CFTe Level 1 : Foundation in Technical Analysis

 

The CFTe I candidate is responsible for the material on a definition level. The candidate must understand the terminology used in these readings, be able to describe the concepts discussed in these readings, and be able to examine trends.

 

The CFTe Level I Exam measures basic, entry-level competence. Candidates should have a working knowledge of the basic tools of the technician.

 

Exam time length: 2 hours

 

Exam format: MULTIPLE CHOICE

 

CFTe Level I Exam tests the candidate's knowledge of six basic areas of technical analysis:

 

1. Terminology of technical analysis

2. Methods of charting

3. Determination of price trends/basics of pattern recognition

4. Establishing price targets

5. Equity market analysis

6. Applying technical analysis to bonds, currencies, futures and options

 

Listed below and on the following page are the reading assignments for the CFTe Level I exam.

Candidates are responsible for knowing and understanding the entire list of reading.

Past exams/questions are NOT available for review. Several sample questions are listed at the end of this document.

 

CFTe Level I Exam Reading Assignments

 

The following are required reading in preparation for theCFTe Level I Exam:

 

1. Edwards, Robert D. and Magee, John, Technical Analysis of Stock Trends, 9th (or current) Edition (2001-2008), John Magee Inc.,

Chicago   Illinois  c2001, ISBN 1-57444-292-9

 

Chapters:

1. The Technical Approach to Trading and Investing

2. Charts

3. The Dow Theory

4. The Dow Theory in Practice

5. The Dow Theory’s Defects

6. Important Reversal Patterns

7. Important Reversal Patterns – Continued

8. Important Reversal Patterns – The Triangles

9. Important Reversal Patterns – Continued

10. Other Reversal Phenomena

11. Consolidation Formations

12. Gaps

13. Support and Resistance

14. Trendlines and Channels

15. Major Trendlines

16. Technical Analysis of Commodity Charts

25. Two Touchy Questions

27. Stop Orders

28. What Is a Bottom – What Is A Top?

30. Use of Support and Resistance

 

2. Murphy, John J.: Technical Analysis of the Financial Markets, New York Institute of Finance, New York, NY, c. 1999, ISBN 0-7352-0066-1

 

Chapters:

1. Philosophy of Technical Analysis

2 Dow Theory

3. Chart Construction

4. Basic Concepts of Trend

5. Major Reversal Patterns

6. Continuation Patterns

7. Volume and Open Interest

8. Long Term Charts

9. Moving Averages

10. Oscillators and Contrary Opinion

11. Point and Figure Charting

12. Japanese Candlesticks

13. Elliott Wave Theory

14. Time Cycles

16. Money Management and Trading Tactics

18. Stock Market Indicators

 

3. Pring, Martin J.: Technical Analysis Explained, 4th (or current) Edition, McGraw Hill Book Company, 

New York ,  NY , c. 2001, ISBN 0-07-138193-7

 

Chapters:

2. Financial Markets and the Business Cycle

3. Dow Theory

4. Typical Parameters for Intermediate Trends

5. Price Patterns

6. Smaller Price Patterns

7. One- and Two-Bar Price Patterns

8. Treadlines

9. Moving Averages

10. Momentum Principles

11. Individual Momentum Indicators I

12. Individual Momentum Indicators II

13. Candle Charts

14. Point and Figure Charting

15. Miscellaneous Techniques for Determining Trends

16. The Concept of Relative Strength

18. Price: The Major Averages

20. Time: Longer-Term Cycles

22. Volume: General Principles

23. Volume Oscillators

24. Breadth

26. Sentiment Indicators

 

Sample Questions for CFTe Level I Exam

 

Following are three sample type questions for the Level I Exam (the correct response is underlined).

 

1. A point and figure chart differs from a bar chart as

A. a new plot on a point and figure chart is made only when the price changes by a given amount

B. time intervals are clearly shown in a point and figure chart

C. point and figure charts are only concerned with measuring price momentum

D. price behaviour in the financial markets is cyclically based

E. a new plot on a bar chart is made only when the price changes by a given amount

 

2. Technical analysis is rooted in the basic premise that

A. price behaviour in the financial markets is random

B. price behaviour in the financial markets moves in trends

C. price behaviour in the financial markets can only be understood by analysis of the underlying economic conditions surrounding the markets

D. price behaviour in the financial markets is cyclically based

E. none of the above

 

3. A sell signal is normally given when

A. a shorter length moving average crosses below a longer length moving average from above

B. a longer length moving average crosses below a shorter length moving average from above

C. a shorter length moving average remains above a longer length moving average

D. a longer length moving average remains above a shorter length moving average

E. none of the above