From the desk of Louis Sykes @haumicharts
Monday was the big day, I had my first CMT exam.
It’s one thing stacking up all the topics you need to learn for the test, but it’s another to take on lasting knowledge that’ll carry you for the years ahead.
Shooting through the textbooks and lectures reinforced that despite all the charts I go through, the process I use represents only a very small proportion of the way people interpret technical data. Seriously, there were dozens of indicators, ways to plot price, and even basic assumptions on why we do technical analysis that I had never come across.
This was all so great to learn.
While I might not use these tools on a day-to-day basis, understanding how people look at markets differently and expanding my knowledge and skills can only be a strength.
Here’s an example I came across in the textbook, that I bet even the most experienced technical analysts haven’t come across in a while! Check out this Wavelet chart of the Dow Jones Industrial Average going back to the 1800’s – it has to be one of the wackiest ways I saw how people analyze cycles.
All of the various ways to break down markets is making me realize just how much we’re all standing on the shoulders of these technical analysis greats.
Thanks to their work pioneering all these tools, I can write and learn all about it to satiate my craving for markets.
It’s truly a blessing and the CMT made me a hundred times more grateful for their work.
Another lesson I took away was just how little the curriculum focused on indicators.
Hear me out.
When I first stumbled onto technical analysis, I was told it was this study of mathematical indicators and obscure pattern names. Gartley’s, inside-bar hikkake breakout, bullish catapults, the list goes on…
While the curriculum covered this stuff in great detail, the emphasis was on the psychology and behavior behind these formations and indicators. It’s no good knowing what an RSI failure swing or Harami pattern is if you don’t understand the human behavior driving these patterns.
Technical analysis is the study of the market and market participants, after all.
Speaking to behavior, here’s a quote from the textbook I loved:
Liquidity and psychology are inversely related
It is also said that Level 1 in the CMT Program is where the true and hearty technical analysis lies. And that wouldn’t be the case if trends weren’t a big topic of discussion.
And man, they were.
No matter how complicated you make your analysis, at the end of the day, you’re looking to ride the trend – up or down.
We’re here to identify trends. That’s our job.
So in saying that, as cliché as it may sound, a trend I’ve come to identify is that the more I learn, the more I know how long the road is ahead of me.
From what I’ve gathered about the CMT Level 1, it’s the perfect first step on a long road in technical analysis.
Thanks for reading this week’s note, and let me know your thoughts. I’d be happy to get in touch with anyone looking to take the CMT Level 1 exam!