Questions and Answers of Fundamentals Of Technical Graphics

What is the difference between in‐sample and out‐of‐sample data? Explain how you would use such data to test a trading system.
Explain how we can reduce the effects of curve fitting.
What is meant by curve fitting?
Is back testing for the largest return an effective strategy?
Categorize the trade‐related metrics into return and risk metrics.
Explain what is meant by a robust system.
What constitutes an effective trader?
Describe the various components of a trading system.
Calculate the minimum %win for a system with an R/r ratio of 5:1.
What are the advantages of using a stochastic exit?
How would you use the R/r ratio setup effectively?
Describe the two uncontrollable factors in trading and how they affect performance.
What is the difference between fixed and dynamic sizing?
How can traders reduce the effects of asymmetry in trading?
Describe the relationship between the six passive components of a money management system.
List and explain the six passive components of a money management system.
Describe how you would reduce the effects of multicollinearity in multiple oscillator STF setups.
Explain the meaning of significantly clear and obvious and why it is important.
What is the difference between dynamic clusters and price‐time clusters?
Explain the meaning of reliable insofar as overlays and barriers are concerned.
Explain why one‐to‐one, two‐to‐one, and three‐to‐one chart pattern height expansions are a significant part of risk management.
Describe how you would integrate oscillators into your analysis of market cycles.
List the types of clusters that can be found in the markets.
Explain what is meant by the term integrated technical analysis.
Under what conditions would you reconsider taking on a client?
What is the behavior profile of a trader who goes long at support?
“For every bullish or bearish signal or indication, there exists an equal and opposite interpretation of that signal or indication.” Discuss with examples.
How much information about the daily management of a client’s position should be made known to the client? Where would you draw the line?
Explain how you would use overreactions in the market to alter your overall capital exposure.
Describe ways in which you would help your client understand that losses resulting from following a trading plan are justifiable.
Describe why it may be difficult to exit all positions on behalf of your client.
Explain why client profiling is not merely about understanding their psychological makeup.
Explain why positive feedback cycles are responsible for the formation of tops and bottoms in the market.
How do market specialists take advantage of knowledge‐based bias in the markets?
Why do chart patterns exist?
Describe how regret bias influences market action.
Explain how loss aversion bias can lead to sunk cost bias.
Explain prospect theory and how it affects market action.
What are the behavioral elements associated with consolidations?
What are the behavioral elements associated with market tops and bottoms?
Why would you need price confirmation when trading via the use of an RS line?
How are performance charts better than RS charts?
What technical tools would you employ to help identify RS trends?
Explain how two stocks can rally but have their RS line decline.
What are the advantages of using RS charts?
What is the difference between the ratio and difference methods of constructing RS charts?
List the number of ways one can study the relationship between two markets.
Explain the meaning of relative strength.
Why are price‐based indicators sometimes a proxy for sentiment indicators?
What is meant by a contrary indicator?
How does the Put‐Call Ratio differ from the VIX?
Describe the cycle of emotions and reactions for both the well-informed and under-informed at various stages of a market cycle.
How would you distinguish between the well-informed and the underinformed?
Explain how you would use a flow of funds‐type sentiment indicator to gauge market tops and bottoms.
What is the difference between flow of funds and poll‐based sentiment indicators?
Describe what is meant by the term market sentiment.
What is the advantage of a ratio-adjusted breadth indicator?
What are the weaknesses associated with the Arms Index and how would you rectify the issues?
Describe how you would use the McClellan Oscillator with volume.
Explain why you cannot add up five daily net advances to represent a week’s net advance.
Name and describe eight main challenges associated with using breadth indicators.
List five breadth operations and their corresponding breadth indicators.
Describe the type of market‐breadth indicator that would allow you to gauge the strength of a trend.
Explain the term market breadth and how is it different from market depth.
Describe some popular market indicators of volatility.
Can volatility indicate the potential future direction of the markets?
Describe how you would identify volatility in a consolidation.
What is the significance of the normal distribution?
Explain how you would size a stop using ATR.
What is the difference between the first and second measures of volatility?
Explain how you would measure trend‐based volatility.
Define volatility.
List at least five advantages of using cycle analysis.
Explain how cycles may be used to classify reversal and continuation patterns.
Describe the five methods for identifying a cycle in the market.
What role does a centered moving average play in cycle analysis?
Explain how you would calculate the half period of a given cycle.
What is the principle of proportionality?
Explain cycle translation.
Describe the different parts of a cycle.
Calculate, using the Square of Nine, the 90‐degree support and resistance for a price peak at $310.
Describe the various retracement approaches that Gann used in his analysis of the markets.
What does the rule of all angles mean?
Briefly describe how Gann fan lines are created.
What is the connection between squaring the range and price cycles?
Explain how one squares the highs and the lows.
How would you calculate the most appropriate scale or trend rate for a particular market?
Describe a few number systems that Gann used in his analysis.
Describe two W‐X‐Y corrective combinations in detail.
List as many wave guidelines as you can.
List all nine wave degrees and their labeling conventions from the Grand Supercycle down to the Subminuette.
List the most common Fibonacci price and time ratios associated with impulse and corrective waves.
What are the rules associated with corrective triangles?
What is alternation? Give two examples of alternation.
Describe the various corrective flat patterns found in Elliott waves.
Explain the difference between motive and corrective waves.
Explain how reversion to the mean is an underlying characteristic of Market Profile.
How would you use Market Profile to forecast potential future price direction?What is the basis for your forecast?
What do single print buying and selling tails represent in Market Profile?
Define the potential points of entry for a trader using Market Profile as a means of trading the market.

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