‭Questions‬

‭1.‬ W ‭ hich of the following is NOT a characteristic of a strong bear trend?‬

‭A) Lower highs and lower lows‬
‭B) Most bars are bear trend bars‬
‭C) Frequent gaps between the bodies of consecutive bars‬
‭D) The presence of large bull trend bars‬
‭2.‬ ‭What is the primary function of a trend channel line?‬
‭A) To identify the exact entry point for a trade‬
‭B) To confirm the validity of a trend‬
‭C) To highlight potential areas for countertrend trades‬
‭D) To predict the duration of a trend‬
‭3.‬ ‭Which of the following is the MOST reliable signal for a continuation of a bull trend‬
‭after a pullback?‬
‭A) A high 1 buy setup with a doji signal bar‬
‭B) A high 2 buy setup at the moving average with a bull reversal bar‬
‭C) A lower low pullback that breaks the bull trend line‬
‭D) A three-push pattern that forms a wedge top‬
‭4.‬ ‭What is the typical outcome after a trend channel line overshoot and reversal?‬
‭A) A continuation of the original trend with increased momentum‬
‭B) A two-legged correction in the opposite direction of the trend‬
‭C) A breakout in the direction of the overshoot, followed by a measured move‬
‭D) A tight trading range followed by a trend reversal‬
‭5.‬ ‭Which of the following is NOT a characteristic of a micro channel?‬
‭A) Most bars have highs and lows touching the trend lines‬
‭B) The pullbacks are small and infrequent‬
‭C) It often represents a strong trend on a higher time frame‬
‭D) It typically breaks out in the opposite direction of the trend‬
‭6.‬ ‭What is the primary reason why traders should avoid trading during barbwire‬
‭patterns, especially if they are beginners?‬
‭A) Barbwire patterns are inherently unpredictable and unreliable‬
‭B) The market is too volatile during barbwire patterns‬
‭C) Stop entries in barbwire often result in losses due to whipsaws and false‬
‭breakouts‬
‭D) Barbwire patterns are rare and offer limited trading opportunities‬
‭7.‬ ‭Which of the following is the MOST reliable signal bar for a long entry in a strong bull‬
‭trend?‬
‭A) A large bull trend bar with a close near its high‬
‭B) A small doji bar with a close near its midpoint‬
‭C) A bear trend bar with a large tail at the bottom‬
‭D) An outside up bar with a close near its high‬
‭8.‬ ‭What is the primary function of an exhaustion gap in a trend?‬
‭A) To signal the beginning of a new trend in the opposite direction‬
‭B) To indicate a potential continuation of the existing trend‬
‭C) To mark a potential area of strong support or resistance‬
‭D) To signal a potential climax and a subsequent correction or reversal‬
‭9.‬ W ‭ hich of the following is NOT a typical scenario for scaling into a trade?‬
‭A) Adding to a long position as a bull trend progresses‬
‭B) Adding to a short position as a bear trend declines‬
‭C) Buying more of a stock as its price drops in a bear market‬
‭D) Doubling your position size after every losing trade‬
‭10.‬‭What is the key principle behind the "always-in" approach to trading?‬
‭A) Always be in the market, either long or short, regardless of market conditions‬
‭B) Trade only in the direction of the most recent signal on the 5-minute chart‬
‭C) Maintain a core position and adjust it based on higher timeframe trends‬
‭D) Assess the market's likely direction and trade accordingly, even without a clear‬
‭signal‬
‭11.‬‭Which of the following is NOT a valid reason to consider exiting a trade early, even if‬
‭it's profitable?‬
‭A) The market reaches a predetermined profit target‬
‭B) The market's behavior contradicts your initial premise for the trade‬
‭C) The market enters a tight trading range, creating uncertainty‬
‭D) The market has a one-bar pullback against your position‬
‭12.‬‭Which of the following statements about the relationship between risk, reward, and‬
‭probability in trading is TRUE?‬
‭A) High-probability trades always have a large potential reward relative to risk‬
‭B) Low-probability trades can be profitable if the potential reward is‬
‭significantly larger than the risk‬
‭C) The probability of success is always known with certainty before entering a trade‬
‭D) Successful traders focus solely on high-probability setups and ignore‬
‭low-probability ones‬
‭13.‬‭Which of the following is NOT a typical characteristic of a trend from the open day?‬
‭A) The open is often near the high or low of the day‬
‭B) The initial move can be a strong spike or a small opening range‬
‭C) Pullbacks are typically small and infrequent‬
‭D) The market tends to consolidate in the middle of the day and break out in the‬
‭opposite direction of the initial trend‬
‭14.‬‭What is the primary reason why most traders should avoid trading in tight trading‬
‭ranges?‬
‭A) Tight trading ranges offer limited profit potential‬
‭B) The market's direction is highly uncertain in tight trading ranges‬
‭C) Stop entries in tight trading ranges often result in losses due to whipsaws‬
‭D) All of the above‬
‭15.‬‭Which of the following is the LEAST reliable signal for a short entry in a trading‬
‭range?‬
‭A) A low 2 setup near the top of the range‬
‭B) A bear trend bar breaking below a swing low in the range‬
‭C) A large bull trend bar near the top of the range‬
‭D) A high 2 setup near the bottom of the range‬
‭16.‬‭What is the primary function of a protective stop in trading?‬
‭A) To guarantee a profit on every trade‬
‭B) To limit losses in case the market moves against your position‬
‭C) To identify the ideal entry point for a trade‬
‭D) To predict the direction of the next market move‬
 ‭17.‬‭Which of the following is NOT a valid reason to use a wider protective stop than‬
‭usual?‬
‭A) The market is in a strong trend and you want to avoid getting stopped out on a‬
‭pullback‬
‭B) The bars on the chart are unusually large, increasing the potential volatility‬
‭C) You are fading a breakout and expect a larger than usual pullback‬
‭D) You are scalping for a small profit and want to minimize your risk‬
‭18.‬‭Which of the following statements about scaling into trades is TRUE?‬
‭A) Scaling into a losing trade is always a profitable strategy‬
‭B) Scaling in should only be done when the market is moving in the direction‬
‭of your initial entry‬
‭C) Scaling in can be used to increase position size in a winning trade or to average‬
‭down in a losing trade‬
‭D) Scaling in is the most suitable strategy for beginner traders‬
‭19.‬‭Which of the following is NOT a typical reason for a pullback in a bull trend?‬
‭A) Profit-taking by bulls who bought earlier in the trend‬
‭B) Short covering by bears who are exiting their positions‬
‭C) New buying by aggressive bulls who missed the initial rally‬
‭D) Aggressive selling by bears who anticipate a trend reversal‬
‭20.‬‭Which of the following statements about the relationship between trends and trading‬
‭ranges is FALSE?‬
‭A) All trends eventually transition into trading ranges‬
‭B) Trading ranges are often pullbacks in higher timeframe trends‬
‭C) The breakout from a trading range always leads to a new trend in the same‬
‭direction‬
‭D) Trading ranges offer opportunities for both long and short trades‬

