Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

CFTe Level I
CORE READING MATERIAL
I. Edwards, Robert D. and Magee, John, Technical Analysis of Stock Trends, 9th (or current) Edition (2001-2008),
John Magee Inc., Chicago Illinois ©2001, 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
17. A Summary of Some Concluding Comments
17.2 Advancements in Investment Technology
18. The Tactical Problem
18.1 Strategies and Tactics for the Long-Term Investor
20. The Kind of Stocks we Want: The Speculator’s View Point
20.1 The Kind of Stocks we Want: The Long-Term Investor’s View Point
23. Choosing and Managing High-Risk Stocks: Tulip Stocks, Internet Sector and Speculative Frenzies
24. The Probable Moves of Your Stocks
25. Two Touchy Questions
27. Stop Orders
28. What is a Bottom - What is a Top?
29. Trendlines in Action
30. Use of Support and Resistance1

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

CFTe Level I (Continued)
CORE READING MATERIAL
33. Tactical Review of Chart Action
34. A Quick Summation of Tactical Methods
36. Automated Trendlines: The Moving Average
38. Balanced and Diversified
39. Trial and Error
40. How Much Capital to Use in Trading
41. Application of Capital in Practice
42. Portfolio Risk Management
43. Stick to Your Guns
II. Murphy, John J.: Technical Analysis of the Financial Markets, New York Institute of Finance, New York, NY,©1999, ISBN 0-7352-0066-1
Chapters:
1. Philosophy of Technical Analysis
2. Dow Theory
3. Chart Construction
4. Basic Concepts of Trend
7. Volume and Open Interest
14. Time Cycles
III. Pring, Martin J.: Technical Analysis Explained, 4th (or current) Edition, McGraw Hill Book Company, New York,NY, ©2001, ISBN 0-07-138193-7
Chapters:
2. Financial Markets and the Business Cycle
4. Typical Parameters for Intermediate Trends
12. Individual Momentum Indicators II
16. The Concept of Relative Strength
18. Price: The Major Averages
20. Time: Longer-Term Cycles
22. General Principles
26. Sentiment Indicators

2

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

CFTe Level I (Continued)
CORE READING MATERIAL
IV. Le Beau Charles, Lucas David: Technical Traders Guide to Computer Analysis of the Futures Market
Chapters:
1. System Building
2. Technical Studies
4. Day Trading
V. Nison Steve: Candlestick Charting Techniques, Second Edition
Chapters:
1. Introduction
2. A historical background
3. Constructing the candlestick lines
4. Reversal patterns
5. Stars
6. More Reversal Patterns
7. Continuation Patterns
8. The Magic Doji
9. Putting it all Together
VI. Du Plessis Jeremy: The Definitive Guide to Point and Figure
Chapters:
1. Introduction to Point and Figure Charts
2. Characteristics and Construction
3. Understanding Point and Figure Charts
4. Projecting Price Targets
5. Analysing Point and Figure Charts

3

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

CFTe Level I (Continued)
CORE READING MATERIAL

VII. Constance M. Brown: Trading Markets Dynamics Using Technical Analysis (added: 1 February 2023)
Chapters:
1. Universe of Markets
2.1 Cycle Principles
Required additional IFTA reading material (see Appendices):
1.
2.
3.

4.

Elliott Wave Theory (Appendix A–Provided when candidate registers for CFTe I.)
Breadth Indicators (Appendix B– Provided when candidate registers for CFTe I.)
Time Cycles Analysis (Appendix C– Provided when candidate registers for CFTe I.):
Note: The questions on the exam for this topic will be pulled from Murphy, John J. recommended reading
listed above.
Point and Figure Techniques (Appendix D–Provided when candidate registers for CFTe I.)

RECOMMEDED (ADDITIONAL) READING:
VII: Elder, Alexander Dr.: Trading for a Living, Psychology, Trading Tactics, Money Management
Chapters:
1. Individual Psychology
2. Mass Psychology
3. Classical Chart Analysis
4. Computerized Technical Analysis
5. The Neglected Essentials
6. Stock Market Indicators
7. Psychological Indicators
10. Risk Management

4Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

CFTe Level II
CORE READING MATERIAL
I. Edwards, Robert and Magee, John, Technical Analysis of Stock Trends, 9th Edition
II. Martin J. Pring: Technical Analysis Explained
Chapters:
1. The Market Cycle model
2. Financial Markets and the Business Cycle
16. The concept of Relative Strength
18. Price: The Major Averages
19 Price: Group Rotation
20. Time: Longer-Term Cycles
III. Le Beau Charles, Lucas David: Technical Traders Guide to Computer Analysis of the Futures Market
Chapters:
1. System Building
2. Technical Studies
4. Day Trading
IV. Steve Nison: Beyond Candlesticks: New Japanese Charting Techniques Revealed (Wiley Finance, Nov 10,
1994)
Chapters:
2. The Basics
3. Patterns
4. Candles and the Overall Technical Picture
5. How the Japanese use Moving Averages
6. Three-Line Break Charts
7. Renko Charts
8. Kagi Charts

5Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

CFTe Level II (Continued)
CORE READING MATERIAL
V. Jeremy Du Plessis: The Definitive Guide to Point and Figure
Chapters:
1. Introduction to Point and Figure Charts
2. Characteristics and Construction
3. Understanding Point and Figure Charts
4. Projecting Price Targets
5. Analysing Point and Figure Charts
VI. Yukitoshi Higashino, MFTA: Primer on ICHIMOKU (Appendix E–Attached Below)
VII. J. Peter Steidlmayer and Steven B. Hawkins: SteidlMayer On Markets. Trading with Market Profile. Second
EditonChapters:
6. Understanding Market Profile
7. Liquidity Data Bank, On Floor information, and Volume @ Time
8. The Steidlmayer Theory of Markets
9. The Steidlmayer Distribution
10. The You
11. Anatomy of a trade
12. Profile of a Successful Trader
13. Trading, Technology, and the Future
VIII. A.J. Frost, Robert R. Prechter: Elliott Wave Principle: Key To Market Behavior
Chapters:
1. The Broad Concept
2. Guidelines of the Wave Formation
3. Historical and Mathematical Background of the Wave Principle
4. Ratio Analysis and Fibonacci Time Sequence.

6

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

CFTe Level II (Continued)
CORE READING MATERIAL
IX. Charles D. Kirkpatrick, Julie R. Dahlquist: Technical Analysis: The Complete Resource for Financial Markets
Technicians
Chapters:
3. History of Technical Analysis
4. The Technical Analysis Controversy
5. An overview of Markets
7. Sentiment
8. Measuring Market Strength
9. Temporal Patterns and Cycles
10. Flow of Funds
13. Breakouts, Stops, and Retracements
18. Confirmation
19. Cycles
21. Selection of Markets and Issues: Trading and Investing
22. System Testing and Management
X. Constance M. Brown: Technical Analysis for the Trading Professional, Second Edition (Added 7 March 2019;
This material will be covered beginning in October 2019.)
Chapters:
1.

Oscillators Do Not Travel Between 0 and 100
This chapter introduced range rules for RSI. The ability to define a trend based on the displacement of
the oscillator was a very new concept for the use of oscillators. In bull markets a 14-period RSI will track
40 to 80+. In bear markets and the transition into a bear market, the oscillator travels from 68 to 30 orlower.
2. Dominant Trading Cycles Are Not Time Symmetrical
Rhythmical fluctuations can be more than just a fixed interval. This chapter will introduce cycle
historians Samuel Benner and Edward Dewey showing an extension of their work into modern times.
10. Using Oscillators with the Elliott Wave Principle
The chapter over the years has had the most feed-back. Readers have stated they did not ‘get it’ until
reading this real-time walk-through of how to develop Elliott Wave interpretations as a market evolves
over a time interval. It also shows the reader the steps that follow after the wave scenario has been
lost and how to resync with a market.

7Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

CFTe Level II (Continued)
CORE READING MATERIAL
12.

The Composite Index
RSI is the most widely used oscillator according to an industry survey from the magazine ‘TechnicalAnalysis Stocks and Commodities’. It has a fatal flaw. RSI will fail to diverge before a major trend
reversal. The Composite Index is a formula that teaches the reader that one can embed the momentum
formula inside of an RSI and solve this problem. The chapter explains the solution and how it is usedwith RSI to avoid this very common and costly indicator problem.

XI. Constance M. Brown: Trading Markets Dynamics Using Technical Analysis (added 1 February 2023)
Chapters:
2. Cycle Principles
3. Correlation
5. Oscillators
6. Fibonacci
XII. Laurence A. Connors & Linda Bradford Rachke: STREET SMARTS: High Probabilty Short Term Strategies(added 11 August 2023. This material will be covered beginning in April 2024.)
Required additional IFTA reading material:
1.

IFTA’s Ethical and Professional Standards (Appendix F–Attached Below)

RECOMMEDED (ADDITIONAL) READING:
X. David Linton: Cloud Charts: Trading Success with the Ichimoku Technique [Hardcover]
Chapters:
8 . Cloud Chart Construction
9. Interpreting Cloud Charts
10. Multiple Time Frame Analysis
11. Japanese Patterns Techniques
12. Clouds Charts with other techniques
13. Ichimoku indicator techniques
14. Back-testing and Cloud Trading Strategies
15. Cloud Market Breadth analysis
16. Conclusion

8

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

Appendix E
Primer on ICHIMOKU(IFTA Required CFTe II Reading Material)
Yukitoshi Higashino, MFTANTAA Director
Nippon Technical Anlaysts Association (NTAA)
Preface“Ichimoku Kinko Hyo”, commonly referred to as just “Ichimoku”, is a technical analysis method developed by
Goichi Hosoda (1898–1982), a Japanese financial market journalist, through his many years of research infinancial markets. Even 30 years after Hosoda’s death, Ichimoku is still widely used by traders and investors as
an effective tool for analyzing markets and trade in Japan. Although Ichimoku is becoming more popularamong an increasing number of traders and investors around the world, it does not seem to be used as widelyand as effectively as it is in Japan. The causes of this are multifold. First, Ichimoku is an integrated set of
multifaceted market analysis principles and techniques, including price projection, time projection, and wave
analysis, among others. The wide variety of techniques and concepts included in the Ichimoku theory make ithighly challenging to fully master. And obviously, a language barrier exists. Japanese is a tricky language formany Westerners (on a side note, in my humble opinion, with its simple pronunciation system it can be a very
friendly language, making it one of the best choices when deciding to learn a new language). Japanese
vocabulary and grammatical structure are very different from English, making translation from Japanese into
English quite difficult. It is an especially challenging task to find the right English translations of many Japanesewords used in the original Ichimoku theory. Unless one has a good understanding of the theory, it is practically
impossible to adequately translate Ichimoku educational materials into English.
Using NTAA’s educational material as the base, I have prepared this primer on Ichimoku, with the aim ofeffectively introducing Ichimoku to English-speaking learners. To make this primer “study-friendly”, I havemade an attempt to use plain English words instead of being “loyal” to the Japanese words in the original
theory. Ichimoku theory puritans may say that the original theory has been outrageously simplified in this workand that a lot of important things are missing. They may even say that such oversimplified Ichimoku is not real
Ichimoku. There is an element of truth in such a criticism. To be very clear, this is just a primer on Ichimoku andnot comprehensive educational material describing all the tenets of the theory. Learners should treat this work
as such. Nevertheless, I believe this document will push the interested in the correct direction and hopefully
inspire people to seek out all its more complex aspects.
I hope this primer helps my IFTA colleagues learn the very basics of this unique technical analytical method
developed in Japan.

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Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

Introduction
To know the next market direction, one only needs to know which side—buyers or sellers—is winning or losing.
The market moves in the direction of the break in equilibrium between the buyers and sellers. The chartdeveloped by Hosoda allows one to instantly grasp the equilibrium state of the market. This is why it wasnamed “Ichimoku Kinko Hyo”, which literally means “One Glance Equilibrium Chart” in Japanese.
The three basic principles of the Ichimoku theory are “time”, “wave structure”, and “price level”.
In Ichimoku, analysis is focused on the underlying “powers” in the market. Overpriced stocks fall, andunderpriced stocks rise. No market continues rising or falling infinitely. Stock prices often rise when theeconomy is in bad shape and fall when the economy is in good shape. This is a common economic phenomenon
that reflects movements of money in the system. Ichimoku is a method for rationally gauging the state of thefinancial markets that fluctuate, reflecting the underlying powers.
The market can only move or stay flat. When it moves, it can only rise or fall. It is as simple as this. But many
traders/ investors fail to make money, frequently because they make the process of market analysis overly
complicated. Another reason is that their trading/investment process lacks rigor. We should not take action
based on subjective market analysis or a wishful projection. We should not act on unverified rumors, nor should
we be influenced by the market atmosphere. When we take an action based on a projection, it has to bemeasurable. We often hear people saying that we should “buy on weakness” or “sell on strength”. In mostcases, however, their answers are vague and do not state at exactly what price. Ichimoku provides an objective
base for taking trading/investment action. It tells us at what price to buy or sell and when. Projections madewith Ichimoku are always measurable.
One of the important traits of Ichimoku is its “time” study. Most market players focus on price moves and tend
to make light of the time factor. In Ichimoku, while price moves are important, the time factor is more
important; without a solid “time” study, one cannot have a true understanding of the markets.

