Portfolio of Risk-free and Risky Assets
By combining a portfolio of risky assets with a risk-free asset, we can... Read More
Technical analysis is a branch of behavioral finance that studies collective investor psychology or sentiment. In any freely traded market, prices are set by humans or their mechanical proxies, and a price is set when demand and supply are at equilibrium at any particular time.
Chart patterns represent human trading activity because human conduct is frequently repeated, becoming identifiable and predictable. Technicians rely on recognizing past patterns and trends to predict future asset price patterns. For example, in bubbles, the price of an asset rises irrationally to high levels driven by hope and greed of investors. According to another premise of technical analysis, a market represents a combination of knowledge and attitudes. This is because every market has a varied collection of players.
Trades determine volume and pricing. Technicians analyze such technical market data as price and volume movement to try to figure out what investors are thinking.
Human activity has an impact on the fluctuation of security prices. Even if they have a favorable assessment of an investment’s fundamentals, an investor may sell a security for a variety of reasons, including the need for capital or margin. These acts cause the prices to fluctuate, generating trends from which technicians can benefit.
Unlike fixed-income and equity securities that have income streams, for asset types that do not yield income or do not have any underlying financial statements (i.e.such as commodities, currencies, and futures), technical analysis is oftentimes used..
Question
Which of the following is least likely used by technicians to determine trading patterns?
- Price.
- Volume.
- Market players.
Solution
The correct answer is C.
Technicians do not use market players to determine trading patterns. Technicians use price and volume to determine trading patterns.
Sergio Torrico
2021-07-23
Excelente para el FRM 2
Escribo esta revisión en español para los hispanohablantes, soy de Bolivia, y utilicé
AnalystPrep para dudas y consultas sobre mi preparación para el FRM nivel 2 (lo tomé una sola vez y aprobé muy bien), siempre tuve un soporte claro, directo y rápido, el material sale rápido cuando hay cambios en el temario de GARP, y los ejercicios y exámenes son muy útiles para practicar.
diana
2021-07-17
So helpful. I have been using the videos to prepare for the CFA Level II exam. The videos signpost the reading contents, explain the concepts and provide additional context for specific concepts.
The fun light-hearted analogies are also a welcome break to some very dry content.
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Kriti Dhawan
2021-07-16
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Thank you ! Grateful I saw this at the right time for my CFA prep.
nikhil kumar
2021-06-28
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Marwan
2021-06-22
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Benjamin anonymous
2021-05-10
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Daniel Glyn
2021-03-24
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michael walshe
2021-03-18
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