‭1. Which of the following is NOT a characteristic of a strong bear trend?‬

‭●‬ ‭C) Frequent gaps between the bodies of consecutive bars‬

‭○‬ ‭Excerpt (from "Trading Price Action Reversals"):‬‭"There‬‭is very little‬
‭overlap of the bodies of consecutive bars. For example, in a bull spike,‬
‭many bars have lows that are at or just one tick below the closes of the‬
‭prior bar. Some bars have lows that are at and not below the close of the‬
‭prior bar, so traders trying to buy on a limit order at the close of the‬
‭prior bar do not get their orders filled and they have to buy higher."‬
‭○‬ ‭Explanation: This excerpt, while describing a bull trend, highlights the‬
‭principle that strong trends exhibit minimal overlap between‬
‭consecutive bars. In a bear trend, this would translate to minimal gaps‬
‭between the bodies of consecutive bars, making option C the incorrect‬
‭characteristic.‬

‭2. What is the primary function of a trend channel line?‬

‭●‬ ‭C) To highlight potential areas for countertrend trades‬

 ‭○‬ E ‭ xcerpt (from "Trading Price Action Trends"):‬‭"Trend channel lines are‬
‭most helpful in finding tradable countertrend trades."‬
‭○‬ ‭Explanation: This excerpt directly points to the primary function of trend‬
‭channel lines. They help identify potential areas where the trend might‬
‭temporarily reverse or pull back, offering opportunities for countertrend‬
‭trades.‬

‭ . Which of the following is the MOST reliable signal for a continuation of a bull trend‬
3
‭after a pullback?‬

‭●‬ ‭B) A high 2 buy setup at the moving average with a bull reversal bar‬
‭○‬ ‭Excerpt (from "Trading Price Action Trading Ranges"):‬‭"A high 2 in a‬
‭bull trend and a low 2 in a bear trend are often referred to as ABC‬
‭corrections where the first leg is the A, the change in direction that‬
‭forms the high 1 or low 1 entry is the B, and the final leg of the pullback‬
‭is the C. The breakout from the C is a high 2 entry bar in a bull ABC‬
‭correction and a low 2 entry bar in a bear ABC correction."‬
‭○‬ ‭Excerpt (from "Trading Price Action Reversals"):‬‭"The‬‭pullbacks have‬
‭strong setups. For example, the high 1 and high 2 pullbacks in a bull‬
‭trend have strong bull reversal bars for signal bars."‬
‭○‬ ‭Explanation: A high 2 buy setup at the moving average, especially with‬
‭a strong bull reversal bar, indicates a potential continuation of the bull‬
‭trend after a two-legged pullback. The combination of the moving‬
‭average acting as support and the bullish reversal bar suggests strong‬
‭buying interest, making it a reliable signal for the trend's resumption.‬

‭4. What is the typical outcome after a trend channel line overshoot and reversal?‬

‭●‬ ‭B) A two-legged correction in the opposite direction of the trend‬

‭○‬ ‭Excerpt (from "Trading Price Action Trends"):‬‭"Trend‬‭channel line‬
‭overshoots are closely related to wedges and should be viewed and‬
‭traded as if they are one and the same. Most wedges have failed trend‬
‭channel line breakouts as the trigger for a reversal trade, and most‬
‭trend channel line overshoots and reversals are also wedge reversals...‬
‭The reversal from the overshoot can be reason enough to enter if the‬
‭pattern is strong. Sometimes the trend will resume within a bar or two‬
‭and break beyond the channel line again and that second breakout will‬
‭also fail. When that happens, the reversal trade is even more reliable."‬
‭○‬ ‭Explanation: This excerpt highlights the connection between trend‬
‭channel line overshoots and reversals, often leading to a correction in‬
‭the opposite direction of the trend. The mention of "wedge reversals"‬
‭further suggests that these corrections typically involve multiple legs or‬
‭swings, aligning with the concept of a two-legged correction.‬

