. A trusty 200-day SMA can show you if the market is in a long-term uptrend or downtrend. Mix short and long moving averages for crossover magic that shouts "trend alert"! Moving Averages Basics
    4. investacle.com
  4. Apply the Relative Strength Index (RSI) - Meet the RSI, your overbought and oversold detective, flashing alerts when prices leap above 70 or dip below 30. Use it to catch potential reversals before they happen and avoid buying at the top or selling at the bottom. Mix it with other tools for a trading tag-team! RSI & Indicators Overview
    5. capitalinvestopedia.com
  5. Interpret Trend Lines Accurately - Draw your trend lines by connecting at least two swing points to see if the market is climbing or sliding. An upward line = bullish vibes; a downward line = bearish mood. Keep your lines honest by adjusting them with fresh highs and lows as new data arrives! Trend Lines Wiki
    6. wikipedia.org
  6. Analyze Candlestick Patterns - Dive into candles like Doji, Hammer, and Engulfing to read market sentiment in a flash. A Hammer at the bottom of a downtrend can be your golden ticket to a bullish reversal. The more patterns you spot, the sharper your market intuition becomes! Candlestick Essentials
    7. toxigon.com
  7. Understand Bollinger Bands - Stretch those comfort zones with Bollinger Bands: a middle SMA flanked by volatility lines that show you when prices roam wild. When prices hit the upper band, it's like they're shouting "I'm overbought!" and vice versa for the lower band. Ride the volatility waves with confidence! Bollinger Bands Guide
    8. capitalinvestopedia.com
  8. Explore the MACD Indicator - Use MACD to catch shifts in trend strength and momentum with its dynamic line crossovers. When the MACD line leaps above the signal line, it's a bullish handshake - below means bearish vibes. Keep an eye on the histogram bars for early twist alerts! MACD Deep Dive
    9. capitalinvestopedia.com
  9. Implement Risk Management Techniques - Guard your trading capital with stop-loss orders and smart position sizing to handle market surprises. Setting your stop just below support can save you from nasty drops. Remember: preserving your money is just as fun as making it! Risk Management Basics
    10. wikipedia.org
  10. Combine Multiple Indicators for Confirmation - Overshadow false signals by teaming up indicators like RSI and MACD to get the green light on trades. When different tools point in the same direction, you've got a confidence boost in your strategy. It's like having a trading buddy cheering you on! Composite Indicator Strategy
    11. capitalinvestopedia.com
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