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CMT Level2 Reading

The document provides information on the Chartered Market Technician (CMT) Level II exam. The CMT Level II exam measures a candidate's ability to apply technical analysis concepts to relevant scenarios. It is a multiple choice exam that takes 4 hours and 15 minutes to complete. The exam covers 12 domains of technical analysis including trend analysis, chart patterns, risk management, and ethics. The document provides sample exam topics, weightings, and learning objectives for each domain to help candidates prepare. An alternative reading list is also provided for study materials.

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Muhammad Azhar Saleem
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© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
1K views

CMT Level2 Reading

The document provides information on the Chartered Market Technician (CMT) Level II exam. The CMT Level II exam measures a candidate's ability to apply technical analysis concepts to relevant scenarios. It is a multiple choice exam that takes 4 hours and 15 minutes to complete. The exam covers 12 domains of technical analysis including trend analysis, chart patterns, risk management, and ethics. The document provides sample exam topics, weightings, and learning objectives for each domain to help candidates prepare. An alternative reading list is also provided for study materials.

Uploaded by

Muhammad Azhar Saleem
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 7

Chartered Market Technician (CMT) Program Level II

The CMT Level II exam measures the candidates competency in the application of concepts, theory, and
techniques covered by the required readings. CMT Level II candidates must demonstrate their ability to
apply concepts identified in their Level I studies to relevant conditions or scenarios.
Exam time length: 4 hours, 15 minutes
Exam format: Multiple Choice
The curriculum is organized into exam specific knowledge domains that provide a framework for
recognizing and implementing investment/trading decisions. CMT Level II exam tests the candidates
knowledge in 12 domains:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

Theory and History


Market Indicators
Construction
Trend Analysis
Chart and Pattern Analysis
Confirmation
Cycles
Selection and Decision
System Testing
Risk Management
Statistical Analysis
Ethics

CMT Chartered Market Technician | Level II

Page 1

CMT Level II Exam Topics & Question Weightings


1. Theory and History

a. behavioral finance

5%

8%

13

3%

15%

23

15%

23

b. Adaptive Market Hypothesis


2. Market Indicators

a. breadth indicators
b. sentiment measures
c.

volatility

3. Construction

a. volume

4. Trend Analysis

a. trendlines
b. multiple time frame analysis
c. breakouts
d. moving averages
e. trend strength indicators

5. Chart and Pattern Analysis

a. gap analysis
b. support and resistance

6. Confirmation

a. oscillators and divergence


b. sector rotation
c. intermarket signals

6%

7. Cycles

a. seasonal cycles

3%

8. Selection and Decision

a. uncorrelated assets
b. relative strength
c. forecasting techniques

10%

15

9. System Testing

a. algorithmic development
b. objective analysis of rules
c. performance measures

10%

15

10. Risk Management

a. absolute and relative risk

15%

23

b. risk modeling
c. value at risk
d. volatility risk
e. liquidity risk
f. diversification
g. leverage risk
h. portfolio risk management
i. risk-based performance measures
11. Statistical Analysis

a. inferential statistics

7%

11

12. Ethics

a. Standards and Practices

3%

CMT Chartered Market Technician | Level II

Page 2

CMT Level II Exam - Learning Objectives


1. Theory and History
Behavioral finance

Andrew Los Adaptive Market Hypothesis

Identify the correct application of behavioral finance theory


Recognize evidence of cognitive errors or behavioral biases
investment selection
Contrast the tenets of Behavioral Finance principles with
Efficient Market Hypothesis
Contrast Efficient Market Hypothesis with Andrew Lo's
Adaptive Market Hypothesis,

2. Market Indicators
breadth indicators (e.g., A/D, up/down
volume)
index construction

sentiment measures (e.g., put-call ratio,


investor polls)
volatility (e.g., vix, historical, implied)

Interpret data and charts of market breadth indicators


Recognize changes in market breadth and identify their
significance
Distinguish between different methods for constructing a
market or sector index
Recognize the influence of index construction on price action
Contrast the uses of differing sentiment measures
Identify different measures of volatility Interpret volatility
signals as part of a market forecast
Compare volatility behavior with corresponding price behavior

3. Construction
volume

Interpret volume data


Analyze the behavior of a given volume-weighted indicator

4. Trend Analysis
trend lines

Select valid trend lines


Interpret the significance of trend line breaks
multiple time frame analysis
Compare trend signals over multiple time frames Identify
evidence of changing trends in multiple time frames
breakouts (from channels or chart patterns) Analyze breakout signals for use in forecasting
Recognize evidence for improving confidence in breakout
signals
moving averages
Contrast the use of various moving averages Analyze changes
in moving average behavior Interpret signals given by various
moving averages
trend strength indicators (e.g., DMI, ADX,
Determine the strength of a trend based on indicator data
etc.)
Select the correct definition of trend strength indicators
5. Chart and Pattern Analysis
gap analysis
Recognize gap signals Evaluate the strength of various gap
signals
Classify gap types Identify support and resistance on given
charts
support and resistance
Evaluate support and resistance evidence from data and
charts for use in forecasts

CMT Chartered Market Technician | Level II

Page 3

6. Confirmation
oscillators and divergence
sector rotation
Intermarket signals

Identify confirming divergence signals within oscillators


Recognize confirmation signals given from sector rotation data
Recognize confirmation signals inferred from intermarket
analysis

7. Cycles
seasonal cycles

Identify potential opportunity and risk based on seasonal cycle


information
Define methods for applying cycle studies

8. Selection and Decision


uncorrelated assets

Determine appropriate asset selections based on correlation


data

relative strength

Determine appropriate asset selections based on relative


strength
Determine appropriate asset selections based on trend and
pattern forecasts

forecasting techniques (pattern and trend


recognition)

