Candlestick Principles Quiz

What does a Close greater than Open indicate?

• Bearish sentiment

• Neutral market

• Bullish sentiment

• Market indecision

Answer explanation

A Close greater than Open indicates that the price has increased during the trading period, reflecting bullish sentiment as buyers are in control and pushing prices higher.

What does a volatility burst typically indicate?

• A strong trend continuation

• A lack of interest

• A potential reversal

• Market stability

Answer explanation

A volatility burst often signals increased market activity and uncertainty, which can lead to a potential reversal in price direction, making 'A potential reversal' the correct choice.

What does it mean if the Current Range is much less than the Average Range?

• Market is trending strongly

• Market is reversing

• Market is resting

• Market is volatile

Answer explanation

If the Current Range is much less than the Average Range, it indicates that price movements are smaller than usual, suggesting the market is resting rather than trending or reversing.

What does a New High greater than a Prior High confirm?

• Bearish sentiment

• Downtrend confirmation

• Intrabar Up-Trend Confirmation

• Market reversal

Answer explanation

A New High exceeding a Prior High indicates that the price is making upward progress, confirming an intrabar up-trend. This suggests bullish momentum rather than bearish sentiment or a market reversal.

What should you treat the prior high as during pullbacks?

• A neutral point

• A sell signal

• Support

• Resistance

Answer explanation

During pullbacks, the prior high should be treated as support. This means that traders expect the price to bounce back from this level, indicating a potential buying opportunity rather than a sell signal.

What is the first step in the Practical Cheat-Sheet Workflow?

• Mark yesterday's/last session's High & Low

• Mark today's High & Low

• Identify key support levels

• Analyze the last week's trends

Answer explanation

The first step in the Practical Cheat-Sheet Workflow is to mark yesterday's/last session's High & Low. This establishes a reference point for analyzing current market conditions.

What should you note about the first two candles of the current session?

• They are irrelevant

• They set the volatility tone

• They indicate market reversal

• They confirm the trend direction

Answer explanation

The first two candles of the session are crucial as they set the volatility tone, indicating how much price movement can be expected. This helps traders gauge market conditions and adjust their strategies accordingly.

What is essential to frame a trade according to the principles?

• Market rumors

• Historical data only

• Candle information alignment

• Random market movements

Answer explanation

Candle information alignment is crucial for framing a trade as it provides insights into market trends and price movements, allowing traders to make informed decisions based on real-time data.

What does a bullish candle hitting weekly resistance signify?

• Information about market conditions

• A guaranteed profit

• A strong buy signal

• A market crash

Answer explanation

A bullish candle hitting weekly resistance indicates that the market is testing a significant price level. It provides information about market conditions, but does not guarantee profit or signal a strong buy or a market crash.

What is the purpose of studying charts bar-by-bar?

• To internalize principles

• To memorize patterns

• To avoid losses

• To predict future prices

Answer explanation

Studying charts bar-by-bar helps to internalize principles of market behavior, allowing traders to understand trends and patterns deeply, rather than just memorizing them. This foundational knowledge is crucial for effective trading.