CMT Level 1

Level I is all about basic knowledge, terminologies and analytical tools available in Technical Analysis. It is one of the most important level as it paves the path for a Next Levels.

Chartered Market Technician Level 1 - Prep Course

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Primary Language : English 
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  • 1 The Basic Principle of Technical Analysis – The Trend
    Define what is meant by a trend in technical analysis
    Explain why determining the trend is important to analysts
    Identify primary, secondary, short-term, and intraday trends
    Describe the basic beliefs behind the art of technical analysis
    Define “fractal” as used in describing price action
  • 2 Dow Theory
    Describe the history of Dow Theory
    Discuss the basic principles of Dow Theory
    Identify the three basic types of trends identified in Dow Theory as defined by time: primary, secondary and minor
    Identify the three basic trend patterns of all prices: upward, downward, and sideways
    Describe the “ideal market picture” according to Dow Theory
    Express the concept of confirmation in Dow Theory
    Explain the role of volume in Dow Theory
  • 3 Introduction to Charts, Part 1
    Explain how a technical analyst uses charts to summarize price action
    Discuss the advantages of reviewing price information in chart format
    Identify the four basic price points represented in charting
    Describe how to construct line, bar, and candlestick charts
    Identify the components of individual candles: real body and shadows
    Review the information available in line, bar, and candlestick charts
    Describe what is meant by “data interval”
    Define “range” as it applies to prices on a bar or candlestick chart
    Define “fractal” and how it relates to chart construction
  • 4 Introduction to Charts, Part 2
    Identify the variables plotted on the axes in a conventional price chart
    Explain the differences between arithmetic and logarithmic scales and their uses
    Describe typical methods for displaying volume in a price chart
    Discuss volume as an alternative to time on the x-axis of a chart
  • 5 Trends – The Basics
    Explain why trend identification is important to achieve profits
    Recognize an uptrend, a downtrend, and a trading range
    Describe the concept of support and resistance, and the underlying psychology
    Identify trends using most common methods
    Recall how significant reversal points are identified
    List general rules for trendlines
  • 6 Breakouts, Stops and Retracements
    Describe and identify breakouts
    List methods for confirming and filtering breakouts
    Explain the purpose of entry and exit stops
    Describe methods for setting entry and exit stops
    Define retracements, pullbacks, and throwbacks
  • 7 Moving Averages
    Describe the basic principle of moving averages
    Explain how to calculate simple, linearly weighted and exponentially smoothed moving averages
    Identify trends and signals with moving averages
    Describe and interpret Directional Movement Indicators
    List common envelope, channel, and band indicators and their characteristics
  • 8 Bar Chart Patterns
    Define what is meant by “chart patterns”
    List common characteristics of patterns
    Discuss opposing viewpoints over whether patterns exist
    Describe the influence of computer technology on price-pattern study
    Identify classic chart patterns such as triangles, and double and triple tops and bottoms
    Identify rounding chart patterns such as head-and-shoulders
    Identify “half-mast” chart patterns such as flags and pennants
  • 9 Short-Term Patterns
    Locate reversals in longer-term trends using short-term price patterns
    Describe the types of gaps that occur on price charts and their significance
    Recognize wide-range and narrow-range bars and their implications for volatility
    Identify one- and two-bar reversal patterns
    Identify common candlestick patterns and their significance within a trend
  • 10 Introduction to Volume Analysis
    Define volume
    Define open interest
    Define the terms related to volume as discussed in this chapter
    Describe how volume provides information on liquidity and participation
    Describe how volume adds perspective to price action
  • 11 Volume: The Technician’s Decryption Device
    State the implications of volume changes for price trends
    Identify trends in price and volume in a chart
    Describe how volume is displayed in a Volume-at-Price chart
    Define VWAP
    Describe Equivolume charts
    Explain how open interest rises and falls
    State the implications of open interest changes for price trends
  • 12 An Introduction to Volume Indicators
    List the seven types of volume indicators
    Describe the major differences among the types of volume indicators
  • 13 Confirmation
    Define terms including overbought, oversold, failure swings, divergence, and reversal