9. System Testing
algorithmic development

optimizing entry and exit rules (filtering)


equity curve analysis
position size rules (e.g., Tharp's methods,
Kelley criterion, Optimal f)

profit measures (e.g., profit factor, outlieradjusted profit to loss, percentage of


winning trades, annualized rate of return,
payoff ratio, length of average winning
trade, efficiency factor)

Select correct procedures for proper development of


algorithms
Identify valid data output for algorithmic system testing
Determine proper optimizing and filtering procedures for
system testing
Identify valid system adjustments based on equity curve
analysis
Recognize the influence of position size rules

Distiguish between different profit measures (profit factor,


outlier-adjusted profit to loss ratio and others)

10. Risk Management


absolute and relative risk (i.e. total risk v.
risk compared to benchmark)
risk modeling
value at risk
volatility risk
liquidity risk
diversification

Determine differences in risk measures (absolute vs. relative,


etc.)
Select appropriate risk modeling steps
Identify appropriate use of Value at Risk (VaR)
Identify effective measures of volatility risk Identify volatility
risk from given charts and data
Select appropriate responses to liquidity risk
Select appropriate diversification strategies to mitigate risk

stops v. hedging
leverage risk

Explain leverage risk for various asset classes

CMT Chartered Market Technician | Level II

Page 4

portfolio risk management (e.g., market


neutral, relative strength)

Determine appropriate rules useful in portfolio risk


management

risk measures (e.g., maximum cumulative


drawdown, net profit to drawdown,
maximum consecutive losses, largest
losses, longest flat time, time to recovery,
maximum + and - excursions)
risk-based performance measures

Select appropriate risk measures for various objectives

Define various risk-based performance measures (maximum


cumulative drawdown, net profit to drawdown, maximum
consecutive losses, largest losses, longest flat time, time to
recovery, maximum favorable and adverse excursions

11. Statistical Analysis


inferential statistics (e.g., correlation,
regression, t-test)

Identify proper application of inferential statistics methods in


system development and testing Determine results from an
analysis of correlation data Interpret results from regression
or t-test data Analyze data from tests using inferential
statistics

12. Ethics

Code of Ethics and Standards of Professional Conduct

CMT Chartered Market Technician | Level II

Page 5

**************************************************************************************
Listed below is an alternative reading list for the CMT Level II exam. The official readings are contained
in the forthcoming custom text published by Wiley due out in July. The CMT candidate is responsible
for knowing and understanding the entire list of reading assignments.
As part of our ongoing re-investment in the CMT Program, we have entered into a publishing agreement with
John Wiley & Sons to publish a custom text for each level of the CMT exams. Each level-specific text will be
available through Wiley in eBook format in July 2015. As our publisher, Wiley is working diligently to produce a
top quality offering as quickly as possible. We will continue to update you as we receive more detailed
information.
With any change to established practices, there are some challenges. Making the transition simple and easy
for candidates currently enrolled is one of our highest priorities. For candidates who have already purchased
some of the books from the required reading lists or for those interested in starting their preparation for the
October administration immediately, we have detailed a modified reading list below.
Please note, the content and curriculum topics covered in the books listed for each level will correspond to the
same learning objectives and topics as seen in the custom text that will be published by Wiley. The specific
readings and authors may vary from the reading list below. Both methods of study are equivalent and will
cover the same topics and prepare you for the exams.

**************************************************************************************

CMT LEVEL II Alternative Reading List

CMT Chartered Market Technician | Level II

OR

Wiley Custom Curriculum

Page 6

CMT Level II Exam Alternative Reading List


1. Kirkpatrick, Charles D. and Dahlquist, Julie, R.: Technical Analysis: The Complete Resource for Financial
Market Technicians 2nd Edition, Pearson Education, Inc., c. 2011, ISBN-10: 0-13-705944-2; ISBN-13: 978-013-705944-7
Chapters:
7, 10, 13, 21-23
Appendices A & B
2.

Du Plessis, Jeremy: The Definitive Guide to Point and Figure 2 nd Edition, Harriman House LTD, c. 2012,
ISBN: 978-0857192-45-5. Click on the following link to buy it at an MTA members special discount:
www.updata.co.uk/shop/mtabookoffer.asp
Chapters:
4, 5

3. Elder, Alexander: The New Trading for a Living, John Wiley & Sons, Inc., c. 2014, ISBN: 978-1-118-44392-7
Chapters:
21-29, 31-37
4. Kaufman, Perry J: Trading Systems and Methods, 5th Edition, John Wiley & Sons, Inc., c. 2005, 2013,
ISBN:978-1-118-04356-1
Chapters:
6-12
5.

Aronson, David R.: Evidence-Based Technical Analysis, John Wiley & Sons, Inc., c. 2006, 2007, ISBN-13:
978-0-470-00874-4, ISBN-10:0-470-00874-1
Chapters:
4-6

6. Nison, Steve: Japanese Candlestick Charting Techniques, 2 nd Edition, New York Institute of Finance, c.
2001, ISBN: 0-7352-0181-1
Chapters:
4-9
7. Burton, Edwin T and Shah, Sunit N.: Behavioral Finance, Understanding the Social, Cognitive, and
Economic Debates, John Wiley & Sons, Inc., c. 2013, ISBN: 978-1-118-30019-0
Chapters:
9-11
8. Faber, Mebane, (White Paper) Relative Strength Strategies for Investing, Cambria Investment
Management, Inc.
9. Code of Ethics and Standards of Professional Conduct

CMT Chartered Market Technician | Level II

Page 7

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