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CMT Curriculum

How to Pass the

The Ultimate Quick Reference Guide

Wiley 2016

CMT Curriculum

How To Pass the Level I CMT Exam

The Ultimate Cheat Sheet
The Chartered Market Technician (CMT) designation is a popular and powerful credential sought after
by financial analysts, strategists, fund managers, traders, brokers and other industry professionals.
The CMT program bestows professional certificationon financial professional who demonstrate
knowledge and proficiency in a broad range of technical analysis subjects. Administered by the Market
Technicians Association (MTA), Inc., the Program consists of three exam levels offered twice each year.
This executive summary deals solely with the Level I exam, which assesses a candidates recognition,
definition, and basic understanding of concepts within technical analysis.

About the Exam

The Level I CMT Exam consists of 120 multiplechoice questions (plus 12 pre-test questions)
and candidates have 2 hours and 15 minutes to
complete the test. Candidates may only sit for one
exam each administration. However, there are no
limitations on candidates ability to retake exams.
Once the first level is successfully completed,
there is no time limit for a candidate to pass the
subsequent levels.

About the Curriculum

The MTA develops the CMT Program curriculum
via a clearly defined process that ties its Learning
Outcome Statements to the needs of the market.
Every five years, a job analysis survey is conducted
of practitioners in the field, which can produce
heavy revisions of the curriculum. In intervening
years, the program sees minor revisions on the
order of 10% or less.
In 2015, the Programs curriculum underwent a
heavy revision, based on the results of the latest job
analysis survey.
Today, the CMT Program is designed to:

investment professionals apply technical

analysis with discipline and objectivity to
remove subjective bias from their process

technical analysis in the theoretical

framework of behavioral finance

the complementary nature of technical

analysis with other disciplines, including
fundamental analysis, quantitative analysis and
macro economics

CMTs with the ability to apply technical

analysis as a means of risk management in the
portfolio context

From the most recent curriculum review, a single

publication for each of the Level I, Level II and Level
III examinations was created. They are published
exclusively by Wiley and available at

Topics of Study for the Level I Exam

Each exam level of the CMT Program is different in
its focus and weighting. The levels progressively
narrow in focus while increasing the emphasis on
higher-order reasoning, each level building on the
previous. The Level I examination is focused on
the foundational elements of technical analysis,
including recognition, definition, and understanding
of basic concepts.
Areas of Emphasis
Market Study 26%
Chart Study 42%
Strategies & Selections 18%
Statistical Analysis 6%
Systems Testing 5%
Ethics 3%
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CMT Curriculum

Two Proven Study Methods

Level I Learning Objectives by Chapter

For most investment professionals, much of their

understanding of technical analysis has been
learned piecemeal while on the job.

The bullets listed in the tables below represent the

desired outcomes for candidates in each chapter of

While practical training and regularly reading price

charts often helps in the performance of various
job duties, it is often incomplete. The CMT Program
takes candidates from the theoretical framework
popularized in academia by Behavioral Finance
through an applied learning of the most vigorously
validated elements of technical analysis.
The CMT Program provides a disciplined, systematic
approach to understanding the law of supply and
demand in liquid markets across all asset classes.
This standardized presentation of technical
analysis covers all of the tools used by investment
professionals today. As such, just the readings
for Level I total more than 750 pages and can be
a challenge for many candidates to tackleso
candidates need to develop a clearly defined study
Here are the two most popular and effective
1) Linear Study Starting with Chapter 1,
candidates work their way through the entire
curriculum, chapter by chapter. This method
requires the most amount of time but is
most effective in helping you master the CMT
Program. You can also map your studies to the
MTAs learning outcome statements to ensure
you master all the critical topics.
2) Topical Study This method is far faster but
also presents more risk. Candidates focus their
studies based on the weighting of topics and
likelihood of related questions on the CMT
exam. Essentially, candidates focus their time
and efforts on the heaviest-weighted subjects
(Market Study, Chart Study, etc.) and the
chapters related to those topics.
While the second method may be most attractive
in terms of time, we recommend linear study and
using topical study as a supplement to ensure
candidates learn what they need to know.