‭5. Which of the following is NOT a typical characteristic of a micro channel?‬

‭●‬ ‭D) It typically breaks out in the opposite direction of the trend‬
‭○‬ ‭Excerpt (from "Trading Price Action Trends"):‬‭"A micro‬‭trend line is a‬
‭trend line on any time frame that is drawn across from 2 to about 10‬
 ‭ ars where most of the bars touch or are close to the trend line and the‬
b
‭bars usually are relatively small. Typically a trend channel line can be‬
‭drawn along the opposite ends of the bars as well, and the result is a‬
‭very tight channel called a micro channel. Unlike a conventional channel‬
‭where pullbacks are common, a micro channel progresses with no‬
‭pullbacks, or rare, small pullbacks, making it an extremely tight‬
‭channel."‬
‭ ‬ ‭Explanation: Micro channels represent strong trends on smaller‬
○
‭timeframes, often appearing as a single trend bar on higher timeframes.‬
‭Like other trends, they are more likely to continue in the same direction‬
‭or transition into a trading range than to reverse abruptly. Option D‬
‭contradicts this characteristic behavior of micro channels.‬

‭ . What is the primary reason why traders should avoid trading during barbwire‬
6
‭patterns, especially if they are beginners?‬

‭●‬ C
‭ ) Stop entries in barbwire often result in losses due to whipsaws and false‬
‭breakouts‬
‭○‬ ‭Excerpt (from "Trading Price Action Trading Ranges"):‬‭"The cardinal‬
‭rule for trading in barbwire is to never enter on a breakout. Instead, wait‬
‭for a trend bar to break out of the pattern. The trend bar is the first sign‬
‭of conviction but, since the market has been two-sided, the odds are‬
‭high that the breakout will fail, so be ready to fade it."‬
‭○‬ ‭Explanation: Barbwire patterns, characterized by overlapping bars,‬
‭dojis, and prominent tails, represent a market in balance with high‬
‭uncertainty. This makes stop entries particularly risky, as the market can‬
‭easily whipsaw back and forth, triggering stops and leading to losses.‬
‭The excerpt advises waiting for a clear trend bar breakout before‬
‭considering a trade, which aligns with option C.‬

‭ . Which of the following is the MOST reliable signal bar for a long entry in a strong‬
7
‭bull trend?‬

‭●‬ ‭C) A bear trend bar with a large tail at the bottom‬
‭○‬ ‭Excerpt (from "Trading Price Action Trends"):‬‭"In‬‭the strongest trends,‬
‭the pullbacks usually have weak signal bars, making many traders not‬
‭take them, and forcing traders to chase the market. For example, in a‬
‭bear trend the signal bars for a low 2 short are often small bull bars in‬
‭two or three bar bull spikes, and some of the entry bars are outside‬
‭down bars."‬
‭○‬ ‭Explanation: In a strong bull trend, the market's momentum is upward,‬
‭and pullbacks are often shallow and quickly bought up. A bear trend bar‬
‭with a large tail at the bottom indicates a failed attempt by the bears to‬
‭push the price down, suggesting strong buying pressure and a potential‬
‭continuation of the uptrend. This makes it a reliable signal bar for a long‬
‭entry in this context.‬

‭8. What is the primary function of an exhaustion gap in a trend?‬

 ‭●‬ ‭D) To signal a potential climax and a subsequent correction or reversal‬
‭○‬ ‭Excerpt (from "Trading Price Action Trading Ranges"):‬‭"Traditional gaps‬
‭(breakout, measuring, and exhaustion) on daily charts have intraday‬
‭equivalents in the form of various trend bars."‬
‭○‬ ‭Excerpt (from "Trading Price Action Reversals"):‬‭"An‬‭unusually large‬
‭trend bar in the direction of the trend can often represent an emotional‬
‭exhaustion of a trend... If the market pulls back for a few bars and does‬
‭not retrace too much of the breakout bar, the odds of the breakout being‬
‭successful are good, and traders will enter on the high 1 breakout‬
‭pullback if this was a bull breakout (or short a low 1 in a bear‬
‭breakout)."‬
‭○‬ ‭Explanation: An exhaustion gap, often represented by a large trend bar‬
‭late in a trend, suggests that the trend's momentum is waning and a‬
‭potential climax is forming. This climax could lead to a correction, a‬
‭period of consolidation, or even a reversal, making option D the most‬
‭accurate description of its function.‬

‭9. Which of the following is NOT a typical scenario for scaling into a trade?‬

‭●‬ ‭D) Doubling your position size after every losing trade‬
‭○‬ ‭Excerpt (from "Trading Price Action Trading Ranges"):‬‭"“Never add to a‬
‭losing position.” That is one of the most fundamental rules on Wall‬
‭Street. However, it is misleading because institutions do it all the time‬
‭and it is part of many profitable strategies. How can that possibly be? It‬
‭is because the adage refers to countertrend trades and the institutions‬
‭are scaling into with trend trades."‬
‭○‬ ‭Explanation: While scaling into a losing trade can be part of a valid‬
‭strategy in certain contexts (like adding to a with-trend position during a‬
‭pullback), blindly doubling down after every loss is a recipe for disaster.‬
‭This approach, known as the Martingale strategy, can lead to‬
‭catastrophic losses if the market continues to move against you.‬

‭10. What is the key principle behind the "always-in" approach to trading?‬

‭●‬ D
‭ ) Assess the market's likely direction and trade accordingly, even without a‬
‭clear signal‬
‭○‬ ‭Excerpt (from "Trading Price Action Reversals"):‬‭"If‬‭you had to be in the‬
‭market at all times, either long or short, the always-in position is‬
‭whatever your current position is."‬
‭○‬ ‭Excerpt (from "Trading Price Action Trading Ranges"): *"always in If you‬
‭have‬

‭ 1. Which of the following is NOT a valid reason to consider exiting a trade early, even‬
1
‭if it's profitable?‬