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Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

2. Composition of the Ichimoku Chart
Ichimoku consists of a candle chart and five lines, as shown in Fig. 1.
(1) Conversion line – (highest high + lowest low)/2 in the last nine periods (including the current period)(2) Base line – (highest high + lowest low)/2 in the last 26 periods (including the current period)* Base line and Conversion line are plotted in the current period.
(3) Leading Span 1 – (Conversion line + Base line)/2(4) Leading span 2 – (highest high + lowest low)/2 in the last 52 periods (including the current period)*Leading spans 1 and 2 are plotted 26 periods ahead (including the current period).
(5) Lagging-span – Current price plotted 26 periods back (including the current period)* It becomes a line that runs parallel to the current price line.
(6) Cloud – The space between Leading span 1 and 2(Fig. 1) Composition of ICHIMOKU chart
牼P牽

26

S&P500 (Daily.2012/10/1-2013/2/1)

1550

26
9

Lagging span

1500

Leading span1

1450

Cloud
1400
Base line

Leading span2

Conversion line

1350

52
1300
10/1

10/15

10/31

11/14

11/29

12/13

12/28

1/14

1/29

2/12

2/27

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Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

3. The Five Basic Lines and Their Uses/Functions(1) Base line and Conversion line
The Conversion line is the midpoint of the high-low range in the last nine periods (including the current period),
and the Base line is that of the last 26 periods. They may look similar to moving averages but are different. They
may be called "moving midpoints". In Ichimoku, midpoints are thought to represent better equilibrium points inthe market than moving averages. In moving averages, closing prices are treated as king. Regardless of thevolatility or the price swing in a given period, the closing price is the only thing that is counted. That is, even if
the price swings vary widely in a period, it is not reflected. Ichimoku dismisses this and instead uses the
midpoint indicators, which reflect the whole price range in a given period.
When the Conversion line crosses above the Base line, a bullish signal is generated, indicating that one should
start looking to buy the market. When the Conversion line crosses below the Base line, it is a bearish crossover,signaling that one should start looking to sell the market. This is the basic rule.
When implementing this, one should bear in mind the following points:
(a)

(b)
(c)

The direction of the Base line should be taken as the direction of the market. Even if theConversion line has crossed above the Base line, it is not really bullish if the Base line fails toturn up. More often than not, a rally not accompanied by an upturn in the Base line ends up
short-lived. By the same token, even if the Conversion line has crossed below the Base line, it is
not really bearish if the Base line keeps trending upward. More often than not, a downswing
not accompanied by a downturn in the Base line also ends up short-lived.
The Base line often serves as support when the price corrects downward in a bull market. It
serves as resistance when the price corrects upward in a bear market.
In a strongly bullish or bearish market, the Conversion line often serves as support orresistance, and that is often enough to terminate any corrective moves.

(2) “Cloud” (Space between Leading span 1 and Leading span 2)
The cloud-like area formed by the Leading span 1 and the Leading span 2 is called the “Cloud” (“kumo” inJapanese).
Following are the principal points of the Cloud:(a) The Cloud is used to determine the market direction. When the price is above the Cloud, it is judgedthat the market is in a longer term bull market. When the price is below the Cloud, it is judged that themarket is in a longer term bear market.
(b) The Cloud serves as longer term support in a bull market and longer term resistance in a bear market. A
break through the Cloud signals a change in the longer term market trend. A break above the Cloudsignals that the longer term trend has turned from bearish to bullish. A break below the Cloud signalsthat the longer term trend has turned from bullish to bearish.
(c) The degree of thickness of the Cloud indicates the degree of strength of the support or resistance it
provides. When the Cloud is thin, it is weak as a support/resistance zone. The price can break through itwith relative ease. When the Cloud is thick, it serves as a strong support/resistance zone. In a bull
12

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

market, down corrections often stop in the Cloud. In a bear market, upward corrections often stop in
the Cloud.
(d) Changes in the shape of the Cloud provide useful insights into what is happening in the market. As theresult of the two lines constituting the Cloud (the Leading span 1 and the Leading span 2) interactingwith each other in various ways (e.g., approaching each other, diverging, crossing, moving in parallel toeach other), the shape of the Cloud changes constantly. For instance, it is observed in many markets
that when the Cloud “twists”, as the two lines constituting the Cloud (the Leading span 1 and the
Leading span 2) cross each other, a trend change takes place at relatively high frequencies. So is thecase when the Base line and the Leading span 2 approach each other. There are many other interestingobservations, but discussing them at length here would not fit to the purpose of this primer. Readersof this primer are encouraged to make your own discoveries by observing the changing shapes of the
Ichimoku Cloud in the markets you trade in or analyze.

(3) Lagging span
The lagging span is drawn by plotting the current closing price 26 periods back.
Much information can be obtained from the relationships between the Lagging span and the other four lines.
While there are many ways to use the Lagging line, the most common ways to judge the market direction using
the Lagging span are as follows:(a) Lagging span vs. Current price (of 26 periods ago)
If the Lagging span is above the current price (of 26 periods ago), it is bullish. If the Lagging span is below thecurrent price (of 26 periods ago), it is bearish.
(b) Lagging span vs. CloudIf the Lagging span is above the Cloud, the longer term trend is upward. If the Lagging span is below the Cloud,the longer term trend is downward.

(4) Three Conditions to Make a Safe Bull (Bear) Call
According to the Ichimoku theory, when the following three conditions are in place, one can safely judge thatthe market is in a bullish (bearish) state.
(a) The Conversion line is above (below) the Base line, which is trending up (down) or at least flat.
(b) The Lagging span is above (below) the current price (of 26 periods ago).
(c) The price is above (below) the Cloud.

(5) Typical Bottoming-out (or Top-forming) PatternFig. 2 illustrates a typical bottoming-out pattern, with the price starting to rise sharply after hitting the second
bottom (C) without falling below the previous low (A). (The horizontal line drawn from the first bottom is called“Border line” in the Ichimoku terminology.)
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Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

In terms of Ichimoku, the following are the typical bottoming-out patterns. (Markets do not always follow this,so readers should treat it as just a reference example.)(Fig. 2) Typical Bottom Forming Pattern

B

C
A

l
l

l
l
l

Border line

The second bottom (C) is formed within 26 days of the first bottom (A).
Within several days of the second bottom (C) forming, the Conversion line crosses above the Baseline, the Lagging span crosses above the current price (of 26 days ago), and the price crosses
above the Cloud.
After the price crosses above the Cloud, the price starts rising at an accelerated rate. The pricemay correct downward, but it gets supported by the Cloud and resumes the rally within nine days.
It is ideal if a breakaway gap develops after the price hits the second bottom (C) and even betterif consecutive gaps appear.
Ideally, the price does not fall below the Base line.

The reverse applies in the case of a top-forming pattern. These are some typical examples.

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Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

Fig. 3 is the daily chart of Trendmicro, a Japanese Internet security company, from July to early November 2011.

(Fig. 3) Example - Typical bottom
forming
4704
TRENDMICRO (daily.2011/7/1-2011/11/8)
牼Yen牽

2900

Lagging span
Leading span1

$

2700

#
!
2500

B
%

Cloud

2300

Leading span2

"

C

2100

Base line

A

Conversion line

27

1900
7/1

7/15

8/1

8/15

8/29

9/12

9/28

10/13

10/27

11/11

11/28

In September, a secondary low (C) was formed without the price falling below the previous low (A).
In early October, the Conversion line crossed above the Base line, and the price crossed above the Cloud (À).
Then, the Base line started trending upward (Á).
Subsequently, the Lagging span, which occured in late August, crossed above the current price line (Â). Now,
the three conditions have occurred under which one can safely judge that the market is in an uptrend.
In mid-October, the Lagging span, which occured in early September, crossed above the Cloud, further
confirming that the market was in an uptrend (Ã).
The subsequent rally was strong, and the price was supported by the Conversion line (Ä).
Fig. 4 is the daily chart of Japan Tobacco, a Japanese tobacco company, from May to early November 2011.

15

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)(Fig. 4) Example - Base line providing support in uptrending market
2914 Japan Tabacco Indusry (daily.2011/5/2-2011/11/8)
牼Yen牽
2100

Lagging span

2000

Conversion line

" The price crossed above the Cloud

1900

D

1800
1700

Cloud

B

Base line

1600# The Basic line provides support

1500$%&'(%)*+,-%./+01-(2%2,..+/3

C

1400

# The Base line started rising sharply

A! Consecutive gap

1300
5/2

5/19

6/2

6/16

# The Basic line provides support

6/30

7/14

7/29

8/12

8/26

9/9

9/27

10/12 10/26 11/10 11/25 12/9

In late July, supported by the Base line, the secondary low (C) was formed without the price falling below theprevious low (A).
The price crossed above the Cloud, gapping above the upper boundary of the Cloud (À). This was seen as abreakaway gap—a bullish signal.
The price gapped up again, forming successive gaps (Á). This was strongly bullish.
The Base line started rising sharply (Â).
During the subsequent period, except for the period from late August to early September, the Base line served
fairly well as support (on a closing basis).
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Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

From late August to early September, although the price fell below the Base line, it rebounded immediately as it
approached the Cloud. There was no need to be concerned about a possible trend reversal at this stage, since
the Cloud started to become thick in early September, indicating that it would provide strong support (Ã).

Fig. 5 is the daily chart of Toho Holdings, a Japanese wholesaler of medicine and medical tools and equipment,from June to early November 2011.

(Fig. 5) Example - Conversion line providing support in strongly bullish
8129 TOHO Holdings (daily.2011/6/1-2011/11/8)
牼Yen牽
1150

Conversion line
Lagging-span runs parallel to the current price line

1100
1050

Lagging span

Base line

1000
The price takes out the high B

950

Cloud

900

B

850
800

The Base line rising

750

C

700

A

The Conversion line provides support
The Cloud provides support

650

6/1

6/15

6/29

7/13

7/28

8/11

8/25

9/8

9/26

10/11 10/25

11/9

11/24

12/8

The price started rising sharply after forming a higher low at C (higher than the low at A) and breaking above
the Cloud. During the rally, the price was supported by the Conversion line.
Prior to this, the market hit a temporary high at B. This was because the Lagging span was hitting the Cloud.

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Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

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Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

4. Waves Structure Principles
Hosoda, in his book on Ichimoku, explained his wave theory in detail, spending many pages on this subject
alone. While it may be interesting to advanced Ichimoku students, I do not think that discussing it at length iswithin the scope of this primer, so, I will just briefly explain his wave theory without going into great detail.
Hosoda classified the wave patterns that appear in financial markets into a number of groups according to theirwave structure, and he gave them unique names. They are designed to help understand price levels, time levels,and the direction of the market.
I wave: A single rectilinear or straightish (normally sharp) thrust up or down without notable corrective moves.
V wave: A wave consisting of two successive I waves, a sharp thrust up followed by a sharp thrust down, or a
sharp thrust down followed by a sharp thrust up.
N wave (Fig. 7): An up-down-up or down-up-down wave. This is the wave pattern most commonly seen in themarket.
An uptrend is made up of a series of N waves forming higher highs and higher lows. A downtrend is made up ofa series of N waves forming lower lows and lower highs.
When the price falls below the previous low, the uptrend terminates. In a downtrend, lower lows and lower
highs are formed.

(Fig. 6) N wave

19

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)(Fig. 7) Consecutive N waves
7
2

5

4

3
1

6

6

1
3

4
2

5
7

An uptrend terminates when the price falls below the previous low. It is confirmed that the market has hit a top
when a lower high is formed. (Fig. 8)(Fig. 8) Top forming
pattern2

pattern1

C

A

C

A

B

B

A downtrend terminates when the previous high is broken. It is confirmed that the market has hit a bottom
when a higher low is formed. (Fig. 9)20

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)(Fig. 9) Bottom forming
pattern2

pattern1

B
B
A
C

A

C

Y wave: A wave pattern characterized by widening price movements (with the price forming higher highs andlower lows), similar to the expanding triangle pattern. Candlestick-wise, the engulfing pattern is formed. This isa reversal pattern.
P wave: A wave pattern characterized by narrowing price movements (with the price forming lower highs andhigher lows), similar to the normal triangle pattern. Candlestick-wise, the harami pattern develops.
S wave: A wave pattern that appears in the middle of a large (up or down) trend. In an uptrend, a higher low isformed near the second last high. In a downtrend, a lower high is formed near the second last low.

21

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)(Fig.10) Waves
Down

Up
A

D

B

C

N wave
B

C

D

A

E

C

A

D

B

Y wave
A

B

C

D

B

A

F

D

E

C

E

P wave
E

C

F

D

B

F

A

C
E

S wave

E
A

D

B

A

B

C

D

A

D

F
C

B
Bottom / Top forming

B
(A!C)

A

C

(A!C)

D

Example:Fig. 11 is a daily chart of the Nikkei Stock Average from June 2010 to March 2011.