1. Introduction to the Evolution of


Describe the development of modern technical analysis

Describe the origins of technical analysis

2. A New Age for Technical Analysis

Describe the history of the original Dow indexes

Identify the basic principles of Dow Theory

3. Technical Analysis Today

Discuss the assumptions of technical analysis

List the characteristics of markets where technical
analysis is most effectively used
Discuss the pragmatic criticisms of technical analysis

4. A Brief History of Randomness and


Identify the basic concept of the Efficient Market

Hypothesis (EMH)

5. Academic Approaches to Technical Analysis

Contrast Efficient Market Hypothesis with Adaptive

Market Hypothesis
Describe how technical analysis remains relevant
despite the EMH

6. The New High-New Low Index

Describe the New High-New Low Index as a breadth

Identify signals from the New High-New Low Index

7. Stocks above 50-day MA

Describe the Stocks above 50-day MA as a market or

breadth indicator
Identify signals from Stocks above 50-day MA

8. Other Stock Market Indicators

Describe the concept of breadth

(See also Chapter 11 on Breadth of Trading)
Explain what changes in breadth may signal about the
Identify proper use of the A/D line indicator
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CMT Curriculum
9. Consensus and Commitment Indicators

Recognize signals from Commitment of Traders

report, Advisory Opinions, press headline stories,
advertisements, and short interest

13. Basic Indicators Reference I to O

10. Basic Candlestick Chartings

Compare and contrast candlestick charts with other

chart types (bar chart, line chart, point and figure chart)
Describe the construction of a candlestick chart
Describe the advantages of a candlestick chart
Define real body and shadow/wick
Identify confirmation signals with candlesticks
Recognize the basic six candlesticks: Long, Short, Doji,
Long Shadows, Long upper shadow only, Long lower
shadow only

11. Basic Indicators Reference A to C

Identify basic characteristics, usage, and key points of

the following:
A/D Indicator
Breadth indicators
Average True Range
Bollinger Bands
Breadth of Trading
Breakaway Gap
Chaikin Money Flow
Channel Lines
Common Gap

12. Basic Indicators Reference D to H

Identify basic characteristics, usage and key points of

the following:
Double Bottom
Double Top
Entry and Exit Signals
Exhaustion Gap
Failed Pattern
Falling Wedge
Fibonnaci Retracement
Head and Shoulders

Identify basic characteristics, usage and key points of

the following:
Ichimoku Cloud
Inverse Head and Shoulders
Money Flow
Money Flow Index
Moving Average
Narrow-Range Day
On-Balance Volume

14. Basic Indicators Reference P to R

Identify basic characteristics, usage and key points of

the following:
Price Oscillator
Primary Trend
Rectangle (top/bottom)
Rising Wedge
Runaway Gaps

15. Basic Indicators Reference S to Z

Identify basic characteristics, usage and key points of

the following:
Stochastic Oscillator
Trading Range
Triangle (Ascending/Descending/Symmetrical)
True Range
Weighted Moving Average

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CMT Curriculum
11-15. Learning objectives general to all

Identify whether a technical study falls into one of three

categories: trend-following indicators, oscillators, and
sentiment indicators.
Identify the category of usage for the following
Moving Averages

19. Hard Assets

16. Overview (of Financial Markets)

Identify basic definition, concepts and key points of the

Debt vs. Equity
Returns, Risk and Relative Value

17. Government
(as related to the Financial Markets)

Recognize the differences between the forex market and

other markets.
Recognize relative values between various currencies.
Identify basic definition, concepts and key points of the
Government securities
Returns, Risk and Relative Value
Yield Curve

18. Companies

Describe how market prices are quoted and how they

change in various market conditions
Identify basic definition, concepts and key points of the
Company securities (Stocks and Bonds)
Money markets
Returns, Risk and Relative Value

Describe how commodity market prices are quoted and

how they change in various market conditions
Describe leverage in the context of futures markets
versus cash markets.
Identify basic definition, concepts and key points of the
Commodities and Futures
Real Estate
Returns, Risk and Relative Value

20. Indexes

Identify the different weightings that may be used in an index.

Identify the specific weightings used for commonly
followed indexes.
Explain how stock price changes impact price weighted,
market capitalization-weighted and equally weighted

21. Basic Concepts and Calculations

Identify components that need to be considered when

back testing, or conducting quantitative, statistical
Recognize how the relationship between variables is
Identify the characteristics of a statistically normal
Define variance, skewness and kurtosis
Recognize proper calculation of returns
Recognize proper application of Beta
Recognize annualized daily and monthly returns
adjusted for target volatility
Recognize standard measurements of performance
such as: Information ratio, Sharpe Ratio, Treynor Ratio,
Calmar Ratio, Sortino Ratio.

22. Point and Figure Charting

Describe how point and figure charts are constructed.