‭●‬ ‭D) The market has a one-bar pullback against your position‬
‭○‬ ‭Excerpt (from "Trading Price Action Trading Ranges"):‬‭"All pullbacks are‬
‭small trading ranges on the chart that you are viewing, and all trading ranges‬
‭are pullbacks on higher time frame charts. However, on the chart in front of‬
 ‭ ou, most attempts to break out of a trading range fail, but most attempts to‬
y
‭break out of a pullback succeed."‬
‭ ‬ ‭Explanation:‬‭Pullbacks are natural and expected occurrences‬‭within trends.‬
○
‭A single one-bar pullback doesn't necessarily invalidate the trade premise,‬
‭especially in a strong trend. Exiting on such a minor retracement could lead to‬
‭missing out on further gains.‬

‭ 2. Which of the following statements about the relationship between risk, reward,‬
1
‭and probability in trading is TRUE?‬

‭●‬ B
‭ ) Low-probability trades can be profitable if the potential reward is‬
‭significantly larger than the risk‬
‭○‬ ‭Excerpt (from "Trading Price Action Trading Ranges"):‬‭"To take a trade,‬
‭you must believe that the probability of success times the potential reward is‬
‭greater than the probability of failure times the risk."‬‭(This is referred to as the‬
‭trader's equation)‬
‭○‬ ‭Explanation:‬‭This statement encapsulates the essence‬‭of the trader's‬
‭equation. Even if a trade has a low probability of success, it can still be‬
‭profitable if the potential reward (profit potential) is large enough to‬
‭compensate for the higher risk of loss.‬

‭ 3. Which of the following is NOT a typical characteristic of a trend from the open‬
1
‭day?‬

‭●‬ D
‭ ) The market tends to consolidate in the middle of the day and break out in‬
‭the opposite direction of the initial trend‬
‭○‬ ‭Excerpt (from "Trading Price Action Trends"):‬‭"The‬‭final period of the day‬
‭often resumes the trend from earlier in the day, as in a trend resumption day,‬
‭but it sometimes reverses the trend and forms a reversal day."‬
‭○‬ ‭Explanation:‬‭A trend from the open day is characterized‬‭by the initial trend‬
‭continuing or resuming after a midday pause. Option D describes a pattern‬
‭more typical of a reversal day or a less pronounced trend day, where the‬
‭initial trend might not sustain throughout the day.‬

‭ 4. What is the primary reason why most traders should avoid trading in tight trading‬
1
‭ranges?‬

‭●‬ ‭D) All of the above‬

‭○‬ ‭Excerpt (from "Trading Price Action Trading Ranges"):‬‭"Since most‬
‭traders should enter almost exclusively on stops, they should never trade‬
‭once they see any sign that the market is entering a tight trading range,‬
‭because entering on stops will result in repeated losses."‬
‭○‬ ‭Excerpt (from "Trading Price Action Trading Ranges"):‬‭"The tighter the‬
‭range, the fewer trades you should take. When the range is a tight trading‬
‭range, you should rarely take any trades."‬
‭○‬ ‭Explanation:‬‭Tight trading ranges present multiple‬‭challenges: limited profit‬
‭potential due to small price movements, high uncertainty about the breakout‬
‭direction, and the risk of whipsaw losses due to frequent reversals. These‬
 f‭actors make them unsuitable for most traders, especially beginners relying‬
‭on stop entries.‬

‭ 5. Which of the following is the LEAST reliable signal for a short entry in a trading‬
1
‭range?‬

‭●‬ ‭D) A high 2 setup near the bottom of the range‬

‭○‬ ‭Excerpt (from "Trading Price Action Trading Ranges"):‬‭"A high 2 in a bull‬
‭trend and a low 2 in a bear trend are often referred to as ABC corrections..."‬
‭○‬ ‭Explanation:‬‭A high 2 setup is generally a buy signal,‬‭indicating a potential‬
‭continuation of an uptrend or a reversal from a downswing within a trading‬
‭range. It's least reliable for a short entry, especially near the bottom of the‬
‭range where buying pressure is likely to be strong.‬

‭16. What is the primary function of a protective stop in trading?‬

‭●‬ ‭B) To limit losses in case the market moves against your position‬
‭○‬ ‭Excerpt (from "Trading Price Action Trading Ranges"):‬‭"risk The number‬
‭of ticks from a trader's entry price to a protective stop. It is the minimum that‬
‭the trader will lose if a trade goes against him (slippage and other factors can‬
‭make the actual risk greater than the theoretical risk)."‬
‭○‬ ‭Explanation:‬‭The primary function of a protective‬‭stop is risk management.‬
‭It's an order placed to automatically exit a trade if the market moves against‬
‭your position beyond a certain point, thereby limiting potential losses.‬

‭ 7. Which of the following is NOT a valid reason to use a wider protective stop than‬
1
‭usual?‬

‭●‬ ‭D) You are scalping for a small profit and want to minimize your risk‬
‭○‬ ‭Excerpt (from "Trading Price Action Trading Ranges"):‬‭"For most small‬
‭scalps, traders do not want to see any pullbacks and will often exit as soon as‬
‭one appears. However, if they believe that the market has entered a trend‬
‭channel, they will usually allow small pullbacks."‬
‭○‬ ‭Explanation:‬‭Scalping aims for small profits with‬‭tight stops. Using a wider‬
‭stop contradicts the essence of scalping, as it increases the potential loss,‬
‭making it harder to achieve the required high win rate for profitable scalping.‬

