[CMT] Chartered Market Technician Exam

1. Theory and History

Foundations of Technical Analysis: Principles, assumptions, and the Dow Theory.

The Efficient Market Hypothesis (EMH): Basic tenets and challenges to EMH.

History of Technical Analysis: Key figures and the evolution of charting.

2. Markets, Instruments, and Data

Asset Classes: Equities, Fixed Income, Currencies, and Commodities.

Market Mechanics: Bid-ask spreads, order types, and market participants.

Data Types: Arithmetic vs. Logarithmic scales, timeframes, and data cleaning.

3. Chart Types and Construction

Classic Charts: Line, Bar, and Candlestick charts.

Alternative Charting: Point and Figure, Renko, and Kagi charts.

Gap Analysis: Common, breakaway, runaway, and exhaustion gaps.

4. Trend Analysis

Trendlines and Channels: Drawing and interpreting support and resistance.

Moving Averages: Simple (SMA), Exponential (EMA), and Weighted (WMA).

Price Polarity: Understanding the shift from support to resistance.

5. Chart Patterns

Reversal Patterns: Head and Shoulders, Double/Triple Tops and Bottoms.

Continuation Patterns: Triangles (Symmetrical, Ascending, Descending), Flags, and Pennants.

6. Indicators and Oscillators

Momentum: Relative Strength Index (RSI), Stochastics, and Rate of Change (ROC).

Trend Following: Moving Average Convergence Divergence (MACD) and Directional Movement Index (ADX/DMI).

Volatility: Bollinger Bands, Average True Range (ATR), and Keltner Channels.

7. Behavioral Finance and Ethics

Market Psychology: Crowd behavior and sentiment indicators.

Code of Ethics: Standards of Professional Conduct and Integrity of Capital Markets.

CMT Level II: Theory and Application

The Level II exam requires a deeper functional knowledge of technical analysis and the ability to apply these concepts to market scenarios.

1. Theory and History

Adaptive Market Hypothesis: Integrating EMH with behavioral insights.

Advanced Dow Theory: Intermarket confirmation and volume requirements.

2. Market Indicators

Breadth Indicators: Advance-Decline Line, McClellan Oscillator, and High-Low Index.

Sentiment Measures: Put/Call ratios, Investor Polls, and Mutual Fund Cash levels.

3. Trend and Chart Analysis

Multiple Time Frame Analysis: Using daily, weekly, and monthly charts for confirmation.

Breakout Analysis: Identifying high-probability entry and exit signals.

Candlestick Patterns: Analysis of single and multiple-candle formations (Doji, Engulfing, Morning Star).

4. Confirmation and Selection

Intermarket Analysis: Relationships between Bonds, Stocks, Commodities, and Currencies.

Relative Strength: Comparison of assets against benchmarks or sectors.

Sector Rotation: Identifying leadership phases in the economic cycle.

5. Statistical Analysis and System Testing

Inferential Statistics: Correlation, Linear Regression, and T-tests.

Backtesting Foundations: Data mining, in-sample vs. out-of-sample testing.

System Evaluation: Profit Factor, Drawdown analysis, and Payoff ratios.

6. Risk Management

Position Sizing: Fixed fractional, Kelly Criterion, and Optimal f.

Stop Loss Strategies: Trailing stops, Volatility-based stops, and Time stops.

Portfolio Risk: Diversification across non-correlated assets and Value at Risk (VaR).

CMT Level III: Integration and Strategy

The Level III exam is the "capstone," focusing on the professional application of technical analysis in an institutional or portfolio management setting.

1. Risk Management and Quantitative Analysis

Advanced Modeling: Fat-tailed distributions and market volatility regimes.

Liquidity Risk: Impact of price shocks and execution strategies.

System Development: Designing robust trading systems and algorithmic logic.

2. Asset Relationships

Global Intermarket Dynamics: Impact of interest rate carry and global liquidity.

Relative Strength Strategies: Implementing momentum-based portfolio allocation.

3. Portfolio Management

Asset Allocation: Integrating technical signals with fundamental or quantitative overlays.

Alternative Investments: Technical analysis applied to Hedge Funds, Private Equity, and Crypto-assets.

Performance Attribution: Measuring risk-adjusted returns (Sharpe, Sortino, Treynor ratios).

4. Volatility Analysis

Implied vs. Historical Volatility: Using the VIX and volatility term structures.

Options Strategies: Technical timing for writing or buying options based on volatility skews.

5. Behavioral Finance and Ethics

Institutional Biases: Groupthink and herd behavior in professional trading desks.

Advanced Ethics: Case studies on conflicts of interest, research independence, and supervisory responsibilities.