Describe the importance of box size on the sensitivity of
point and figure charts.
Construct various box size reversal point and figure
Interpret reversal signals on a point and figure chart.
Describe the concept of price targets attained by using a
horizontal or vertical count on a point and figure chart.
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CMT Curriculum
23. Technical Analysis as a Science

Describe the difference between objective and

subjective methods in technical analysis
Recognize some key findings from academic research on
technical analysis

28. What is the Market?

Recognize the market as a mass of varying groups

of participants including amateur traders, trading

29. The Trading Scene

24. Objective Rules and their Evaluation

Identify how to distinguish an objective from a

subjective rule in technical analysis
Describe the use of binary rules and individual or
multiple thresholds
Recognize the difference between traditional rules and
inverse rules
Recognize the difference between regular prices and
detrended prices

25. Being Right or Making Money

Identify the four key characteristics Ned Davis claims are

common to successful investors.
Identify nine rules to consider when building a timing
Explain the logic of using moving averages as trend

26. The Model Building Process

Describe the use of advisory service opinion as a

sentiment indicator.
Recognize the difference between sentiment and
valuation indicators
Describe the main tools that the Federal Reserve uses to
adjust the money supply.
Interpret the likely results of changes in Fed monetary
policy tools on market conditions.
Identify the outcome of good economic indicator
readings and the likely influence of this news on stock
Recognize how moving averages of stock prices can be
included in a forecasting model.
Recognize how momentum indicators can be included
in a forecasting model.

27. What is Price?

Describe how price is a momentary consensus of value.

Describe how chart patterns reflect swings of mass

Describe characteristics of Institutional Traders

Describe how price is a momentary consensus of value.
Describe how chart patterns reflect swings of mass

30. The Market Crowd and You

Describe why traders join a crowd

Describe benefits of maintaining independence from a

31. Psychology of Crowds

Describe how human emotion manifests itself in the

crowd psychology of the market

32. Managing vs. Forecasting

Describe the difference between forecasting and

managing positions based on information

33. Charting

Compare and contrast bar charts with other chart types.

Identify the four key prices of an individual bar on a bar
Identify the same four key prices on a candle chart

34. Support and Resistance

Identify the connection between peoples memories and

support or resistance prices
Identify evidence that suggests support or resistance is
Identify evidence that suggests support or resistance is

35. Trends and Trading Ranges

Identify a trends using a pattern of highs and lows

Identify a trends using a moving average
Identify a trend using an oscillator
Describe general concepts using multiple time frame
charts effectively

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CMT Curriculum
36. Volume-Based Indicators

Interpret price and volume charts

Describe the role volume and volume spikes play in
determining turning points in the market
Describe the concept of on-balance volume
Interpret a chart containing price and on-balance

37. Force Index

Describe the construction and use of the Force Index in

general terms

43. The Forerunners to Behavioral Finance

Contrast Momentum strategies and Mean Reversion

Define the general concept of value investing
Describe why value investing is similar to a mean
reversion strategy

44. Noise Traders and the Law of One Price

Describe the concept of Fungibility

Identify what defines a noise trader

45. Noise Traders as Technical Traders

38. Open Interest

Define the concept of open interest

Contrast open interest and daily volume

Describe the important elements of the Elliott Wave

Differentiate between impulse waves and corrective

40. The Anatomy of Elliott Wave Trading

Differentiate between impulse waves and corrective

Identify the count of a given wave in a defined structure
Identify whether a technical study falls into one of three
categories: trend-following indicators, oscillators, and
sentiment indicators.

41. What Is the Efficient Market Hypothesis?

Identify the basic concept of the Efficient Market

Hypothesis (EMH)
Recognize the characteristics of stock prices as a

42. The EMH and the Market Model

Explain why Technical Traders are considered a specific

type of noise trader.
Explain the implications of Technical Traders in the

46. Understanding Chart Patterns

39. Introduction to the Wave Principle

Describe the basic components of the CAPM model

Identify valid criticisms of the CAPM model

Describe the characteristics and uses of trendlines

Recognize what determines the significance of a
Describe how trendlines can build patterns

47. Understanding Chart Pattern Breaks

Define Overhead resistance

Describe the characteristics of support and resistance on
Identify the four types of Gaps
Recognize the definition of throwbacks and pullbacks

48. T
 riangles, Pennants, and Flags

Identify price pattern formations and their basic

characteristics (rectangles, triangles, flags, pennants,
Identify the effect of breakout, price velocity,
undershoot and overshoot, on patterns

49. Tops and Bottoms

Identify additional price pattern formations and their

basic characteristics (double tops, double bottoms,
triple tops, triple bottoms)
Describe the psychology of investors that is thought to
coincide with these patterns

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CMT Curriculum
50. Head and Shoulders Patterns

Identify Head and Shoulders price pattern formations

and their basic characteristics
Describe the psychology of investors that is thought to
coincide with these patterns

51. Understanding Implied Volatility

Describe the difference between historical and implied

Identify the concept of put-call parity
Calculate single-day implied volatility

52. About the VIX Index

Describe the VIX index.