‭18. Which of the following statements about scaling into trades is TRUE?‬

‭●‬ C
‭ ) Scaling in can be used to increase position size in a winning trade or to‬
‭average down in a losing trade‬
‭○‬ ‭Excerpt (from "Trading Price Action Trading Ranges"):‬‭"You can scale in‬
‭either as the trade moves against you or as it moves in your direction. If you‬
‭scale in after you already have a profit, this is also referred to as adding to‬
‭your position, or pressing your trade."‬
‭○‬ ‭Explanation:‬‭This statement accurately describes the‬‭dual nature of scaling‬
‭in. It can be used to increase exposure in a winning trade (adding to a winner)‬
‭or to lower the average entry price in a losing trade (averaging down),‬
‭although the latter is generally riskier.‬
‭19. Which of the following is NOT a typical reason for a pullback in a bull trend?‬

‭●‬ ‭C) New buying by aggressive bulls who missed the initial rally‬
‭○‬ ‭Excerpt (from "Trading Price Action Trading Ranges"):‬‭"The reversal‬
‭down into the pullback is due to profit taking by the bulls and, to a lesser‬
‭extent, scalping by the bears."‬
‭○‬ ‭Explanation:‬‭Pullbacks in bull trends are primarily‬‭caused by profit-taking‬
‭from existing longs and short-term selling by bears, not by new buying from‬
‭bulls who missed the initial rally. New buying would contribute to the trend's‬
‭continuation, not a pullback.‬

‭ 0. Which of the following statements about the relationship between trends and‬
2
‭trading ranges is FALSE?‬

‭●‬ C
‭ ) The breakout from a trading range always leads to a new trend in the same‬
‭direction‬
‭○‬ ‭Excerpt (from "Trading Price Action Trading Ranges"):‬‭"The market is‬
‭always trying to break out, and then the market tries to make every breakout‬
‭fail. This is the most fundamental aspect of all trading and is at the heart of‬
‭everything that we do."‬
‭○‬ ‭Explanation:‬‭This excerpt highlights the uncertainty‬‭inherent in breakouts.‬
‭While trading ranges often resolve in the direction of the preceding trend, it's‬
‭not always the case. Many breakouts fail, leading to false breakouts or‬
‭reversals back into the range.‬

‭1.‬ I‭n a strong bull trend, which of the following is the LEAST reliable signal for a short‬
‭trade?‬

‭A) A lower high after a trend line break‬

‭B) A large bear trend bar closing on its low‬

‭C) A high 1 buy setup at the top of the trend‬

‭D) A two-legged pullback to the moving average‬

‭2.‬ ‭Which of the following is NOT a characteristic of a strong breakout?‬

‭A) The breakout bar has a large body and small or no tails‬

‭B) The first pullback occurs after one or two bars‬

‭C) There is a sense of urgency in the market‬

 ‭D) The breakout reverses many recent closes and highs/lows‬

‭3.‬ ‭What is the primary reason why most breakouts fail?‬

‭A) Market manipulation by institutions‬

‭B) Lack of sufficient trading volume‬

‭C) Market inertia and resistance to change‬

‭D) Emotional trading by retail investors‬

‭4.‬ ‭Which of the following is the MOST reliable time to fade a trend with a limit order?‬

‭A) During the initial spike phase‬

‭B) At the beginning of the channel phase‬

‭C) As the market approaches a measured move target‬

‭D) During a pullback to the moving average‬

‭5.‬ ‭Which of the following is NOT a typical characteristic of a trading range?‬

‭A) Presence of both bull and bear trend bars‬

‭B) Many bars with prominent tails‬

‭C) The moving average is steeply angled‬

‭D) A sense of uncertainty about the market direction‬

‭6.‬ ‭What is the primary reason for the magnetic pullback effect in trading ranges?‬

‭A) Institutional traders deliberately manipulating prices‬

‭B) The tendency of traders to buy low and sell high within the range‬

‭C) The influence of news and external events‬

‭D) The natural oscillation of market prices‬

‭7.‬ W
‭ hich of the following is the LEAST likely outcome after a successful breakout from‬
‭a trading range?‬

‭A) A measured move in the direction of the breakout‬

‭B) A pullback to retest the breakout point‬

 ‭C) A reversal back into the trading range‬

‭D) A continuation of the trend for several days‬

‭8.‬ ‭In which scenario is scaling into a trade generally considered the MOST risky?‬

‭A) During a strong trend in the direction of your trade‬

‭B) During a pullback in a strong trend‬

‭C) At the extremes of a trading range‬

‭D) Against a strong trend in the final hour of the day‬

‭9.‬ ‭Which of the following is NOT a characteristic of a strong reversal?‬

‭A) A strong reversal bar with a large body and small tails‬

‭B) The first pullback occurs after several bars‬

‭C) The breakout reverses many recent closes and highs/lows‬

‭D) The signal is the first attempt to reverse within the past few bars‬

‭10.‬‭What is the primary purpose of using measured move targets in trading?‬

‭A) To predict the exact high or low of a trend‬

‭B) To identify potential areas for profit-taking and reversals‬

‭C) To determine the precise entry point for a trade‬

‭D) To confirm the validity of a trend line break‬

‭11.‬‭Which of the following is the MOST reliable setup for a trend reversal trade?‬

‭A) A large trend bar in the opposite direction of the trend‬

‭B) A second entry reversal setup after a trend line break‬

‭C) A breakout pullback in the direction of the trend‬

‭D) A high 2 setup at the moving average in a bull trend‬

‭12.‬‭What is the primary reason why most traders should avoid scalping, especially in the‬
‭first hour of the trading day?‬
 ‭A) Scalping requires a high winning percentage, which is difficult to achieve‬

‭B) Scalping is inherently riskier than swing trading‬

‭C) Scalping is not suitable for all market conditions‬

‭D) Scalping is less profitable than swing trading‬

‭13.‬‭Which of the following is NOT a typical characteristic of a climactic reversal?‬