    List the major indexes and oscillators designed to use volume as confirmation
    Describe open interest and how it might be used for confirmation
    Explain the concept of momentum in price action
    Identify characteristics and applications of indexes and oscillators such as MACD, RSI, and stochastics
  • 14 Candlestick Charting Essentials
    Describe strengths and limitations of candle charts
    Identify the components of individual candle lines – real bodies and shadows
    Explain how candles depict the high, low, open, and close of a trading period
    Identify candle confirmations of support and resistance
  • 15 Point-and-Figure Charting
    List three important characteristics of point-and-figure charts
    Define “box size” and “reversal”
    Describe how point-and-figure charts are constructed
    Explain the importance of box size to the sensitivity of point-and-figure charts
    Review the construction of various box size and reversal point-and-figure charts
    Identify common point-and-figure patterns
    Explain how trendlines are drawn on point-and-figure charts
    Locate basic signals on a point-and-figure chart
    Describe how price targets are obtained using a horizontal or vertical count on a point-and-figure chart
  • 16 Introduction to the Wave Principle
    Describe the basic operating theory of the Wave Principle
    Define motive waves and corrective waves
    Identify types of motive waves such as impulse, extension, and diagonal
    Identify types of corrective waves such as zigzag, flat, and triangle
    Label waves using standard Elliott Wave notation
    Describe Fibonacci relationships as applied to Elliott Wave analysis
  • 17 The Anatomy of Elliott Wave Trading
    Match the waves as labeled on a chart to the description in the text
    List the waves considered the most advantageous to trade
    Describe trade signals associated with various wave patterns
  • 18 Measuring Market Strength
    Explain the concept of divergence
    Define market breadth
    Identify signals of change in market breadth using the advance-decline line
    Describe other measures of internal stock-market strength such as McClellan’s calculations
    Explain the use of volume in measuring stock-market strength
    Identify measures of stock-market strength from new high and new low data
    Describe measures of stock-market strength based on the number of stocks priced above their moving average
  • 19 Foundations of Cycle Theory
    Name the two types of cycles
    Identify the three defining characteristics of a cycle
    List and define Hurst’s seven Principles of Commonality
    Define a composite wave
    Identify left and right translation
    Describe a dominant cycle
    Recall the tools that aid in cycle identification
  • 20 Basics of Cycle Analysis
    Explain how the annual cycle conforms to cycle theory
    Describe two methods of detrending price data
    Restate common seasonal tools
    Memorize notable economic cycles and their periods
    Recall some sequences/nonlinear cycles
  • 21 Markets, Instruments, Data, and the Technical Analyst
    Name four asset classes amenable to technical analysis
    List five tradeable instruments that a technician is likely to employ
    Describe data-handling issues with which a technician should be familiar
  • 22 Equities
    Define equity securities and primary data types
    Describe the benefits of equities for investors
    Identify the effect of corporate actions on price data
    Classify sectors, capitalization and other ways to segment the market
  • 23 Indexes
    Identify major global equity indexes
    Name common non-equity indexes used by technical analysts
    Explain weighting methods used in major indexes
    Define “survivorship bias”
  • 24 Fixed Income / Bonds
    List the major types of issuers of debt securities
    Identify the basic terms of a debt instrument: issuer, coupon, maturity
    State the ways in which debt prices are expressed
    Explain the relationship between price and yield
    Define “yield curve”
    Describe the importance of US government debt in the pricing of other debt securities: “yield (or credit) spread”
  • 25 Futures
    Explain the purpose of futures markets
    Classify various futures markets as industrial, agricultural, financial, and so on
    List the major terms of a futures contract
    Define open interest in futures
    Describe challenges technicians face when using futures market data
  • 26 Exchange-Traded Products (ETPs)
    Define an exchange-traded product
    Review differences between exchange-traded funds (ETFs) and exchange-traded notes (ETNs)
    Describe the uses for leveraged ETPs
  • 27 Foreign Exchange (Currencies)
    Identify the base and quote currencies in a pair
    Classify currency pairs as “major” or “cross”
    Discuss the impact on technical analysis of the “dealer market” system of currency trading
    Explain the data used in building currency charts
    Describe cryptocurrencies
  • 28 Options
    Explain the purpose of options markets
