Question

True or False (1-7)

1. Momentum trading used by technicians is based on the concept that Buy (Sell) signals are associated with commodities that do Well (Poorly) over a time period

2. Katie martin, Chief Investment Officer of Vomitting Camel Asset Management, sincerely believes technical analysis is a sensible approach to trading futures markets.

3.If futures prices follow a random walk then this implies price changes from day to day average to zero.

4. When the dollar weakens, a sale made overseas in a foreign currency translates into more dollars back home.

5. In technical analysis the larger the number of days used in a moving average, the less smoothing of prices will occur

6. According to the purchasing power parity theory of exchange rates, the exchange rate between two countries should be the same as the ratio of the price levels of the two countries.

7.Profits are usually higher for speculators that use technical analysis than for those that use fundamental analysis.

Answer 1

Answer 1 - This statement is true as it states momentum trading used by technicians is based on the concept that buy (sell) signals are associated with commodities that do well (poorly) over a time period. This is due to the fact that momentum strategies in case of commodities are measured on the basis of past performance. If the commodities are performing well then more investment is made . On the other side , if commodities were underperformed, then commodities are sold in the market.