‭A) A sharp move followed by a sharp move in the opposite direction‬

‭B) The presence of a vacuum effect created by the absence of traders in one‬
‭ irection‬
d

‭C) A gradual transition from one trend to another‬

‭D) The formation of a trading range or a trend reversal‬

‭14.‬‭Which of the following is the LEAST reliable signal bar for a trend reversal trade?‬

‭A) A strong reversal bar with a large body and small tails‬

‭B) A two-bar reversal with opposite trend bars‬

‭C) A large doji bar wi‬‭th a close near its midpoint‬

‭D) A small inside bar with a body in the opposite direction of the trend‬

‭15.‬‭What is the primary difference between a trend line and a trend channel line?‬

‭A) Trend lines are always horizontal, while trend channel lines are diagonal‬

‭ ) Trend lines are drawn across the highs or lows of a trend, while trend channel‬
B
‭lines are drawn on the opposite side of the price action‬

‭ ) Trend lines are used to identify support and resistance levels, while trend channel‬
C
‭lines are used to identify trend direction‬

‭ ) Trend lines are more reliable than trend channel lines for predicting market‬
D
‭reversals‬

‭16.‬‭Which of the following is NOT a typical characteristic of a successful trend?‬

‭A) The presence of trending highs and lows‬

‭B) Most bars are trend bars in the direction of the trend‬
 ‭C) Frequent and large pullbacks against the tren‬‭d‬

‭D) A sense of urgency in the market‬

‭17.‬‭Which of the following is the MOST reliable entry approach for beginner traders using‬
‭price action?‬

‭A) Entering on a stop in the direction of the trend‬

‭B) Entering on a limit order against the trend‬

‭C) Scaling into a position as the market moves against the trader's initial entry‬

‭D) Fading breakouts of trading ranges with limit orders‬

‭18.‬‭What is the primary reason why traders should avoid trading during the release of‬
‭economic reports?‬

‭A) The market is too volatile and unpredictable during these times‬

‭B) The news associated with the report can be misleading‬

‭ ) Computer algorithms have a significant speed advantage in analyzing and‬

C
‭trading on the report‬

‭D) The market often gaps on the report, creating unfavorable risk/reward ratios‬

‭19.‬‭Which of the following is NOT a typical characteristic of a trend from the open day?‬

‭A) The high or low of the day is formed within the first few bars‬

‭B) The day begins with a strong spike or a small opening range‬

‭C) The trend often resumes in the final hour or two after a midday pause‬

‭D) The pullbacks are typically large and frequent throughout the day‬

‭20.‬‭Which of the following statements about trading ranges is FALSE?‬

‭ ) Trading ranges are areas of two-sided trading where both bulls and bears are‬
A
‭active‬

‭B) The directional probability of an equidistant move within a trading range is‬
t‭ypically around 50%‬

‭C) Most breakouts from trading ranges are successful and lead to new trends‬

‭D) Trading ranges often act as continuation patterns, eventually breaking out in the‬
 ‭direction of the prior trend‬

‭ . In a strong bull trend, which of the following is the LEAST reliable signal for a short‬
1
‭trade?‬

‭●‬ ‭C) A high 1 buy setup at the top of the trend‬

‭○‬ ‭Excerpt:‬‭"A high 1 is a bar with a high above the‬‭prior bar in a bull flag or‬
‭near the bottom of a trading range... If the market is in a clear bull trend, do‬
‭not look for low 1 or low 2 shorts, because those are setups only in bear‬
‭trends and trading ranges. In fact, if the market is in a bear trend, you can‬
‭often look to short above the high of the prior bar because buying a high 1 in‬
‭a bear trend is a low-probability trade."‬
‭○‬ ‭Explanation:‬‭In a strong bull trend, the market's‬‭momentum is upward. A‬
‭high 1 setup, which indicates a potential pause or minor pullback, is more‬
‭likely to result in a continuation of the uptrend rather than a reversal. Hence,‬
‭it's the least reliable signal for a short trade in this context.‬

‭2. Which of the following is NOT a characteristic of a strong breakout?‬

‭●‬ ‭B) The first pullback occurs after one or two bars‬
‭○‬ ‭Excerpt:‬‭"The first pullback occurs only after three‬‭or more bars of breaking‬
‭out."‬
‭○‬ ‭Explanation:‬‭A strong breakout typically exhibits‬‭sustained momentum, with‬
‭the first pullback occurring only after several bars, not just one or two. This‬
‭indicates a greater commitment from the dominant side (buyers in a bull‬
‭breakout, sellers in a bear breakout).‬

‭3. What is the primary reason why most breakouts fail?‬

‭●‬ ‭C) Market inertia and resistance to change‬

‭○‬ ‭Excerpt:‬‭"The most important concept in trading is‬‭that most breakouts fail.‬
‭Because of this, entering on every breakout in the direction of the breakout is‬
‭a losing strategy. However, there are often price action events that increase‬
‭the likelihood that a breakout will succeed."‬
‭○‬ ‭Explanation:‬‭The text emphasizes that markets have‬‭a tendency to continue‬
‭their existing behavior (inertia), making them resistant to change. This‬
‭inherent resistance to change is the primary reason why most breakout‬
‭attempts fail.‬

‭4. Which of the following is the MOST reliable time to fade a trend with a limit order?‬

‭●‬ ‭C) As the market approaches a measured move target‬

‭○‬ ‭Excerpt:‬‭"Once the market has clearly transitioned‬‭into a trading range,‬
‭traders can then fade the top and bottom of the trading ranges (especially on‬
‭second signals), where they have a reasonable expectation that the always-in‬
‭trade is about to flip into their direction."‬
‭○‬ ‭Explanation:‬‭Fading a trend involves betting against‬‭its continuation.‬
‭Measured move targets represent potential areas where the trend might‬
 ‭ xhaust itself or reverse. Therefore, as the market approaches such a target,‬
e
‭the probability of a reversal increases, making it a more reliable time to fade‬
‭the trend with a limit order.‬