22

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)(Fig.11) Daily chart of NIKKEI Stock Average
牼Yen牽

11000
10500

6/21
10238
B

10000

7/14
9807
D

10/6
9691
F

I
10237
1/31

9500
9000
8500

A
9439
6/9

2/21
10857
J

1/13
10589
H

C
9191
7/1

(2010/6/1-2011/3/11)

E
8824
8/31

G
9154
11/1

8000
6/1 6/15 6/29 7/13 7/28 8/11 8/25 9/8 9/24 10/8 10/25 11/9 11/24 12/8 12/22 1/11 1/25 2/8 2/23 3/9 3/24

The wave from A to B is an "I wave".
The wave from B to C is also an “I wave”.
The wave from A to C is a “V wave”.
The wave from B to E is an “N wave”.
The wave from E to J is an “N wave” structured upward. The uptrend would terminate if the price fell
below the low I.

23

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

5. Price Projection
In Ichimoku, there are six principal projection methods, as shown below in Fig. 12. The first four are the principle
ones. .
(Fig.12) Price Projection
N projection
N
B

A

=

=

C

=

=

B

C

N

A
E projection
E

A
C

=

=

B

=

B
C

=

A

E
V projection
V
B

A

=

C

=

=
B

C

=
V

A
NT projection
NT
B

A

=C

=
C

=

24

=
B
NT

A

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)l

N projection – Up: N = C + (B – A) Down: N = C – (A – B)
* These two equations are effectively the same, but I show both as I believe this makes it intuitively
easier to understand for readers. The same applies to the following:
Up: Add the distance of the last upleg to the last low
Down: Subtract the distance of the last downleg from the last highl

E projection – Up: E = B + (B – A) Down: E = B – (A – B)
Up: Add the distance of the last upleg to the last high
Down: Subtract the distance of the last downleg from the last lowl

V projection – Up: V = B + (B – C) Down: V = B – (C – B)
Up: Add the distance of the last downleg to the last high
Down: Subtract the distance of the last upleg from the last lowlNT projection – Up: NT = C + (C – A) Down: NT = C – (A – C)
Up: Add the distance between the last two lows to the last low.
Down: Subtract the distance between the last two highs from the last high25

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)(Fig.13) Price Projection
P waveY wave
Y

A

=

B

=

=

=

A

C

P

B

C
S wave
C

B

(A=S)

A

S
A

S
(A=S)

B

C

3E projection
V

3E projection

C

=

=
=
B=
=
A

A

B

C

=
=
=
3E projection

26

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)l

Y projection (to be used in Y waves) – Y = B + (A – C)
Add the distance between the last two lows to the last highl

P projection (to be used in P waves) – P = B + (A – C)
Add the distance between the last two highs to the last lowl

S projection (to be used in S waves) – S = A
Up: The level of the second last high itself
Down: The level of the second last low itself

To project higherdegree targets, using the four principle projection methods (N, V, E and NT projection), whole
number multiples of the distances used above (i.e., distances between previous highs and lows) are used.
When the market is about to make a big move up, those distances typically are multiplied by four to projecttargets (and added to or subtracted from the pivot point).
According to the original Ichimoku theory, to calculate the target prices for indices, closing prices should be
used; to calculate the target prices for individual stocks, intraday highs and lows should be used.
Readers are reminded, however, that in the Ichimoku theory, the time factor is more important than the pricefactor. One should avoid being excessively obsessed with the price targets.

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Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

Let me show a couple of examples.
Fig. 14 is the daily chart of Toyota, Japan’s largest car manufacturer, from October 2011 into 2012. It hit the firstbottom at 2,330 (A), followed by an intermediate top at 2,690 (B). The secondary bottom was formed at 2,472(C).

(Fig. 14) Example of Price Projection - Toyota(daily.2011/11/2-2012/3/7)
牼Yen牽
3600

(E projection)

3400

3410=2690+360+360

3200

3344=2690+218+218+218

360

2600

218
3050=2690+360

3000
2800

(V projection)

360

3126=2690+218+218

218
2,690

B
360

2908=2690+218

218

2832=2472+360

C

2200

2472
11.12/19

11/2

3192=2472+360+360

360
360

218

2400

2000

(N projection)

A
2330
11.11/24
11/17

12/2

12/16

1/4

1/19

2/2

2/16

3/1

Alth
ough one cannot confirm that the secondary bottom was formed at C before the price takes out the high B,
one can start calculating the targets assuming that the low C would hold.
l

N projection: The targets can be calculated by adding the distance of the previous upleg (from A to B),
or its whole number multiples, to the low at C.
N1 = C + (B – A)
= 2,472 + (2,690 – 2,330)= 2,832
N2 = C + (B – A) x 2= 2,472 + (2,690 – 2,330) x 2= 3,192
N3 = C + (B – A) x 3= 2,472 + (2,690 – 2,330) x 3= 3,552

28

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)l

E projection: The targets can be calculated by adding the distance of the previous upleg (from A to B),
or its whole-number multiples, to the high at B.
E1 = B + (B – A)
= 2,690 + (2,690 – 2,330)= 3,050
E2 = B + (B – A) x 2= 2,690 + (2,690 – 2,330) x 2= 3,410E3 = B + (B – A) x 3= 2,690 + (2,690 – 2,330) x 3= 3,770l

V projection: The targets can be calculated by adding the distance of the previous downleg (from B toC), or its whole-number multiples, to the high at B.
V1 = B + (B – C)
= 2,690 + (2,690 – 2,472)= 2,908
V2 = B + (B – C) x 2= 2,690 + (2,690 – 2,472) x 2= 3,126
V3 = B + (B – C) x 3= 2,690 + (2,690 – 2,472) x 3= 3,344l

NT projection: The targets can be calculated by adding the distance of the previous downleg (from A toC), or its whole-number multiples, to the low at C.
V1 = C + (C – A)
= 2,472 + (2,472 – 2,330)= 2,614
V2 = C + (C – A) x 2= 2,472 + (2,472 – 2,330) x 2= 2,756
V3 = C + (C – A) x 3= 2,472 + (2,472 – 2,330) x 3= 2,898

The NT projection is not displayed on the chart, as it was not adequate to use this projection method in thisparticular case.

29

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

Fig. 15 is a daily chart of Sojitsu, an integrated Japanese trading company, from October 2011 into 2012. It hit thefirst low at 114 (A) and an intermediate top at 131 (B9), followed by a secondary low at 116 (C). Then it rallied andformed an intermediate top at 138 (D), followed by a brief dip that terminated at 129 (E).

(Fig. 15) Example of Price Projection - Sojitsu(daily.2011/11/1-2012/3/22)
牼Yen牽
170

(E projection)

160(V projection)=D+(D-C)

17

15

150

22

=B+(B-A)
140

17

11.12/8131=B+(B-C)

17

22

15

E
129

C

A

110

11/1

=E+(D-C)

138

22

120

100

(N projection)

D

15

B

130

(E projection)

116
11.12/29

114
11.11/21
11/16

12/1

12/15

12/30

1/18

2/1

2/15

2/29

3/14

I will not show all the target values projected by all the projection methods discussed above, only the ones thatlooked relevant in this particular case.
The target prices projected by the E projection method using the first low (A) and the first intermediate high (B)are:
E1 = B + (B – A)
= 131 + (131 – 114)
= 148
E2 = B + (B – A) x 2= 131 + (131 – 114) x 2= 165
E3 = B + (B – A) x 3= 131 + (131 – 114) x 3= 182
The target prices projected by the V projection method using the first intermediate high (B) and the secondarylow (C) are:30

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

V1 = B + (B – C)
V2 = B + (B – C) x 2
V3 = B + (B - C) x 3= 131 + (131 – 116)
= 146
= 131 + (131 – 116) x 2= 131 + (131 - 116) x 3

= 161
= 176

The targets projected by the E projection method using the second low (C) and the second intermediate high(D) are:E1 = D + (D – C)
= 138 + (138 – 116)= 160
E2 = D + (D – C) x 2= 138 + (138 – 116) x 2= 182
E3 = D + (D – C) x 3= 138 + (138 – 116) x 3= 204
The targets projected by the N projection method using the second low (C), second intermediate high (D), andthird low (E) are:
N1 = E + (D – C)
= 129 + (138 – 116)
= 151
N2 = E + (D – C) x 2= 129 + (138 – 116) x 2= 173
N3 = E + (D – C) x 3= 129 + (138 – 116) x 3= 195
One should be alert for cluster areas of projected target prices. In this particular case, one can see that there
are cluster zones at 146–151 and 160–165.

31

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

Fig. 16 is a daily chart of Nippon Kayaku, a diversified chemical company based in Japan, from September toDecember 2012.

(Fig. 16) Price Projection - Nippon Kayaku(daily.2011/9/1-2012/1/25)
牼Yen牽

11.9/29
829

840

A

12/7
803

820

97

C

800
780

93

760

755
9/12

740
720

B

700

732
11/7

26

D

680

27

710
12.1/18

660

9/1

9/15

10/3

10/18

11/1

11/16

12/1

12/15

12/30

1/18

I am including this to show how the price projection must be done together with the time projection.
The first target price projected by the N method using the first high at 829 (A), the first intermediate low at 732(B), and the secondary high at 803 (C) was 706 (C – (A – B)). Actually, the market hit bottom when it
approached the said target price at 710. It took place during a projected time window for a trend reversal. There
were 26 trading days between the first high (A) and the second low (B). The time zone centering on the day 26
trading days after the second top (C) was the projected time window. The actual bottom was just one day off.
I will discuss time projection in more detail in the next section.

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Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

6. Time Projection
One striking characteristic of the Ichimoku theory is the degree of importance it places on the time factor.
Hosoda taught, “It is not that time merely passes as prices fluctuate in the market. Time influences the market.
The market is dictated by time.”
À Reversal Datesa) Reversal
In principle, projected “Reversal dates” are the dates on which the market is projected to “reverse” directionsat relatively high probabilities.

b) Acceleration
The market does not always “reverse” on a Reversal date, however. In a strongly (up or down) trending
market, the existing move sometimes simply “accelerates”, instead of “reverses”, on a reversal date. This
happens more often in a downtrending market, than in an uptrending market. Suppose there is a market thathas been moderately declining into a Reversal date. If it cannot reverse direction during that time window,
oftentimes it starts falling sharply.
c) Extension
Comparatively speaking, this does not happen as often in an uptrending market as in a downtrending market.
In an uptrending market, the market sometimes reverses directions after the projected Reversal date, with adelay, due to a phenomenon called “extension” (of a reversal time window).
Apart from the reversal and acceleration phenomena, volatility tends to rise on Reversal dates.
According to the Ichimoku theory, “acceleration” and “extension” are caused by the interaction of the Baseline, Conversion line, and Lagging line.
Á Reversal date projection
Ichimoku calculates “Reversal dates” in the following two ways. These two methods can be used separately or
simultaneously.

a) “Basic number”-based projectionb) “Time parity”-based projection

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Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

Â “Basic number”-based projection
Reversal dates are projected by adding what are called the “Basic numbers” in the Ichimoku theory (e.g., 9, 17,26) to the dates on which the market reversed direction in the past into the future. Fig. 17 illustrates this.

(Fig. 17) “Basic number”-based projection

D

BC
Add a Basic numberA

Add a Basic number
Add a Basic number

34

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

Following are the “Basic numbers” to be used with daily data according to the original Ichimoku theory. Aftermany years of research, Hosoda concluded that these were the most useful default parameters.
(Fig. 18) “Basic numbers” to be used with daily data
Basic number
Comments
9
Useful for calling intermediate tops/bottoms
17
Useful for calling intermediate tops/bottoms
26
Useful in up markets
33
Particularly useful in down markets
42
Very important in both up and down markets
51–
65
More useful in up markets than in down markets
76
More useful in up markets than in down markets
129
More useful in up markets than in down markets
172
More useful in up markets than in down markets
Some Ichimoku researchers claim that they have found that 5, 13, and 21 should be added as Basic numbers
when dealing with weekly data.
Advanced Ichimoku practitioners use the Basic numbers in conjunction with the wave analysis in accordancewith the wave structure principles discussedearlie, which helps gauge which Basic numbers are likely to be
most effective.
Ã “Time parity”-based projection
In this method, Reversal dates are projected by adding the same time distance (the number of days) between
two key dates in the past (on which the market reversed direction in the past) to the pivot date (a key date on
which the market hit a major top or bottom) from which to project into the future. This takes advantage of thephenomenon that the market often reverses direction when the same amount of time has passed from a key
reversal date in the past as the amount of time between past major events in the markets.

