Trading Strategies and Technical Analysis Quiz

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Questions and Answers

What do Bollinger Bands consist of?

  • Simple moving average and one standard deviation line
  • Weighted moving average and four standard deviation lines
  • Exponential moving average and three standard deviation lines
  • Moving average and two standard deviation lines (correct)

What does the Directional Movement Index (DMI) help determine?

  • Entry and exit points in trading
  • Historical price movements
  • Market volatility
  • Strength and direction of a trend (correct)

Which candlestick pattern is characterized by a small body with long upper and lower shadows?

  • Three Black Crows
  • Dark Cloud Cover
  • Highwave (correct)
  • Three White Soldiers

What is the main purpose of Bollinger Bands in technical analysis?

<p>Identify potential reversal (C)</p> Signup and view all the answers

Which indicator is included in the Directional Movement Index (DMI)?

<p>+DI, -DI, ADX (A)</p> Signup and view all the answers

What is the special feature of Heikin-Ashi candles that helps traders overcome the biggest barrier?

<p>Neutral candles at support/resistance (C)</p> Signup and view all the answers

Which type of candle is considered bullish based on its wick characteristics?

<p>Decisive with no lower wick (A)</p> Signup and view all the answers

What signals a strong buy/sell signal in Heikin-Ashi charts?

<p>Changing color without neutral candles at support/resistance (A)</p> Signup and view all the answers

In Heikin-Ashi charts, what is the significance of having wicks on both sides of a candle?

<p>Denotes an indecisive candle (C)</p> Signup and view all the answers

Who developed Heikin-Ashi charts?

<p>Munehisa Homma (D)</p> Signup and view all the answers

Flashcards

Bollinger Bands Components

Bollinger Bands are made up of a moving average and two standard deviation lines.

DMI Purpose

The Directional Movement Index (DMI) shows the strength and direction of a trend.

Highwave Candle

A candlestick with a small body and long upper and lower wicks.

Bollinger Bands Use

Bollinger Bands identify potential price reversals.

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DMI Components

Directional Movement Index (DMI) has +DI, -DI, and ADX.

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Heikin-Ashi Neutral Candle

Neutral candlestick at support or resistance levels.

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Bullish Heikin-Ashi

A candlestick with no lower wick is a possible signal.

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Strong Buy/Sell Signal (Heikin-Ashi)

Changing color without neutral candles at support/resistance levels signals a strong buy/sell signal.

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Indecisive Heikin-Ashi Candle

Candles wicks on both sides depict an indecisive price action.

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Heikin-Ashi Developer

Heikin-Ashi charts were developed by Munehisa Homma.

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Study Notes

Candlestick Patterns

  • Three White Soldiers: a bullish pattern
  • Three Black Crows: a bearish pattern
  • Dark Cloud Cover: a bearish pattern
  • Doji: a neutral pattern
  • High Wave: a bullish pattern
  • Hammers, Shooting star, Gravestone Doji, Long Legged Doji: various bullish and bearish patterns

Indicators

  • Bollinger Bands: a technical analysis tool consisting of a moving average and two standard deviation lines above and below it, indicating price volatility and potential reversal points
  • Upper Band (Upper BB): the top line of the Bollinger Bands
  • Lower Band (Lower BB): the bottom line of the Bollinger Bands
  • Median Line: the middle line of the Bollinger Bands
  • Directional Movement Index (DMI): a technical indicator used to determine the strength and direction of a trend
  • Positive Directional Indicator (+DI): a component of the DMI
  • Negative Directional Indicator (-DI): a component of the DMI
  • Average Directional Index (ADX): a component of the DMI

Heikin-Ashi Charts

  • Developed by Munehisa Homma in the 1700s
  • Decisive Candles: Bullish when there is NO LOWER WICK (Leg), Bearish when there is NO UPPER WICK (Leg)
  • Indecisive Candles: when there are wicks on both sides
  • Overcomes the Psychological barrier due to its special formation method
  • Buy Signal: a strong buy/sell signal is when HA changes color without giving any neutral candle at some support/resistance
  • Sell Signal: a strong buy/sell signal is when HA changes color without giving any neutral candle at some support/resistance

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