    List the major terms of an option contract
    Describe “the Greeks”
    Define implied volatility
  • 29 Understanding Implied Volatility
    Explain the difference between historical and implied volatility
    Describe the concept of put-call parity
    Discuss how implied volatility may be used to estimate price movement
    State how to calculate single-day implied volatility
  • 30 About the VIX Index
    Describe the components of the VIX index
    Explain the implications of a rising or falling VIX index
    State how to calculate expected 30-day market movement
  • 31 What is the Efficient Market Hypothesis
    Identify the basic concept of the Efficient Market Hypothesis (EMH)
    Describe the three forms of the EMH
    Explain the characteristics of stock prices as a martingale
    Describe how randomly generated output can appear non-random and how that might relate to asset prices and returns
    Identify the three areas in which behavioral finance challenges the EMH
  • 32 The Forerunners to Behavioral Finance
    Explain momentum strategies and mean-reversion strategies
    Define the general concept of value investing
    Describe why value investing is similar to a mean-reversion approach
    Explain how value investing (Graham and Dodd) conflicts with the EMH
  • 33 Noise Traders and the Law of One Price
    Define “fungibility” in the context of financial markets
    Explain “arbitrage”
    Describe “noise” vs. “information”
    Define “noise trader”
  • 34 Noise Traders as Technical Traders
    Explain why technical traders are considered a specific type of noise trader
    Describe the actions of technical traders as noise traders in the context of market valuation
  • 35 Academic Approaches to Technical Analysis
    Describe how technical analysis remains relevant despite the EMH
    Discuss how the Adaptive Market Hypothesis reconciles the EMH with technical and behavioral factors
  • 36 Market Sentiment and Technical Analysis
    Define “sentiment” as it relates to financial markets
    Discuss the importance of the “crowd”
    Describe the challenges of using sentiment indicators
  • 37 Sentiment Measures from Market Data
    Describe the VIX as a sentiment measure
    Explain the use of options volume and open interest as sentiment indicators
    Describe the use of futures open interest in gauging sentiment
    Identify the three primary groups in the Commitments of Traders report
    Define short interest
    Explain insider activity as a sentiment indicator
  • 38 Sentiment Measures from External Data
    Describe the use of news and advisories as sentiment measures
    Explain the concept of contrary opinion
    Indicate how mutual fund cash and other funds measures are used to gauge sentiment
  • 39 Introduction to Descriptive Statistics
    Describe the three most common measures of central tendency: mean, median and mode
    Discuss alternative methods of calculating the mean and their uses
    Describe what is meant by “measures of dispersion”
    Explain two measures of dispersion: standard deviation and variance
    State the value of data visualization as a complement to descriptive statistics
  • 40 Introduction to Probability
    Define probability
    Explain the impact of the law of large numbers on a series of outcomes
    Define random variable and the phrase “independent and identically distributed”
    Describe a normal probability distribution
    Identify skew and kurtosis
  • 41 Objective Rules and Their Evaluation
    Describe objective and subjective methods in technical analysis
    Define “rule” as used in trading systems
    Explain binary rules as well as individual and multiple thresholds
    Identify traditional rules and inverse rules
    Discuss the importance of benchmarking in evaluating trading rules
    Describe the key components of “trading costs”
    Describe the value of using detrended prices
  • 42 Being Right or Making Money
    List the four key characteristics Ned Davis claims are common to successful investors
    Describe the importance of having plans to persevere through mistakes and losses
    Identify Ned Davis’ nine rules to consider when building a timing model
    Discuss the theory behind “contrary opinion”
  • 43 The Model Building Process
    Describe “internal” and “external” indicators
    Explain the use of valuation indicators as sentiment measures
    Describe the basic relationships of economic growth, Fed policy, and money supply
    Discuss the use of moving average signals based on “crossings” and “slopes”
    Explain the use of price momentum and indicator momentum
    Identify the problem of curve-fitting, or overoptimization
  • 44 Relative Strength as a Criterion for Investment Selection
    Define relative strength
    Explain the value of relative strength in analyzing stock price movements
    List several relative strength ratios that may be calculated
    Identify some of the limitations of relative strength in investment decisions

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