35

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)(Fig. 19) Time parity projection

A
C

B
(4)

D
(1)

(1)

(2)

(2)
(3)

(3)
(4)

Fig. 19 illustrates this.
(1) Add the time distance (the number of the days) between the high C and the low D to the date of the low D
into the future(2) Add the time distance (the number of the days) between the low B and the low D to the date of the low D
into the future(3) Add the time distance (the number of the days) between the high A and the low D to the date of the low D
into the future(4) Add the time distance (the number of the days) between the high A and the high C to the date of the low D
into the future

36

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

Fig. 20 is a daily chart of the Nikkei Stock Average in 2011. The Basic numbers (9, 17, 26, 33, 42, 51) are counted
from the top A, bottom B, and the top C, to show how the market behaved on the projected dates. Also, it isshown how Time parity-based projections were made using the dates of the same major market events (top A,
bottom B, and top C).
The Nikkei hit an intermediate top near 9 days (a Basic number) after the top A and started plunging into amajor low B, which was projected by the Basic number 17. Near the point 51 days (a Basic number) after the top
A, an intermediate top was formed. And the Nikkei hit the major top C 79 days (close to a Basic number 77)
after the major low B.
Time parity-based Reversal date projections were conducted in the following manners:(Fig. 20) Example of Time Projection
Nikkei Stock Average (daily chart)

11.2/21
10857
A

牼Yen牽
12000
11500

95

95

9 17 26 33 !42 51| | | | | |11000

11.11/25

7/810137
C 9 17 26 33 42 51

10500

|

|

|

|

|

|

10000
9500
9000
8500
8000

B
8605
3/15

7500
7000
1/5

2/3

l

3/4

9 17 26 33 42 51| | | | | |11.11/1

79
4/4

5/6

6/3

7/1

8/1

8/21

9/10

9/30

10/20

11/9

11/29 12/19

There were 95 trading days between the top A (February 21) and the top C (July 8). Adding thisnumber of days (95) to the date of the top C, a Reversal date was projected at November 25.
37

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)l

There were 79 trading days between the low B and the top C. Adding this number of days (79) tothe date of the top C, a Reversal date was projected at November 1.

Fig. 21 shows what actually happened subsequently:(Fig. 21) Example of Time Projection & Results
11.2/21
10857
牼Yen牽
A
11500

Nikkei Stock Average (daily chart)

95

95

95

12.4/12

7/8
10137
C

11000
10500
10000

10/28
9050
E

9500
9000
8500

77

79

8000

B
8605
3/15

7500
7000
1/5

2/10 3/18 4/25

6/3

7/8

D
8374
9/26

9 17 26 33 42 51

F| | | | | |
8160
11/25

8/15 9/20 10/27 12/5 1/13 2/17

5/2

7/16 9/29 12/13 2/26 5/12l

On October 28 (Fri), just two trading days off from the projected Reversal date of November 1(Tue), the market hit a considerable intermediate top (E).

l

On November 25, the exact projected Reversal date, the Nikkei hit a major low (F).

38

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

39

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

Fig. 22 is a daily chart of Nikkei Stock Average. The basic numbers are counted from the date of the low C. The
market hit a considerable intermediate top D 9 days (a Basic number) after the low C, a considerable low E at 17days (a Basic number) after the low C, an intermediate top F 26 days (a Basic number) after the said low, andterminated consolidation at G 33 days (a Basic number) after the said low. The time zones projected with the
Basic numbers 42 and 51 also corresponded with interesting market actions.
The circled numbers are the number of days between the dates of notable highs and lows hit during the period.
One would notice that the Time parity-based projection worked well to call market turns. Also, the one would
notice that the numbers are close to the Basic numbers. To be sure, separately run Basic number-based
projection and Time parity-based projection often converge.
The above may or may not be enough to show why Hosoda and many dedicated Ichimoku practitioners believe“time influences the market, and the market is dictated by time."(Fig. 22) Basic numbers & Time parity projection
Nikkei Stock Average (daily chart)
51

牼Yen牽

27

10000

Base number

25
9

10/28
9050
B

9500

17

26

12/7
8722
D

9000

33

42

51

1/4
8560
F

8500

8000

7500

A
8382
10/5

C
8160
11/25 9
17

19

9

10

17

35

G
8378
1/16

E
8296
12/19
8
17
33

7000
9/12

10/20

11/28

1/5

2/10

We will never be able to win in the market as long as we attempt to follow rumors or unfounded expectationsin the market, thinking that this is the way to make money. It is imperative to try to find unknown market
40

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

drivers, rather than chasing known ones. We should not think about the market based on news or other factorsthat are already known. It should be the other way round. We should evaluate, and make a judgment on,
publicly known factors based on how the market is behaving. At the end of a major bull market, the market isfull of positive news and stories. At the end of a major bear market, negative news and stories abound. Whenthe market stops reacting to such positive or negative news or stories, it is the very moment when we should
enter the market, of course, from the other side of the other players in the market. We have to do it swiftly anddecisively. If we rely on our judgment alone, we will feel uneasy at the decisive moment; oftentimes past
failures prevent us from focusing on the present. This prevents us from what we have to do as professional
market players. Ichimoku is a great tool to help us focus on the present, develop a flair for playing the market,
and do what we must as a professional trader/investor.
Created for IFTA colleagues based on the educational material of Nippon Technical Analysts Association (NTAA).

41

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

Appendix F
IFTA’s Ethical and Professional Standards(IFTA Required CFTe II Reading Material)
Maha Saeed, CETA, CFTe

Code of Ethics and Standards of Professional Conduct:
The "Principles of Ethics" within the IFTA Code of Ethics and Standards of Professional Conduct serve as
foundational guidelines shaping the conduct of investment professionals. Acting with integrity, prioritizing
client welfare, maintaining independence, promoting market integrity, and continuously improving professional
competence are key principles emphasized. Adhering to these principles not only upholds the integrity of theinvestment profession but also fosters trust with clients, employers, and the broader financial community.
Embracing these ethical standards contributes to a more robust and trustworthy financial ecosystem,
benefiting all stakeholders involved.
Evolution of Financial Regulation: Safeguarding Investors and Promoting Market Integrity:
The necessity for regulation in financial markets stems from the imperative to protect investors, set standards,
and resolve disputes, given the inherent risk of financial losses. While rules and codes of conduct havehistorically existed, enforcement has been inconsistent. As markets evolved, self-regulation emerged, withexchanges setting standards and overseeing compliance. However, global market expansion necessitateduniversally accepted standards, leading to a shift towards statutory regulation and the establishment of
independent regulatory bodies in many countries. International cooperation among regulators, facilitated byorganizations like IOSCO, has furthered harmonization and the development of common standards, such as
anti-money laundering rules. This collaborative approach ensures greater investor protection and market
integrity across borders, mitigating risks and fostering confidence in financial systems globally.
-

Case Study 1:

The Enron Scandal and the Sarbanes-Oxley Act:The Enron scandal in 2001, which led to the bankruptcy of the energy company Enron Corporation, highlighted
the need for stronger financial regulation to protect investors and maintain market integrity. The scandal
involved widespread accounting fraud, insider trading, and other financial irregularities that resulted insignificant financial losses for investors. The scandal led to a loss of confidence in the stock market and theaccounting profession, prompting calls for regulatory reform.
In response to the Enron scandal, the U.S. Congress passed the Sarbanes-Oxley Act in 2002, which introduced
sweeping reforms to corporate governance, accounting, and financial disclosure practices. The Act establishedstricter standards for financial reporting, auditing, and corporate governance, and created the Public Company
Accounting Oversight Board (PCAOB) to regulate the auditing profession. The Act also imposed harsh penalties
42

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

for corporate fraud and insider trading and enhanced the powers of the Securities and Exchange Commission(SEC) to oversee and regulate the securities industry.
The Enron scandal and the subsequent passage of the Sarbanes-Oxley Act demonstrate the importance ofeffective financial regulation in safeguarding investors and promoting market integrity. The scandal highlighted
the risks of inadequate regulation and the need for stronger oversight mechanisms to prevent financial fraud
and protect investors. The Sarbanes-Oxley Act represents a significant step towards enhancing transparency,
accountability, and investor protection in the stock market, and has served as a model for regulatory reform inother countries.
By examining the Enron scandal and the Sarbanes-Oxley Act, academics and policymakers can gain insights into
the evolution of financial regulation and its impact on stock markets trading. The case study underscores theimportance of effective regulation in maintaining investor confidence, preventing financial fraud, andpromoting market integrity, and highlights the need for ongoing regulatory vigilance and adaptation to
emerging risks and challenges in the financial sector.
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Case Study 2:

The 2008 Global Financial Crisis and the Dodd-Frank Act:The 2008 global financial crisis exposed major weaknesses in financial regulation and oversight that allowed
excessive risk-taking and predatory lending practices to threaten the stability of the entire global financial
system. The crisis began with the bursting of the U.S. housing bubble and subprime mortgage crisis, but quickly
spread to other asset classes and financial institutions around the world. Key factors that contributed to thecrisis included:
•
•
•
•
•

Lack of regulation and oversight of the "shadow banking" system, including investment banks, hedge
funds, and the derivatives market.
Predatory lending practices by mortgage originators, who issued high-risk loans to unqualified
borrowers.
Securitization of subprime mortgages into complex derivatives that spread risk throughout thefinancial system.
Excessive leverage and risk-taking by financial institutions.
Failure of credit rating agencies to properly assess the risks of mortgage-backed securities.

In response to the crisis, the U.S. Congress passed the Dodd-Frank Wall Street Reform and Consumer
Protection Act in 2010. Dodd-Frank represented the most sweeping financial regulatory reform since the Great
Depression, aiming to promote financial stability and protect consumers by:••••

Establishing the Financial Stability Oversight Council to identify and mitigate systemic risks.
Imposing stricter capital requirements and oversight on large banks and financial institutions.
Creating the Consumer Financial Protection Bureau to enforce consumer protection laws.
Regulating the derivatives market and banning proprietary trading by banks.
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Requiring securitizers to retain some risk in the mortgage-backed securities they sell.

While Dodd-Frank faced criticism from some as overly burdensome, most experts agreed that it was anecessary response to the crisis to close regulatory gaps, rein in excessive risk-taking, and protect taxpayers
from future bailouts of "too big to fail" financial institutions. The 2008 crisis and Dodd-Frank Act demonstrate
how major financial scandals and crises can spur legislative action to strengthen financial regulation andoversight. By adapting to emerging risks and closing regulatory loopholes, policymakers aim to safeguard
investors, promote market integrity, and maintain the stability of the global financial system in the face of
future challenges.
Transition from Market Autonomy to Statutory Oversight:
As capital and financial markets gained prominence in driving economic growth, ensuring public trust andmarket confidence became imperative. Recognizing the potential repercussions of market instability, countries
enacted laws and regulations governing financial services. Various regulatory frameworks emerged,
emphasizing the authorization of firms and adherence to minimum standards for operation. Regulatory bodies
assess applicants for fitness and propriety, focusing on activities, financial standing, and management
suitability. This shift from self-regulation to statutory oversight aims to bolster financial stability, preserve
systemic integrity, and safeguard consumer interests. It signifies a departure from market-led regulations to
independent statutory frameworks, overseen by governmental regulatory authorities, to uphold market
integrity and instill confidence in financial systems.
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Case Study 1:

The UK Financial Services Authority and the 2008 Financial Crisis:
Prior to the 2008 global financial crisis, the United Kingdom relied on a system of self-regulation in financial
services known as "light touch" regulation. The Financial Services Authority (FSA) was the single statutory
regulator for financial services, but it took a largely hands-off approach, deferring to the industry's own codesof conduct and allowing firms to regulate themselves.
The FSA's light touch approach was exemplified by its regulation of Northern Rock, a mortgage lender thatgrew rapidly by relying on short-term wholesale funding. Despite warning signs, the FSA did not intervene until
Northern Rock faced a liquidity crisis and bank run in 2007. The FSA's failure to properly supervise Northern
Rock and other firms contributed to the severity of the financial crisis in the UK.
In the wake of the crisis, the UK government conducted a review that led to the abolition of the FSA in 2013. It
was replaced by two new regulatory bodies with enhanced statutory powers:••

The Financial Conduct Authority (FCA) - Responsible for regulating conduct in retail and wholesale
financial markets, ensuring firms treat customers fairly.
The Prudential Regulation Authority (PRA) - A subsidiary of the Bank of England focused on prudential
regulation and supervision of banks, building societies, credit unions, insurers and major investment
firms.
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The new regulatory framework represented a major shift away from self-regulation and light touch oversight.
The FCA and PRA were given stronger legal powers to authorize firms, set rules, and take enforcement action.
They were also granted more resources and expertise to proactively monitor risks in the financial system. The
transition from the FSA to the FCA and PRA demonstrated the need for robust statutory regulation to maintainfinancial stability and protect consumers. It signaled the end of the era of market autonomy and the rise of
independent regulatory bodies with clear mandates to uphold market integrity. The UK's experiencehighlighted the importance of empowering regulators with the right tools and incentives to effectively oversee
increasingly complex and interconnected financial markets.
Enhancing Market Stability and Integrity:
Financial regulation serves multifaceted objectives aimed at bolstering market confidence, fostering economic
growth, mitigating risks, protecting consumers, and combating financial crime. By establishing standards andoversight mechanisms, regulation instills credibility and reliability in financial markets, encouraging investment
and efficient capital allocation. Moreover, it creates an environment conducive to economic development andwealth generation, facilitating business financing and entrepreneurship. Regulatory oversight also curtails thelikelihood of market failures and systemic risks, safeguarding against excessive risk-taking and institutional
collapses. Additionally, consumer protection measures ensure transparency, fairness, and recourse avenues forinvestors, enhancing trust and participation in financial activities. Lastly, robust regulatory frameworks andenforcement efforts deter financial crimes, such as money laundering and market manipulation, preserving
market integrity and reducing vulnerabilities to illicit activities.
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Case Study 1:

The Flash Crash of 2010 and the Need for Circuit Breakers:
On May 6, 2010, the U.S. stock market experienced a sudden and severe drop in prices, with the Dow Jones
Industrial Average plunging nearly 1,000 points in a matter of minutes before partially recovering. This event,
known as the Flash Crash, highlighted the vulnerability of stock markets to rapid and extreme price fluctuations
driven by automated trading algorithms and high-frequency trading strategies.
The Flash Crash exposed the need for regulatory measures to mitigate the risks of such events and maintainorderly market conditions. In response, the U.S. Securities and Exchange Commission (SEC) and the Commodity
Futures Trading Commission (CFTC) implemented a series of reforms, including the adoption of market-widecircuit breakers.
Circuit breakers are automatic trading halts that are triggered when a stock index reaches a certain threshold ofprice decline within a specified time period. These measures are designed to provide a cooling-off period during
times of extreme market volatility, allowing investors to assess the situation and preventing a full-blown market
crash. The implementation of circuit breakers has been credited with helping to stabilize markets during
subsequent periods of heightened volatility, such as the COVID-19 pandemic in 2020.
The Flash Crash case study demonstrates how financial regulation can enhance market stability and integrity by
mitigating systemic risks and protecting investors from extreme price fluctuations. By establishing circuit
breakers and other safeguards, regulators aim to create an environment that fosters confidence in stock
markets and encourages long-term investment. This case study also highlights the importance of ongoing45

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regulatory adaptation to address emerging challenges posed by technological advancements in trading, such as
the rise of high-frequency trading and algorithmic trading strategies.
Financial Crime:
Financial crime encompasses various illicit activities that pose significant threats to the integrity of financial
systems. Money laundering, a prominent example, involves disguising the origins of criminal proceeds throughcomplex processes like placement, layering, and integration within the financial system. Similarly, terrorist
financing involves concealing funds to support illicit activities, often in smaller, harder-to-detect transactions.
Identity theft and cybercrime are also prevalent, with criminals exploiting personal data and technology toperpetrate fraud and cyber-enabled crimes. To counter these threats, financial institutions must implement
robust controls and adhere to regulations aimed at detecting and preventing such criminal activities. This
necessitates ongoing vigilance and compliance efforts to safeguard against the evolving tactics of criminalorganizations seeking to exploit vulnerabilities in the financial sector.
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Case Study 1:

The HSBC Mexico Money Laundering Scandal:
In 2012, HSBC Holdings, a global banking giant, was fined $1.9 billion by U.S. authorities for violating sanctions
and enabling money laundering by Mexican drug cartels. The scandal highlighted the weaknesses in HSBC's
anti-money laundering (AML) controls, which allowed criminals to launder millions of dollars through the bank's
accounts.
The investigation revealed that HSBC's Mexico unit had failed to implement adequate AML measures, allowing
drug traffickers to deposit large amounts of cash into accounts without proper scrutiny. The bank's lax controls
also enabled the transfer of funds to accounts in the United States, where they were used to purchase assets
and finance illegal activities.
The HSBC scandal underscored the critical need for robust AML regulations and oversight to prevent financial
crimes. The case demonstrated how weaknesses in AML controls can be exploited by criminal organizations,posing significant threats to the integrity of financial systems. The scandal led to a major overhaul of HSBC's
AML practices and increased regulatory scrutiny of the banking industry as a whole.
The case study highlights the importance of financial institutions implementing robust controls and adhering toregulations aimed at detecting and preventing financial crimes. It also underscores the need for ongoing
vigilance and compliance efforts to safeguard against the evolving tactics of criminal organizations seeking to
exploit vulnerabilities in the financial sector.
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Case Study 2:

The Bernard L. Madoff Investment Securities LLC Ponzi Scheme:46

Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

The Bernard L. Madoff Investment Securities LLC Ponzi scheme, uncovered in 2008, is one of the mostnotorious financial frauds in history. Madoff, a financier and investment advisor, ran a Ponzi scheme that
defrauded thousands of investors out of approximately $65 billion over several decades. The scheme involved
promising investors consistent returns, regardless of market conditions, and delivering false statements
showing their investments were performing well. In reality, Madoff was using money from new investors to pay
returns to earlier investors, while also funding his own lavish lifestyle.
The Madoff Ponzi scheme highlighted the need for robust regulatory oversight and effective fraud detection
mechanisms to prevent such crimes. The scheme was able to persist for so long due to a lack of effective
regulation and oversight, as well as a failure of auditors and regulators to detect the fraud. The scandal led towidespread outrage and calls for greater regulatory scrutiny of the financial industry.
In response to the Madoff scandal, regulatory bodies such as the U.S. Securities and Exchange Commission(SEC) implemented reforms aimed at improving fraud detection and prevention. These reforms included
enhancing auditing standards, increasing transparency and disclosure requirements, and strengthening
whistleblower protections.
This case study demonstrates the importance of financial regulation in combating financial crime, particularly inthe context of investment fraud and Ponzi schemes. It underscores the need for robust regulatory oversight,
effective fraud detection mechanisms, and strong auditing standards to prevent such crimes and protect
investors. The Madoff scandal serves as a cautionary tale about the dangers of unchecked greed and theimportance of regulatory vigilance in maintaining the integrity of financial markets.
The Money Laundering:
Money laundering involves disguising the origins of illegally obtained funds to legitimize their appearance. It
typically unfolds in three stages: placement, layering, and integration. During placement, illicit cash is
introduced into the financial system, aiming to avoid suspicion about its source. The layering stage entails
complex transactions to obscure the money's origins, such as moving funds across accounts or engaging insecurities trading. This creates a convoluted money trail difficult to trace back to its criminal roots. Integration
marks the final phase, where laundered funds re-enter the legitimate economy, appearing as though they comefrom legal sources. Effective anti-money laundering measures focus on identifying suspicious activity early inthe process, employing methods like customer due diligence and transaction monitoring to prevent integrationof illicit funds into the financial system.
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Case Study 1:

The Danske Bank Estonia Money Laundering Scandal:
In 2018, Danske Bank, a Danish financial institution, was embroiled in a massive money laundering scandal
involving its Estonian branch. An investigation revealed that from 2007 to 2015, the bank's Estonian branch had
facilitated the laundering of approximately €200 billion in illicit funds, primarily from Russia and other former
Soviet states. The scandal highlighted significant weaknesses in Danske Bank's anti-money laundering controls,
including inadequate customer due diligence, insufficient transaction monitoring, and a lack of effective
reporting of suspicious activities.
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Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)

This case study demonstrates how criminals can exploit vulnerabilities in financial institutions to launder money
through stock markets trading. The layering stage of money laundering was facilitated by the bank's lack ofproper oversight, allowing funds to be moved across accounts and invested in securities to obscure their
origins. The integration phase was enabled by the bank's failure to detect and report suspicious transactions,enabling illicit funds to re-enter the legitimate economy through stock market investments.
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Case Study 2:

The FinCEN Files Leak:
The FinCEN Files leak in 2020 provides another compelling case study showcasing the scale and complexity ofmoney laundering operations despite existing anti-money laundering compliance measures. The leak exposed avast network of financial corruption, revealing over $2 trillion in suspicious transactions that were allowed toproceed due to failures in global banking systems. The case underscored the importance of thorough customer
due diligence and rigorous enforcement of Know Your Customer (KYC) protocols to detect and prevent money
laundering activities. By analyzing the FinCEN Files leak, scholars can explore the challenges faced by regulatory
authorities in combating money laundering on a global scale, emphasizing the critical role of transparency,
information sharing, and regulatory enforcement in disrupting illicit financial flows and preserving the integrityof the financial system.
Terrorist Financing: Similarities and Differences in Scale:
The methods employed to move funds for terrorist activities bear striking resemblances to those used inlaundering proceeds from criminal enterprises. Both utilize legitimate financial channels and layering
techniques to obscure money trails. However, while terrorist acts may require smaller sums compared tocrimes like drug trafficking, this lesser scale poses challenges in identifying and tracking illicit funds amid
legitimate transactions. Additionally, funds originating from lawful sources, such as charitable donations,further complicate detection, as it's difficult to pinpoint when they transition to terrorist financing. The
decentralized nature of terrorist cells allows for minimal funding requirements, making it easier to exploit
technically legitimate transactions. This distinction in scale presents unique challenges for authorities andfinancial institutions, requiring nuanced approaches to detection and prevention beyond traditional anti-money
laundering efforts.
-

Case Study:

The 2013 Boston Marathon Bombing:The 2013 Boston Marathon bombing, carried out by brothers Tamerlan and Dzhokhar Tsarnaev, highlights thechallenges in detecting and disrupting terrorist financing activities, particularly when involving small sums ofmoney and lone wolf operatives. The Tsarnaev brothers financed their terrorist plot primarily through legalmeans, including government welfare benefits, financial aid for college, and small businesses. They spentaround $15,000 on bomb-making materials, firearms, and other supplies, all of which were purchased with cash
to avoid detection. Despite being on the radar of U.S. intelligence agencies, the brothers were able to carry out
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their attack without raising any red flags in the financial system due to the relatively small sums of money
involved and their reliance on cash transactions.
-

Case Study:

In the Danske Bank Estonia Money Laundering Scandal:
It was revealed that from 2007 to 2015, Danske Bank's Estonian branch facilitated the laundering ofapproximately €200 billion in illicit funds, primarily from Russia and other former Soviet states. The scandal
highlighted significant weaknesses in Danske Bank's anti-money laundering controls, including inadequate
customer due diligence, insufficient transaction monitoring, and a lack of effective reporting of suspicious
activities.
This case study demonstrates how criminals can exploit vulnerabilities in financial institutions, including those
involved in stock markets trading, to launder money through complex processes like placement, layering, andintegration. The layering stage of money laundering was facilitated by the bank's lack of proper oversight,
allowing funds to be moved across accounts and invested in securities to obscure their origins. The integration
phase was enabled by the bank's failure to detect and report suspicious transactions, enabling illicit funds to reenter the legitimate economy through stock market investments.
The Danske Bank scandal underscores the importance of robust anti-money laundering measures in the stock
markets trading sector. Effective customer due diligence, transaction monitoring, and reporting of suspicious
activities are crucial to prevent the integration of illicit funds into the financial system. Regulators and financial
institutions must remain vigilant in combating money laundering and terrorist financing to maintain the
integrity of stock markets trading and protect investors from illicit financial activities.
Emerging Financial Crime Threats: Identity Fraud and Cybercrime:
In addition to money laundering and terrorist financing, financial institutions must contend with the risingchallenges posed by identity fraud and cybercrime. Identity fraud involves the illicit use of personal information
to obtain goods or credit under false pretenses, often through synthetic identities created from stolen orpurchased data. Cybercrime, meanwhile, encompasses a broad spectrum of illicit activities facilitated bytechnology, ranging from hacking attacks to online fraud schemes. Today's cybercriminal networks are highlysophisticated and operate on a global scale, perpetrating crimes like data breaches and ransomware attacks
that pose significant risks to the economy. To combat these threats, financial firms must implement robust
cybersecurity measures, anti-fraud protocols, and identity verification procedures. Additionally, regulatory
frameworks are continually evolving to address the dynamic nature of these crimes and safeguard financial
systems against exploitation.
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Case Study:

Equifax Data Breach and the Impact on Financial Systems:

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In 2017, Equifax, one of the largest credit reporting agencies in the United States, experienced a massive data
breach that exposed the personal information of over 147 million individuals. Cybercriminals exploitedvulnerabilities in Equifax's systems to gain unauthorized access to sensitive data, including names, Social
Security numbers, birth dates, and addresses. This breach highlighted the severe consequences of inadequatecybersecurity measures and the far-reaching implications of identity theft for individuals and financial
institutions.
The Equifax data breach serves as a pertinent case study illustrating the risks posed by cybercrime and identity
fraud to financial systems, including stock markets trading. The illicit use of personal information obtained
through data breaches can lead to identity fraud, where criminals create synthetic identities to engage infraudulent activities, including stock market manipulation and illicit trading practices. The breach underscoredthe importance of robust cybersecurity measures, anti-fraud protocols, and identity verification procedures toprotect individuals and financial institutions from the impacts of cybercrime.
This case study demonstrates the critical need for financial firms to implement stringent cybersecurity
measures and anti-fraud protocols to safeguard against identity fraud and cybercrime in stock markets trading.
By learning from incidents like the Equifax data breach, financial institutions can enhance their defenses,
protect investor information, and maintain the integrity of financial systems amidst evolving threats in thedigital age.
Insider Trading and Market Abuse:
Insider trading occurs when someone trades securities while in possession of material non-public informationthat could impact the price. It involves insiders like company employees or those who obtain confidential
information misusing it for personal benefit. Market abuse is broader, covering insider trading as well as othermanipulative behaviors like disseminating false information, using fictitious trades, or engaging in practices that
distort market pricing and activity unfairly. Both insider trading and certain forms of market abuse are illegal
and can incur civil penalties from regulators as well as potential criminal prosecution. Regulations define what
constitutes inside information, covered instruments, disclosure requirements, and prohibited market
manipulation tactics.
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Case Study:

Albert H. Wiggin Insider Trading Case:
After the Wall Street Crash of 1929, it was revealed that Albert H. Wiggin, the respected head of Chase National
Bank, had shorted more than 40,000 shares of his own company. Using companies owned by his family to hide
the trades, Wiggin built up a position that actually gave him a vested interest in running his company into theground. At the time, there were no specific rules against short-selling stocks of your own company. So, in theaftermath of the 1929 crash, when many different investors exited their positions of Chase National Bank stockat the same time, Wiggin legally made over $4 million.
This case study exemplifies insider trading, where an individual with privileged knowledge uses that information
to gain an unfair advantage over other investors. Albert H. Wiggin's actions of short-selling his own company's
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stock based on non-public information demonstrate the unethical nature of insider trading and the potential
harm it can cause to market integrity and investor trust.
The Albert H. Wiggin Insider Trading Case serves as a historical example of how insider trading can distort
market pricing and activity unfairly, leading to personal gain at the expense of other investors. It underscores
the importance of regulations and enforcement mechanisms to prevent insider trading and market abuse,ensuring a level playing field for all market participants and maintaining the integrity of stock markets trading.
Insider Trading:Insider trading is the unlawful act of trading securities based on confidential information not yet disclosed tothe public, which could impact the securities' prices upon revelation. This practice exploits privileged "inside"knowledge unavailable to ordinary investors. To establish guilt in insider trading cases, regulators must define
insiders, identify qualifying inside information, and outline scenarios constituting the offense. Inside
information pertains specifically to certain securities or their issuer, is precise, non-public, and likely to affectsecurity prices if disclosed. Insiders include individuals with access to such information due to their position,
relationship, or employment with the company. They are prohibited from trading securities based on insider
information or sharing it improperly. Actions like buying or selling affected securities, altering trades uponreceiving inside information, or disclosing such information improperly constitute insider trading. This
prohibition typically extends to various financial instruments like stocks, bonds, options, and derivatives.
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Case Study 1:

The Martha Stewart Insider Trading Scandal:
In 2001, Martha Stewart, the founder of Martha Stewart Living Omnimedia, was accused of insider trading
based on confidential information she received about the ImClone Systems drug Erbitux. Stewart sold hershares in ImClone a day before the FDA announced it would not approve the drug, allowing her to avoid
significant losses. She was convicted of conspiracy, obstruction of an agency proceeding, and making false
statements to federal investigators. Stewart was sentenced to a minimum of five months in prison and fined$30,000.
This case exemplifies insider trading, where an individual with privileged knowledge uses that information to
gain an unfair advantage over other investors. Stewart's actions of selling her ImClone shares based on nonpublic information demonstrate the unethical nature of insider trading and the potential harm it can cause tomarket integrity and investor trust.
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Case Study 2:

The Ivan Boesky Insider Trading Scandal:
In the 1980s, Ivan Boesky, a prominent Wall Street arbitrageur, was involved in one of the largest insider trading
scandals in U.S. history. Boesky illegally obtained confidential information from investment bankers and51

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corporate insiders, allowing him to make over $200 million in profits. He was sentenced to three years in prison
in 1987 and fined $100 million.
Boesky's case highlights the severity of insider trading and the consequences faced by those who engage insuch practices. His actions of exploiting market inefficiencies and profiting from confidential information
undermine the fairness and integrity of the stock market, harming ordinary investors who do not have access tothe same privileged information.
These case studies demonstrate the importance of regulations and enforcement mechanisms to prevent insider
trading and maintain a level playing field for all market participants. They underscore the need for transparency,
accountability, and ethical conduct in the financial industry to protect the interests of investors and promote
the efficient functioning of stock markets.
Insider Dealing, Disclosure Failures, and Market Manipulation:
Market abuse encompasses various improper behaviors that disrupt the fair and efficient functioning offinancial markets. Insider dealing involves trading securities based on non-public information, violating fairness
principles. Disclosure failures occur when issuers fail to promptly disclose material information affecting their
publicly traded securities, breaching transparency requirements. Maintaining updated insider lists and reporting
personal transactions are further obligations for company insiders. Market manipulation is another major
offense, involving spreading false information or employing deceptive tactics to influence market prices
artificially. This includes fictitious trades, false rumors, and coordinated trading aimed at distorting supply,
demand, or prices. Regulators globally implement surveillance and enforcement measures to combat market
abuse, including disclosure mandates, restricted trading practices, and reporting requirements. Both regulatorsand exchanges enforce sanctions against violators to uphold market integrity and investor confidence.
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Case Study:

Martha Stewart Insider Trading Scandal:
In 2001, Martha Stewart, the founder of Martha Stewart Living Omni media, was accused of insider trading
based on confidential information she received about the ImClone Systems drug Erbitux. Stewart sold hershares in ImClone a day before the FDA announced it would not approve the drug, allowing her to avoid
significant losses. She was convicted of conspiracy, obstruction of an agency proceedings, and making false
statements to federal investigators. Stewart was sentenced to a minimum of five months in prison and fined$30,000.
This case study exemplifies insider trading, where an individual with privileged knowledge uses that information
to gain an unfair advantage over other investors. Stewart's actions of selling her ImClone shares based on nonpublic information demonstrate the unethical nature of insider trading and the potential harm it can cause tomarket integrity and investor trust.
The Martha Stewart Insider Trading Scandal also highlights the importance of disclosure requirements andtransparency in financial markets. Failure to promptly disclose material information, as seen in Stewart's case,52

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can lead to allegations of insider trading and market manipulation. Regulators globally implement surveillanceand enforcement measures to combat market abuse, including disclosure mandates and reporting
requirements, to uphold market integrity and investor confidence.
This case study serves as a real-world example of the consequences of insider dealing, disclosure failures, andmarket manipulation in stock markets trading. It underscores the significance of regulatory oversight andenforcement mechanisms in maintaining fair and efficient financial markets and protecting investors fromfraudulent practices.
Integrity and Ethical Standards in Finance:
In the financial services industry, integrity and ethical conduct are indispensable for maintaining trust among
stakeholders. While regulations provide a basic framework, ethical considerations should stand apart, as merecompliance doesn't guarantee ethical behavior. Individuals must consciously assess the ethical implications of
their actions, considering transparency, honesty, legality, and fairness to all parties involved. Professional
bodies like the International Federation of Technical Analysts (IFTA) play a crucial role in promoting ethicalstandards beyond regulatory requirements. They establish codes of conduct covering personal accountability,
client focus, conflict management, and continuous professional development. These principles also emphasize
diversity, environmental responsibility, and the duty to report misconduct. Adhering to such ethical standards
fosters confidence, credibility, and trust in financial markets, contributing to their smooth operation andbenefitting the broader economy. Firms and individuals alike must prioritize cultivating an ethical culture to
uphold these essential values.
Fostering Ethical Thinking in Finance:
Navigating ethical dilemmas in the financial sector demands more than mere adherence to rules; it requires acultivated mindset of ethical awareness. Despite the industry's rational nature, numerous instances of unethicalbehavior underscore the necessity of actively prioritizing ethical thinking. This entails introspection before
decision-making, questioning the fairness and transparency of actions. Ethical awareness must become
ingrained through continuous reflection on the moral implications of professional conduct. An ethical culture
cannot be imposed solely through rules; it must stem from internalized values and integrity. Leaders play apivotal role in fostering environments where ethical concerns can be openly addressed, creating a foundationof trust and accountability. Ultimately, the finance industry's credibility hinges on individuals consistently
exhibiting ethical behavior, transcending mere compliance with legal mandates.
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Case Study:

The Enron Scandal: A Failure of Ethical Thinking:
The Enron scandal, which unfolded in 2001, serves as a prime example of the consequences of a lack of ethicalthinking in the finance industry. Enron, once a highly respected energy company, engaged in fraudulent
accounting practices and unethical business dealings that ultimately led to its downfall. The scandal highlighted
several key failures in ethical thinking:53

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1.

2.
3.

4.

Prioritizing short-term profits over long-term sustainability: Enron's leadership, driven by greed and adesire for personal gain, focused on inflating the company's stock price and reporting impressive
financial results, even if it meant engaging in unethical practices.
Lack of transparency and disclosure: Enron's financial statements were intentionally misleading,obscuring the company's true financial position and risks from investors and regulators.
Failure to question the morality of actions: Enron's employees, including accountants and financial
professionals, failed to question the ethical implications of their actions, prioritizing loyalty to thecompany over their professional responsibilities.
Absence of ethical leadership: Enron's leadership failed to foster a culture of ethical thinking, instead
creating an environment that rewarded unethical behavior and discouraged dissent.

The Enron scandal led to significant losses for investors, employees, and the wider economy, and highlighted
the need for a fundamental shift in the finance industry's approach to ethics. It underscored the importance ofcultivating ethical awareness, prioritizing transparency, and accountability, and creating environments thatencourage ethical thinking and behavior.
By studying the Enron case and similar scandals, finance professionals can learn valuable lessons about theimportance of ethical thinking in the industry. Fostering ethical awareness, questioning the morality of actions,and prioritizing long-term sustainability over short-term gains are crucial steps in creating a more ethical financeindustry that serves the interests of all stakeholders.
Ethical Decision-Making Principles:
In navigating ethical dilemmas within professional contexts, employing a structured approach can help ensure
integrity and fairness. A fundamental checklist for ethical decision-making involves evaluating whether thedecision is characterized by openness, honesty, transparency, and fairness to all stakeholders. Openness entails
avoiding concealment and ensuring that all parties involved are fully informed. Honesty goes beyond legal
compliance to encompass acting in good faith and with integrity. Transparency requires clarity andunderstanding in all aspects of the decision-making process. Most crucially, fairness ensures equitable
treatment for all involved, avoiding undue advantage or harm. Consistently applying these principles serves as a
guide for ethical analysis, fostering a culture of ethical thinking and behavior in professional settings.
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Case Study:

Martha Stewart Insider Trading Scandal: Application of Ethical Decision-Making Principles:
In 2001, Martha Stewart, the founder of Martha Stewart Living Omnimedia, was embroiled in an insider trading
scandal related to her sale of ImClone Systems stock based on non-public information. This case study provides
a practical application of ethical decision-making principles in the context of stock markets trading.
•Openness: In the Martha Stewart case, the lack of openness and transparency in her actions wasevident. Stewart failed to disclose the material non-public information she possessed about the FDA's
decision regarding ImClone's drug, leading to suspicions of insider trading.

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Honesty: Ethical decision-making requires more than mere legal compliance; it demands acting in goodfaith and with integrity. Stewart's actions of selling her shares based on privileged information violated
the principles of honesty and integrity in financial dealings.
Transparency: Transparency is crucial in ethical decision-making processes. Stewart's lack oftransparency in her stock trading activities and failure to disclose the inside information she possessed
exemplifies a breach of transparency in financial transactions.
Fairness: Fairness ensures equitable treatment for all stakeholders involved. In the Martha Stewart
case, the unfair advantage gained through insider trading violated the principle of fairness, as otherinvestors did not have access to the same material non-public information.

By analyzing the Martha Stewart Insider Trading Scandal through the lens of ethical decision-making principles,such as openness, honesty, transparency, and fairness, finance professionals can gain insights into theimportance of upholding ethical standards in stock markets trading. Consistently applying these principles
serves as a guide for ethical analysis, fostering a culture of ethical thinking and behavior in professionalsettings, and contributing to the integrity and fairness of financial markets.
Elevating Ethical Standards in Finance:
In addition to governmental regulations, professional bodies within the financial services sector play a pivotal
role in upholding ethics and integrity. These bodies, comprising industry insiders, establish codes of conductthat set ethical benchmarks surpassing mere legal compliance. These codes outline principles such asprioritizing client interests, managing conflicts of interest, upholding market integrity, fostering a culture of
ethical behavior among members.
While regulations primarily focus on enforceable rules, codes of conduct emphasize doing what is morally right,
not just what is legally permissible. For instance, while regulations may mandate certain disclosures, codes
encourage professionals to embrace full transparency beyond minimum requirements. By joining these bodies,
members commit to upholding ethical standards outlined in the codes and can face disciplinary action forviolations. This self-regulation raises industry standards and bolsters public confidence in professionals'
commitment to ethical conduct, establishing ethics as a cornerstone of professionalism alongside knowledge
and competence.
Promoting Ethical Conduct in Technical Analysis:
The IFTA's Code of Conduct outlines fundamental principles that transcend mere regulatory compliance, setting
ethical standards for its members. These encompass personal accountability, client-centric practices, conflict
management, market respect, continuous professional development, and awareness of one's competencies.
Members are held to high standards of integrity, honesty, and conduct that preserves the industry's reputation.
Client focus mandates fair treatment, confidentiality, and responsible use of client information. Conflict
management involves transparent handling of conflicts while upholding regulatory requirements. Respecting
market integrity necessitates adherence to proper conduct and confidentiality standards. Continuous
professional development is emphasized, along with understanding one's limitations and seeking assistancewhen necessary. The code further promotes respect, diversity, environmental consciousness, and a culture of55

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accountability. Collectively, these principles establish a robust ethical framework guiding members' conduct,
fostering a culture of integrity and responsibility beyond regulatory mandates.
Principles of Ethics•

Acting with Integrity:

Within the IFTA Code of Ethics and Standards of Professional Conduct, upholding honesty, fairness, and ethicalbehavior in every professional interaction stands as a fundamental principle. This mandate demands
transparency, requiring professionals to operate with high moral standards and an unwavering commitment toethical norms. Integral to this principle is the embodiment of integrity in action, necessitating a harmonizationof words and deeds. Furthermore, professionals are tasked with maintaining confidentiality to safeguard
sensitive information and to steer clear of conflicts of interest that might compromise their impartiality. As
designated Technical Analysts (IFTA Colleagues), individuals are held to the highest standards of professional
conduct, which extend to strict adherence to the laws and regulations governing their professional activities.
This commitment entails a comprehensive dedication to upholding ethical standards not only in their overt
actions but also in the subtleties of their decision-making processes. By prioritizing transparency and adhering
to legal regulations, professionals cultivate an environment of trust and credibility within their professional
spheres. This mandate not only serves to maintain the integrity of the profession but also ensures that clientsand stakeholders can place their confidence in the ethical framework guiding the actions of Technical Analysts
within the IFTA community.
•

Placing Clients' Interests First:

Emphasizing the paramount importance of prioritizing client welfare above personal gain or other conflicting
interests lies at the core of ethical conduct within the IFTA's guidelines. This principle underscores the fiduciary
duty that investment professionals owe to their clients, necessitating a commitment to act in the clients' bestinterests at all times. To fulfill this obligation, professionals must provide personalized advice tailored to thespecific needs, goals, and risk tolerances of each client. Moreover, they are tasked with the crucial responsibilityof managing conflicts of interest, ensuring that their recommendations are free from undue influence and bias.
Transparent communication serves as a cornerstone in this endeavor, enabling professionals to maintain open
dialogue with clients and empower them to make informed decisions that align with their financial objectives.
By adhering to this principle, investment professionals demonstrate integrity and dedication to serving thelong-term interests of their clients, fostering trust and confidence in their professional relationships.
Furthermore, prioritizing client welfare entails a proactive approach to identifying and mitigating potential
conflicts of interest that may arise in the course of client interactions. Professionals must navigate theseconflicts with diligence and care, ensuring that their recommendations are not compromised by personal
interests or external pressures. By fostering transparency and openness in their dealings, professionals canuphold the trust placed in them by clients and reinforce their commitment to acting with integrity. This
principle underscores the ethical imperative of placing client interests above all else, safeguarding theirfinancial well-being and upholding the integrity of the investment profession. Through personalized advice,conflict management, and transparent communication, investment professionals can ensure that their clients'
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best interests remain at the forefront of their decision-making processes, thereby fostering enduring
relationships built on trust and mutual respect.
-

Case Study:

Bernie Madoff Ponzi Scheme: Violation of Client Interests and Ethical Conduct:
Bernie Madoff, a prominent investment advisor, orchestrated one of the largest Ponzi schemes in history,
defrauding thousands of investors out of billions of dollars. Madoff's scheme involved promising consistent
returns to clients while using new investors' funds to pay returns to earlier investors, creating the illusion of a
successful investment strategy. This fraudulent scheme lasted for decades, deceiving clients, regulators, andthe wider financial community.
•

•
•
•

Placing Clients' Interests First: In the Bernie Madoff case, the paramount importance of prioritizing
client welfare above personal gain was blatantly disregarded. Madoff's actions were driven by greed
and self-interest, leading to severe financial losses for his clients who trusted him with theirinvestments.
Fiduciary Duty: Investment professionals owe a fiduciary duty to act in the best interests of theirclients. Madoff's scheme violated this fundamental principle by prioritizing his own financial gain over
the well-being of his clients, resulting in devastating consequences for those who invested with him.
Conflict Management: Madoff failed to manage conflicts of interest appropriately, as his fraudulent
scheme was driven by personal enrichment at the expense of his clients. The lack of transparency andhonesty in his dealings further exacerbated the ethical violations inherent in the Ponzi scheme.
Transparent Communication: Transparency and open communication with clients are essential
components of ethical conduct in the investment profession. Madoff's lack of transparency and thedissemination of false information to clients exemplify a breach of trust and integrity in client
relationships.

The Bernie Madoff Ponzi Scheme serves as a stark example of the ethical breaches that can occur in thefinancial industry when client interests are not prioritized, conflicts of interest are mismanaged, andtransparency is lacking. By studying this case, finance professionals can learn valuable lessons about theimportance of upholding ethical standards, placing clients' interests first, and fostering trust and integrity intheir professional relationships.
•

Maintaining Independence:

Highlighting the significance of maintaining objectivity, impartiality, and freedom from undue influence indecision-making processes underscores a critical aspect of professional conduct within the IFTA framework.
These imperative mandates that professionals navigate their roles with a commitment to impartiality, ensuringthat external pressures or biases do not unduly sway their judgment. It necessitates a vigilant avoidance of
conflicts of interest, as well as a conscientious effort to identify and mitigate any biases that may potentiallycompromise the integrity of their decisions. By upholding these principles, professionals can make informed
and unbiased judgments that prioritize the welfare of their clients, fostering an environment of trust andreliability in their professional relationships.
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The obligation to remain objective and free from undue influence extends beyond mere adherence to rules; itembodies a deeper commitment to ethical conduct and client-centric practices. Professionals are tasked with
conducting thorough analyses and assessments, drawing on their expertise and knowledge to deliver
recommendations that are grounded in objectivity and serve the best interests of their clients. By upholding
these principles of impartiality and independence, professionals not only safeguard the integrity of theirdecision-making processes but also reinforce the trust and confidence that clients place in their abilities tonavigate the complexities of financial markets with integrity and professionalism.
•

Promoting Market Integrity:

Emphasizing the imperative for fair, transparent, and ethically sound practices within financial markets
underscores a cornerstone principle within the IFTA ethos. Investment professionals are entrusted with apivotal role in cultivating an environment characterized by trust, confidence, and operational efficiency throughtheir unwavering commitment to ethical conduct and strict adherence to regulatory frameworks. This emphasis
on ethical behavior is not merely a regulatory obligation but a moral imperative that underpins the integrity andcredibility of financial markets, ensuring that all participants operate on a level playing field.
At the heart of this principle lies the recognition that ethical conduct is indispensable for the proper functioningof financial markets. Investment professionals serve as custodians of market integrity, leveraging theirexpertise to uphold fairness and transparency in all transactions. By embracing ethical practices and adhering
to regulations, professionals not only fulfill their fiduciary responsibilities but also contribute to thesustainability and resilience of financial markets, thereby fostering an environment conducive to long-term
growth and prosperity.
•

Improving Professional Competence:

Underscoring the significance of continuous learning, skill development, and knowledge enhancement forinvestment professionals serves as a cornerstone within the IFTA's framework. This emphasis reflects an
acknowledgment of the dynamic nature of the financial landscape, wherein staying abreast of industry
developments is not only advantageous but imperative for professional growth and effectiveness. By
embracing a commitment to ongoing education and skill refinement, practitioners position themselves tonavigate the evolving complexities of the financial markets with proficiency and agility. Furthermore, thisdedication to continuous improvement enables professionals to remain responsive to shifting trends, emerging
technologies, and regulatory changes, thereby enhancing their capacity to provide informed and strategic
counsel to clients.
The pursuit of knowledge and skill enhancement is not merely a professional obligation, but a proactive
endeavor aimed at optimizing client outcomes and advancing the broader interests of the financial industry.
Investment professionals who prioritize continuous learning not only deepen their expertise but also cultivate aculture of innovation and excellence within their respective spheres. By fostering a community of practitioners
committed to lifelong learning, the IFTA reinforces the ethos of professionalism and underscores the pivotal
role of education in driving positive change and elevating industry standards. Ultimately, this collective
dedication to knowledge acquisition and skill development contributes to the resilience, adaptability, and longterm sustainability of the financial sector.
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Professionalism:

Maintaining an unwavering commitment to excellence, integrity, and ethical conduct across all facets of theirwork is a fundamental expectation within the IFTA's framework. This mandate underscores the necessity forinvestment professionals to continually hone their skills, expand their knowledge base, and stay abreast ofindustry developments to ensure they deliver the highest caliber of service to their clients. Moreover, thiscommitment extends beyond technical proficiency to encompass the cultivation of integrity and ethicalbehavior as guiding principles in every professional endeavor. By upholding these standards, professionals not
only safeguard their own reputation but also contribute to the overall credibility and trustworthiness of theprofession.
Central to this ethos is the imperative for professionals to conduct themselves with unwavering honesty,transparency, and accountability in all their interactions. By exemplifying these qualities, practitioners not onlyinspire trust and confidence among their clients but also uphold the integrity of the profession as a whole.
Furthermore, this commitment to ethical behavior serves as a cornerstone for building enduring relationships
based on mutual respect and integrity. Through their adherence to these principles, investment professionals
not only elevate their own standing within the industry but also contribute to a culture of professionalism andtrust that is essential for the continued success and sustainability of the financial sector.
•

Integrity of Capital Markets:

The emphasis on preserving fairness, transparency, and ethical conduct within financial markets constitutes apivotal aspect of the IFTA's mandate. This focal point underscores the imperative of curbing practices such as
market manipulation and insider trading, which undermine the integrity of market mechanisms. By upholding
these ethical standards, professionals contribute to the establishment of a level playing field wherein allparticipants can engage in transactions with confidence, knowing that market dynamics are governed byprinciples of fairness and transparency. Moreover, this commitment serves as a bulwark against actions that
distort market prices or confer unfair advantages upon certain individuals, thereby safeguarding the integrityand efficiency of market operations.
Integral to the notion of upholding market integrity is the recognition of its broader implications for fostering
trust, confidence, and efficiency within financial markets. Trust forms the bedrock upon which market
interactions are built, underpinning investor confidence and facilitating capital flows. By maintaining ethicalconduct and promoting transparency, professionals engender a sense of trust among market participants,
which in turn enhances market efficiency by reducing information asymmetries and facilitating price discovery
mechanisms. Ultimately, the preservation of market integrity not only safeguards the interests of investors but
also contributes to the overall stability and vibrancy of financial markets, serving as a cornerstone forsustainable economic growth.
•

Duties to Clients and Employers:

Emphasizing obligations towards both clients and employers underscores a foundational principle within the
IFTA's ethical framework. This principle underscores the importance of prioritizing the best interests of clientsabove all else, requiring investment professionals to demonstrate unwavering loyalty, diligence, and care in
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their interactions. It mandates a commitment to providing tailored and informed advice that aligns with theunique objectives and risk tolerances of each client, ensuring that their financial well-being remains paramount.
Simultaneously, professionals are entrusted with safeguarding the interests and assets of their employers,serving as stewards of organizational integrity and reputation. This obligation demands a vigilant adherence toethical standards and regulatory requirements, as well as a proactive approach to managing potential conflictsof interest to mitigate risks and uphold the trust placed in them by both clients and employers.
Moreover, this emphasis on acting in the best interests of clients and employers underscores the broader
significance of fiduciary responsibility within the investment profession. Investment professionals serve as
fiduciaries entrusted with the stewardship of their clients' financial futures, necessitating a duty of care thattranscends mere compliance with regulations. By prioritizing transparency, honesty, and integrity in theirdealings, professionals not only fulfill their ethical obligations but also cultivate enduring relationships built on
trust and mutual respect. This commitment to ethical conduct not only serves to protect the interests of clientsand employers but also contributes to the overall credibility and integrity of the investment profession as awhole.
Investment Analysis:
Addressing responsibilities and best practices in conducting research, analysis, and making investment
recommendations. Professionals must exercise independent judgment and provide clear, accurate, andunbiased information to clients.
•

Conflicts of Interest:

Stressing the significance of identifying, disclosing, and effectively managing conflicts of interest inherent ininvestment activities is pivotal within the IFTA's ethical framework. This principle underscores the criticalresponsibility of professionals to prioritize the interests of their clients above all other considerations. It
necessitates a proactive approach to recognize and address potential conflicts that may arise, whether
stemming from personal interests or external pressures. By maintaining a steadfast commitment to client
welfare and integrity, professionals can navigate these challenges with diligence and transparency, ensuringthat their recommendations remain untainted by conflicting influences. Moreover, by fostering open
communication and transparency, professionals can instill confidence in clients, demonstrating a dedication to
ethical conduct and the preservation of client trust.
Furthermore, the ethical guidelines outlined by the IFTA underscore the imperative for Technical Analysts touphold the highest standards of accuracy and integrity in their communications and analyses. This mandate
entails a commitment to refraining from making inaccurate or misleading statements, thereby safeguarding the
integrity of market information and maintaining investor confidence. Technical Analysts must ensure that any
statements regarding market positions are grounded in robust evidence and consistent with establishedtechnical analysis knowledge. Additionally, they are tasked with diligently documenting any new developments
or modifications to existing techniques, ensuring transparency and accountability in their analytical processes.
By adhering to these standards, Technical Analysts demonstrate their commitment to professional excellenceand ethical conduct, thereby upholding the integrity and credibility of the investment profession.
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Case Study:

Martha Stewart Insider Trading Scandal: Conflicts of Interest and Ethical Violations:
In the Martha Stewart Insider Trading Scandal, Martha Stewart, a prominent figure in the business and media
industry, was accused of insider trading based on non-public information she received about the FDA's decision
regarding ImClone's drug, Erbitux. Stewart sold her shares in ImClone before the negative news was madepublic, avoiding significant financial losses. This case study exemplifies conflicts of interest and ethical violationsin the context of stock markets trading.
•••Prioritizing Personal Gain over Client Interests: Martha Stewart's actions in the insider trading scandal
highlighted a conflict of interest where personal financial gain was prioritized over the interests ofother investors. By selling her shares based on privileged information, Stewart compromised theintegrity of the financial markets and violated ethical principles.
Lack of Transparency and Integrity: Stewart's involvement in insider trading and subsequent attempts
to cover up the incident by providing false information raised serious concerns about transparency andintegrity in financial dealings. The lack of disclosure and honesty in her actions further exacerbated theethical violations inherent in the scandal.
Client Trust and Professional Responsibility: As a public figure and business leader, Martha Stewart's
actions eroded trust in the financial markets and highlighted the importance of upholding ethicalstandards and managing conflicts of interest. Investment professionals have a critical responsibility toprioritize client welfare and act with integrity in all financial transactions.

