Table of Contents

Introduction ix


The CMT Association ix


The CMT Program x


The Level I Textbook xii


Section I Theory and History of Technical Analysis 1


Chapter 1 The Basic Principle of Technical Analysis—The Trend 3
Charles D. Kirkpatrick II and Julie R. Dahlquist


Chapter 2 Dow Theory 15
Charles D. Kirkpatrick II and Julie R. Dahlquist


Chapter 3 History and Construction of Charts 27
Charles D. Kirkpatrick II and Julie R. Dahlquist


Section II Charts, Trends, and Patterns 45


Chapter 4 Trends—The Basics 47
Charles D. Kirkpatrick II and Julie R. Dahlquist


Chapter 5 Breakouts, Stops, and Retracements 75
Charles D. Kirkpatrick II and Julie R. Dahlquist


Chapter 6 Moving Averages 97
Charles D. Kirkpatrick II and Julie R. Dahlquist


Chapter 7 Bar Chart Patterns 125
Charles D. Kirkpatrick II and Julie R. Dahlquist


Chapter 8 Short-Term Patterns 158
Charles D. Kirkpatrick II and Julie R. Dahlquist


Chapter 9 Confirmation 200
Charles D. Kirkpatrick II and Julie R. Dahlquist


Chapter 10 Candlestick Charting Essentials 242
Steve Nison


Chapter 11 Point-and-Figure Charting 252
Perry J. Kaufman


Section III Advanced Concepts in Charting and Trend Analysis 279


Chapter 12 Introduction to the Wave Principle 281
Wayne Gorman, Jeffrey Kennedy, and Robert R. Prechter, Jr.


Chapter 13 The Anatomy of Elliott Wave Trading 299
Wayne Gorman, Jeffrey Kennedy, and Robert R. Prechter, Jr.


Chapter 14 Measuring Market Strength 314
Charles D. Kirkpatrick II and Julie R. Dahlquist


Chapter 15 Foundations of Cycle Theory 347
Kyle Crystal, CMT, CFTe


Chapter 16 Basics of Cycle Analysis 357
Kyle Crystal, CMT, CFTe


Section IV Markets and Volatility 371


Chapter 17 Markets, Instruments, Data, and the Technical Analyst 373
Michael Kahn, CMT


Chapter 18 Equities 376
Michael Kahn, CMT


Chapter 19 Indexes 382
Michael Kahn, CMT


Chapter 20 Fixed Income/Bonds 391
Michael Kahn, CMT


Chapter 21 Futures 400
Michael Kahn, CMT


Chapter 22 Exchange-Traded Products (ETPs) 407
Michael Kahn, CMT


Chapter 23 Foreign Exchange (Currencies) 412
Michael Kahn, CMT


Chapter 24 Options 417
Michael Kahn, CMT


Chapter 25 Understanding Implied Volatility 424
Russell Rhoads


Chapter 26 About the VIX Index 436
Russell Rhoads


Section V Behavioral Finance and Other Theories of Market Dynamics 451


Chapter 27 What is the Efficient Market Hypothesis? 453
Edwin T. Burton and Sunit N. Shah


Chapter 28 The EMH and the “Market Model” 461
Edwin T. Burton and Sunit N. Shah


Chapter 29 The Forerunners to Behavioral Finance 469
Edwin T. Burton and Sunit N. Shah


Chapter 30 Noise Traders and the Law of One Price 474
Edwin T. Burton and Sunit N. Shah


Chapter 31 Noise Traders as Technical Traders 482
Edwin T. Burton and Sunit N. Shah


Chapter 32 Academic Approaches to Technical Analysis 492
Andrew W. Lo and Jasmina Hasanhodzic


Chapter 33 Market Sentiment and Technical Analysis 507
Michael Carr, CMT, CFTe


Chapter 34 Sentiment Measures from Market Data 511
Michael Carr, CMT, CFTe


Chapter 35 Sentiment Measures from External Data 520
Michael Carr, CMT, CFTe


Section VI Basic Statistics for the Technical Analyst 529


Chapter 36 Introduction to Descriptive Statistics 531
Jonas Elmerraji, CMT


Chapter 37 Introduction to Probability 544
Jonas Elmerraji, CMT


Section VII Perspectives on Technical Trading Systems 553


Chapter 38 Objective Rules and Their Evaluation 555
David Aronson


Chapter 39 Being Right or Making Money 570
Ned Davis


Chapter 40 The Model-Building Process 600
Ned Davis


Chapter 41 Relative Strength as a Criterion for Investment Selection 615
Robert A. Levy


Index 631

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