Explain the implications of a rising or falling VIX index.

53. Seasonality and Calendar Patterns

Describe market cycles and how they differ from

mathematical cycles.
Describe the basic principles of cycles.
Describe seasonal patterns in the markets.

54. Relative Strength as a Criterion for

Investment Selection

Define relative strength (RS).

Describe how relative strength (RS) is used.
Describe the value of relative strength study.
Identify a correlation coefficient.

Chapters Of Focus
To help you map out your study plan, weve broken
out the key subjects of the Level I CMT Exam and
their corresponding chapters.
Category / Weight

Corresponding Chapters

Market Study / 26%

1-4, 7, 8, 16-20, 22, 23, 24, 25-29

Chart Study / 42%

6-15, 21, 32-36, 41, 46-49

Strategy & Selection / 18%

41-45, 51-54

Statistical Analysis / 6%

21, 23, 24

Systems Testing / 5%

21, 23-26

Ethics / 3%

CFA Code of Ethics

The majority of questionsroughly 70%related

to each category would be derived from those
chapters that are bolded. So, taking the Market
Study category as an example, you can assume
that roughly 15% of the questions (18 in all) on
the LevelI exam will come from these highlighted
As you can see, the chapters of heaviest focus are
1-4, 21, 22, 25-29, 32-36, and 41-49.

Recommended Study Time

Based on recommendations from the MTA, here is
how a successful study plan would likely look:
Reading Time
(750 pages in total)
Level 1 = roughly 23 hours of reading
Study Time
(highlighting, making notes,
testing yourself, etc.)
Level 1: Additional 20 hours
Overall, we believe that 50 hours is a reasonable
amount of minimum preparation time for the Level
I CMT Exam. This includes reading the program
materials from beginning to end and the additional
study of heavily weighted topics.

Study Tips for Various Formulas

There are three types of formulas youll encounter
on the Level I exam. Formulas for
3) Calculating Technical Indicators;
4) Expected Price Movements; and
5) Performance metrics.
You do not need to memorize formulas for
calculating technical indicators or performance,
but you must understand what the elements of the
formulas are, their purpose or function, and what
they require to be carried out.
The formulas for Expected Price Movements,
however, will need to be memorized simply based
on their functions.
Be sure to pay close to these elements when
studying the Program curriculum.
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CMT Curriculum
Study Traps To Avoid
Because the majority of CMT candidates utilize
some elements of technical analysis in their job
functions, theres great potential for bias to sneak
into your studying and preparation. Here are three
common study traps and how you can avoid them
as you prepare for the Level I CMT Exam:
Trap #1: Assuming you know technical analysis.
Because youve likely learned on the job and in a
very piecemeal fashion, you likely have many gaps
in your understanding or carry out analysis
in ways that dont correspond to the methods
explained in the CMT curriculum.
INSTEAD: Know that technical analysis is full of
cognitive traps. Candidates are prone to make
mental errors and create blind spots by glossing
over the required study material. Approach your
studies with the assumption that there are potential
gaps in your knowledge and be eager to discover/
learn new tools/concepts that can improve your
professional performance.
Trap #2: Assuming youll pass the exam because
youve passed other exams like a Series 6, 7, or CFA
designation in the past.

INSTEAD: Know that the CMT Program is another

rigorous professional exam and the disciplined
course of study and preparation that lead to your
prior success will need to be employed in pursuit of
the CMT designation as well.
Trap #3: Assuming youre ready because youve
read all of the Program materials.
INSTEAD: Understand that our recommendations
are just thatrecommendationsand you need to
emphasize certain subject areas more than others.
Thats why a combination of the linear and topical
study methods is more effective.

We Wish You Success in Your Studies!

We hope youve found this quick reference guide
to be useful as you map out your study plans for
the CMT Exam. Passing Level I is the first step on
your journey toward career advancement.
Further details and enrollment information can
be found by visiting the Market Technicians
Association at
Good luck!

Wiley 2016