‭5. Which of the following is NOT a typical characteristic of a trading range?‬

‭●‬ ‭C) The moving average is steeply angled‬

‭○‬ ‭Excerpt:‬‭"The moving average is relatively flat."‬
‭○‬ ‭Explanation:‬‭In a trading range, the market moves‬‭sideways, indicating a‬
‭balance between buyers and sellers. A steeply angled moving average‬
‭suggests a trending market, not a range-bound one.‬

‭6. What is the primary reason for the magnetic pullback effect in trading ranges?‬

‭●‬ ‭B) The tendency of traders to buy low and sell high within the range‬
‭○‬ ‭Excerpt:‬‭"The extremes are often tested by large trend‬‭bars, and, if you are‬
‭an experienced trader, you can fade the close of one of these bars... When‬
‭the market is testing the top or bottom of the range and threatening to break‬
‭out, the probability of a reversal might be 60 percent or higher, but if a‬
‭breakout occurs, the directional probability of a move of X ticks up or down‬
‭changes rapidly over the next several bars."‬
‭○‬ ‭Explanation:‬‭The magnetic pullback effect in trading‬‭ranges is primarily‬
‭driven by the natural tendency of traders to buy near the bottom of the range‬
‭(perceived as cheap) and sell near the top (perceived as expensive). This‬
‭creates buying support near the lows and selling pressure near the highs,‬
‭causing the market to oscillate within the range.‬

‭ . Which of the following is the LEAST likely outcome after a successful breakout‬
7
‭from a trading range?‬

‭●‬ ‭D) A continuation of the trend for several days‬

‭○‬ ‭Excerpt:‬‭"Most breakouts fail... The market usually‬‭gets pulled back into the‬
‭trading range, such as the body of the prior bar, and then decides where it will‬
‭go next."‬
‭○‬ ‭Explanation:‬‭While a successful breakout can sometimes‬‭lead to a sustained‬
‭trend, it's statistically less likely than other outcomes. More often, the market‬
‭will either retrace to test the breakout point, reverse back into the trading‬
‭range, or consolidate before deciding on its next direction.‬

‭8. In which scenario is scaling into a trade generally considered the MOST risky?‬

‭●‬ ‭D) Against a strong trend in the final hour of the day‬
‭○‬ ‭Excerpt:‬‭"Also, it is risky to scale in against a‬‭trend in the final hour or so of‬
‭the day, because you will too often find yourself holding a large losing position‬
‭that you will have to cover by the close. Time is against you."‬
‭○‬ ‭Explanation:‬‭Scaling into a losing trade against a‬‭strong trend is already‬
‭risky. Doing so in the final hour of the day compounds the risk, as there's‬
‭limited time for the market to reverse in your favor, and you might be forced to‬
‭exit at a significant loss near the close.‬
‭9. Which of the following is NOT a typical characteristic of a strong reversal?‬

‭●‬ ‭D) The signal is the first attempt to reverse within the past few bars‬
‭○‬ ‭Excerpt:‬‭"The signal is the second attempt to reverse‬‭within the past few bars‬
‭(a second signal)."‬
‭○‬ ‭Explanation:‬‭Strong reversals often occur after the‬‭market has already‬
‭shown some initial signs of weakness in the prevailing trend. A second‬
‭attempt to reverse, rather than the first, is generally considered more reliable‬
‭as it indicates a more significant shift in market sentiment.‬

‭10. What is the primary purpose of using measured move targets in trading?‬

‭●‬ ‭B) To identify potential areas for profit-taking and reversals‬

‭○‬ ‭Excerpt:‬‭"The purpose of finding these measured move‬‭targets is to find‬
‭reasonable areas to take profits, and, if there is a strong countertrend setup,‬
‭to initiate trades in the opposite direction."‬
‭○‬ ‭Explanation:‬‭Measured move targets help traders identify‬‭potential areas‬
‭where the market might pause, reverse, or consolidate. This information can‬
‭be used to strategically place profit-taking orders or to anticipate potential‬
‭reversal setups.‬

‭11. Which of the following is the MOST reliable setup for a trend reversal trade?‬

‭●‬ ‭B) A second entry reversal setup after a trend line break‬
‭○‬ ‭Excerpt:‬‭"It is after this test of the old extreme‬‭that you should look for‬
‭countertrend swing trades and only if there is a good setup on the reversal‬
‭away from the old extreme."‬
‭○‬ ‭Explanation:‬‭The text emphasizes that most trend reversal‬‭attempts fail. A‬
‭strong trend line break indicates a potential reversal, but it's often followed by‬
‭a test of the old extreme. A second entry reversal setup after this failed test is‬
‭considered the most reliable signal for a potential trend reversal.‬

‭ 2. What is the primary reason why most traders should avoid scalping, especially in‬
1
‭the first hour of the trading day?‬

‭●‬ ‭A) Scalping requires a high winning percentage, which is difficult to achieve‬
‭○‬ ‭Excerpt:‬‭"Since the profit (in scalping) is often‬‭smaller than the risk, a trader‬
‭has to win at least 70 percent of the time, which is an unrealistic goal for most‬
‭traders."‬
‭○‬ ‭Explanation:‬‭Scalping involves aiming for small profits‬‭with tight stops,‬
‭necessitating a high winning percentage to offset losses and commissions.‬
‭This high win rate is challenging to achieve consistently, making scalping less‬
‭suitable for most traders, especially in the volatile first hour.‬

‭13. Which of the following is NOT a typical characteristic of a climactic reversal?‬

‭●‬ ‭C) A gradual transition from one trend to another‬

‭○‬ ‭Excerpt:‬‭"Climactic Reversals: A Spike Followed by‬‭a Spike in the Opposite‬
‭Direction"‬
 ‭○‬ E
‭ xplanation:‬‭Climactic reversals are characterized by sharp and abrupt‬
‭changes in price action, often involving a spike in one direction followed by a‬
‭rapid spike in the opposite direction. They are not associated with gradual‬
‭transitions between trends.‬

‭14. Which of the following is the LEAST reliable signal bar for a trend reversal trade?‬

‭●‬ ‭C) A large doji bar with a close near its midpoint‬
‭○‬ ‭Excerpt:‬‭"Doji bars are one-bar trading ranges and‬‭therefore usually terrible‬
‭signal bars. You will usually lose if you buy above a trading range or sell‬
‭below one."‬
‭○‬ ‭Explanation:‬‭A doji bar signifies indecision and a‬‭balance between buyers‬
‭and sellers. This lack of directional conviction makes it a less reliable signal‬
‭for a trend reversal, especially when compared to strong trend bars or two-bar‬
‭reversals.‬

‭16. Which of the following is NOT a typical characteristic of a successful trend?‬

‭●‬ ‭C) Frequent and large pullbacks against the trend‬

‭○‬ ‭Excerpt (from "Trading Price Action Trends"):‬‭"There‬‭are small,‬
‭infrequent, and mostly sideways pullbacks. For example, if the Emini's‬
‭average range is 12 points, the pullbacks will all likely be less than three or‬
‭four points, and the market will often go for five or more bars without a‬
‭pullback."‬
‭○‬ ‭Explanation:‬‭Successful trends are characterized by‬‭sustained momentum in‬
‭one direction. Frequent and large pullbacks indicate a struggle between‬
‭buyers and sellers, which is more indicative of a trading range or a weakening‬
‭trend, not a successful one.‬

‭ 7. Which of the following is the MOST reliable entry approach for beginner traders‬
1
‭using price action?‬

‭●‬ ‭A) Entering on a stop in the direction of the trend‬

‭○‬ ‭Excerpt (from "Trading Price Action Trends"):‬‭"The‬‭single most reliable‬
‭countertrend trade is actually a with-trend trade on a larger time frame. A‬
‭pullback is a small trend against the larger trend, and when you enter against‬
‭the trend of that pullback, you are entering in the direction of the larger trend.‬
‭Once the pullback traders have exhausted themselves and the trend traders‬
‭have again demonstrated their resolve by breaking the trend line that‬
‭contained the pullback, any small pullback to test this breakout is a great‬
‭breakout pullback entry."‬
‭○‬ ‭Excerpt (from "Trading Price Action Trading Ranges"):‬‭"Since most‬
‭traders should enter almost exclusively on stops, they should never trade‬
‭once they see any sign that the market is entering a tight trading range,‬
‭because entering on stops will result in repeated losses."‬
‭○‬ ‭Explanation:‬‭Entering on a stop in the direction of‬‭the trend is considered the‬
‭most reliable approach for beginners because it ensures they enter the trade‬
‭only when the market's momentum confirms their bias. This reduces the risk‬
‭of getting caught in false reversals or breakouts, which are common pitfalls‬
 f‭or novice traders, especially in volatile market conditions or tight trading‬
‭ranges.‬

‭ 8. What is the primary reason why traders should avoid trading during the release of‬
1
‭economic reports?‬

‭●‬ C
‭ ) Computer algorithms have a significant speed advantage in analyzing and‬
‭trading on the report‬
‭○‬ ‭Excerpt (from "Trading Price Action Trading Ranges"):‬‭"Since computers‬
‭can analyze the data and place trades far faster than a trader can, and the‬
‭computers are running programs that have a mathematical edge, it is a losing‬
‭proposition to try to compete with them at the moment a report is released."‬
‭○‬ ‭Explanation:‬‭The text highlights the speed advantage‬‭of computer algorithms‬
‭in processing and reacting to economic reports. This makes it challenging for‬
‭human traders to compete effectively during these periods of heightened‬
‭volatility and rapid price movements.‬

‭ 9. Which of the following is NOT a typical characteristic of a trend from the open‬
1
‭day?‬

‭●‬ ‭D) The pullbacks are typically large and frequent throughout the day‬
‭○‬ ‭Excerpt (from "Trading Price Action Trends"):‬‭"Trend‬‭from the open days‬
‭have urgency and conviction from the outset and are usually the strongest‬
‭trends and have the smallest pullbacks."‬
‭○‬ ‭Explanation:‬‭Trend from the open days are characterized‬‭by strong‬
‭momentum from the start, with the initial trend establishing itself early in the‬
‭day. This strong momentum typically results in smaller and less frequent‬
‭pullbacks compared to other trend days.‬

‭20. Which of the following statements about trading ranges is FALSE?‬

‭●‬ ‭C) Most breakouts from trading ranges are successful and lead to new trends‬
‭○‬ ‭Excerpt (from "Trading Price Action Trading Ranges"):‬‭"The most‬
‭important thing to understand about breakouts is that most breakouts fail.‬
‭There is a strong propensity for the market to continue what it has been‬
‭doing, and therefore there is a strong resistance to change. Just as most‬
‭attempts to end a trend fail, most attempts to end a trading range and begin a‬
‭trend also fail."‬
‭○‬ ‭Explanation:‬‭The text explicitly states that most‬‭breakout attempts from‬
‭trading ranges fail due to market inertia. This contradicts option C, making it‬
‭the false statement.‬