By examining the Martha Stewart Insider Trading Scandal through the lens of conflicts of interest and ethicalguidelines, finance professionals can gain insights into the ethical challenges faced in the industry and theimportance of maintaining transparency, integrity, and client trust in stock markets trading. This case study
underscores the ethical imperative of placing client interests above personal gain and external pressures,
safeguarding client welfare and upholding the integrity of the investment profession.
Responsibilities as an IFTA Member or Candidate
The responsibilities incumbent upon individuals as an IFTA Member or Candidate encompass a comprehensive
set of ethical obligations and standards that extend beyond mere adherence to regulations. As stewards of theinstitute's reputation and values, members and candidates are entrusted with upholding the highest levels ofprofessionalism, integrity, and ethical behavior in all facets of their engagements. This entails not only
complying with the institute's Code of Ethics and Standards of Professional Conduct but also actively
promoting a culture of ethical conduct and excellence within the investment community. By embodying theseprinciples, members and candidates contribute to the advancement of the profession, fostering trust,credibility, and integrity in the global financial markets.
•

Maintaining Ethical Conduct and Professionalism:

Upholding confidentiality, steering clear of unethical behavior, and accurately representing one's affiliation
with the institute are integral facets of ethical conduct within the investment industry as delineated by the61

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IFTA's guidelines. Confidentiality stands as a cornerstone principle, requiring professionals to safeguard
sensitive information entrusted to them by clients and employers. This obligation necessitates the maintenanceof strict confidentiality protocols to protect the privacy and interests of stakeholders. Furthermore, avoiding
unethical behavior encompasses a broad spectrum of conduct, ranging from refraining from engaging indeceptive practices to abstaining from actions that may compromise professional integrity. By adhering tothese principles, professionals cultivate an environment of trust and reliability, ensuring that clients andstakeholders can have confidence in the integrity of their interactions.
Moreover, accurate representation of one's relationship with the institute underscores the importance oftransparency and honesty in professional dealings. Professionals are expected to provide truthful and accurate
information regarding their affiliation with the institute, thereby enhancing transparency and fostering trust
within the investment community. This commitment to transparency extends to all aspects of professional
conduct, from accurately representing qualifications and credentials to disclosing any potential conflicts ofinterest that may arise. By upholding these responsibilities, professionals demonstrate their dedication to
ethical behavior, integrity, and professionalism, thereby contributing to the maintenance of high ethicalstandards within the investment industry. Through their adherence to these principles, professionals uphold
the reputation of the institute and bolster confidence in the integrity of the investment profession as a whole.
•

Confidentiality and Client Rights:

The principle of Confidentiality and Client Rights underscores the paramount importance of safeguarding client
confidentiality, privacy, and rights throughout all professional engagements. It serves as a cornerstone of trustin the practitioner-client relationship, necessitating a commitment to maintaining the privacy andconfidentiality of sensitive information shared during consultations. Practitioners are entrusted with ensuringthat client information remains strictly confidential, thereby upholding the integrity of the client-practitioner
relationship and fostering an environment of trust and confidence. Moreover, this principle encompasses a
dedication to respecting and upholding client rights, including the right to autonomy, informed consent, andconfidentiality, empowering clients to make informed decisions about their financial affairs while safeguarding
their privacy and personal information.
Furthermore, the principle of Confidentiality and Client Rights underscores the ethical obligation ofpractitioners to adhere to stringent confidentiality protocols and privacy standards in all professional
interactions. Practitioners must exercise discretion and professionalism in handling client information, ensuringthat it is protected from unauthorized access or disclosure. Additionally, they must respect and uphold therights of clients to confidentiality and privacy, refraining from disclosing confidential information without
proper authorization or consent. By prioritizing confidentiality and respecting client rights, practitioners not
only fulfill their ethical responsibilities but also cultivate strong, trusting relationships with clients based on
mutual respect, integrity, and professionalism.
•

Alignment with Industry Standards:

The principle of Alignment with Industry Standards underscores the importance of integrating ethicalguidelines from esteemed organizations such as the EWI to augment ethical competency and professionalism
within the financial sector. It emphasizes the recognition and adoption of established ethical frameworks and62

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guidelines developed by reputable institutions, serving as a benchmark for ethical conduct and behavior. Byaligning with industry standards set forth by organizations like the EWI, practitioners demonstrate acommitment to upholding the highest ethical principles and standards in their professional endeavors.
Moreover, this principle emphasizes the significance of continuous learning and improvement, as practitioners
strive to enhance their ethical competency and stay abreast of evolving ethical norms and best practices within
the industry.
Furthermore, the principle of Alignment with Industry Standards highlights the proactive stance taken bypractitioners to integrate ethical guidelines into their professional practices, thereby promoting a culture of
ethical conduct and professionalism within the financial sector. By aligning with established industry standards,
practitioners not only uphold the integrity of the profession but also contribute to the overall credibility andtrustworthiness of the financial industry. Additionally, adherence to industry standards helps foster consistency
and transparency in ethical practices across various organizations and sectors, thereby enhancing confidence
and trust among clients, stakeholders, and the broader public. Through alignment with industry standards,
practitioners reaffirm their commitment to ethical behavior and professionalism, ultimately contributing to theadvancement and sustainability of the financial profession as a whole.
•

Enforcement of Ethical Standards:

The principle of Enforcement of Ethical Standards underscores the critical role of disciplinary measures inmaintaining ethical standards and upholding the credibility of certified professionals. It emphasizes theimportance of holding individuals accountable for breaches of ethical conduct and ensuring that appropriate
actions are taken to address such violations. Disciplinary measures, such as the suspension of certification or
revocation of membership, serve as deterrents against unethical behavior and reinforce the significance ofadhering to ethical guidelines. By enforcing ethical standards through disciplinary actions, regulatory bodies
and professional organizations demonstrate their commitment to maintaining integrity and trust within theprofession, thereby safeguarding the interests of clients and the broader public.
Furthermore, the principle of Enforcement of Ethical Standards highlights the proactive approach taken by
regulatory bodies and professional organizations to monitor and enforce compliance with ethical guidelines.
Through rigorous enforcement mechanisms, such as investigations and disciplinary hearings, these entities
ensure that certified professionals uphold the highest standards of ethical conduct. Moreover, disciplinary
measures are implemented with the overarching goal of promoting accountability and transparency within theprofession, fostering a culture of integrity and trust among practitioners. By enforcing ethical standards
consistently and fairly, regulatory bodies and professional organizations contribute to the preservation of theprofession's credibility and reputation, ultimately enhancing public confidence in the ethical behavior andprofessionalism of certified professionals.
•

CFTe, MFTA, and CEWA Certification Ethics:

The ethical standards governing the CFTe, MFTA, and CEWA certifications emphasize the paramountimportance of integrity, professionalism, and adherence to ethical principles in the practice of technicalanalysis. These certifications underscore the commitment of professionals to upholding the highest standardsof conduct and competence in their roles. They serve as a testament to the dedication of individuals to ethical63

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behavior, transparency, and accountability in their interactions with clients, colleagues, and the broader
financial community. By obtaining these certifications, practitioners demonstrate their commitment toexcellence and ethical conduct, thereby enhancing their credibility and contributing to the integrity of thetechnical analysis profession.
Professional Ethics Standards:
The certifications underscore the imperative of prioritizing ethical principles and upholding the utmost
standards of professional conduct among certified individuals. Through these certifications, individuals pledge
their dedication to integrity, transparency, and accountability in all aspects of their professional endeavors. Byemphasizing ethical behavior and the maintenance of high standards of conduct, the certifications serve as ahallmark of excellence and trustworthiness in the field. Certified individuals commit to fostering a culture of
integrity and ethical conduct, thereby enhancing the credibility and reputation of their profession while
instilling confidence among clients, colleagues, and stakeholders alike.
•

Code of Conduct Adherence:

Certified professionals are obligated to adhere strictly to the specific Code of Ethics and Standards pertinent totheir certification, with any breaches of these standards subject to disciplinary measures. These codes serve as
guiding principles, outlining the ethical responsibilities and professional conduct expected from individuals
holding the certification. Violations of these codes are taken seriously, with disciplinary actions enforced to
uphold the integrity and credibility of the certification. This stringent adherence to ethical guidelines ensuresthat certified professionals maintain the highest levels of integrity, trustworthiness, and competence in theirpractice, thereby safeguarding the interests of clients and the broader professional community.
Ethical Guidelines:•

Respect for Autonomy and Truthfulness:

The principle of Respect for Autonomy and Truthfulness embodies a multifaceted approach to clientinteractions within the professional realm. It underscores the fundamental importance of self-determination,affirming clients' rights to make informed decisions about their financial affairs autonomously. This principleemphasizes the practitioner's obligation to empower clients by providing them with comprehensive
information, guidance, and support to make choices aligned with their individual preferences and goals.
Moreover, it encompasses a commitment to honesty, requiring practitioners to communicate transparently andtruthfully with clients, ensuring that they have accurate and reliable information upon which to base theirdecisions. Additionally, confidentiality plays a pivotal role within this principle, as practitioners are entrustedwith safeguarding the privacy and sensitive information shared by clients during consultations, thereby
fostering an environment of trust and respect.
Furthermore, the principle of Respect for Autonomy and Truthfulness underscores the ethical imperative of
maintaining the highest levels of integrity and professionalism in client interactions. Practitioners mustprioritize honesty and transparency, ensuring that clients are fully informed about the risks, benefits, andimplications of various financial decisions. This entails providing objective and unbiased guidance, free from any
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conflicts of interest or undue influence. Moreover, practitioners must uphold the confidentiality of client
information, respecting their privacy rights and maintaining the trust placed in them. By adhering to theseprinciples, practitioners not only fulfill their ethical obligations but also cultivate strong, trusting relationships
with clients built on mutual respect, honesty, and integrity, thereby enhancing the overall quality of client
service and promoting confidence in the profession.
•

Beneficence and Nonmaleficence:

The principle of Beneficence and Nonmaleficence encapsulates the ethical obligation of professionals toprioritize the well-being of their clients above all else. It underscores the imperative to act in the best interestsof clients, emphasizing the responsibility to promote their welfare and enhance their financial outcomes. This
principle entails a commitment to providing competent and ethical services, ensuring that practitioners possess
the necessary knowledge, skills, and expertise to effectively address clients' needs and objectives. Moreover, it
involves a proactive approach to preventing harm, whereby practitioners strive to mitigate risks and adverse
outcomes associated with financial decision-making, thereby safeguarding the interests and security of theirclients.
Furthermore, the principle of Beneficence and Nonmaleficence underscores the ethical imperative of
maintaining a fiduciary duty towards clients, characterized by a duty of care and loyalty. Practitioners are
entrusted with the responsibility to prioritize client interests above their own, refraining from actions that
could potentially harm or disadvantage clients. This entails providing honest and transparent advice, managing
conflicts of interest effectively, and exercising sound judgment to ensure that clients' financial well-being
remains paramount. By adhering to these principles, practitioners not only uphold the integrity of theprofession but also foster trust and confidence in their relationships with clients, thereby fulfilling their ethicalobligations and promoting the overall welfare of those they serve.
•

Justice and Equity:

The principle of Justice and Equity epitomizes the ethical imperative to ensure fairness and impartiality infinancial analysis and advisory roles. It encompasses a commitment to upholding principles of fairness andequality, ensuring that all clients are treated equitably and provided with access to the same level of quality
service and support. Practitioners are tasked with safeguarding against biases and discrimination, striving toensure that all clients receive fair and just treatment regardless of their background, circumstances, or financial
status. Moreover, this principle emphasizes the importance of promoting equitable distribution of resources,
advocating for the allocation of financial resources in a manner that benefits clients and society as a whole,while also adhering to ethical practices and standards.
Furthermore, the principle of Justice and Equity underscores the ethical obligation of practitioners to upholdthe highest standards of integrity and transparency in their financial analysis and advisory roles. Practitioners
must adhere to ethical practices, ensuring that their recommendations and decisions are based on objective
analysis and sound judgment, free from undue influence or bias. Additionally, they are responsible forpromoting transparency and accountability in their interactions with clients and stakeholders, providing clear
and accurate information to enable informed decision-making. By embracing principles of justice and equity,65

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practitioners not only uphold the integrity of the profession but also contribute to the creation of a fair and justfinancial environment that benefits clients, society, and the broader economy.
Enforcement and Oversight:
The principle of Enforcement and Oversight encompasses the systematic monitoring and regulation of ethicalstandards within professional domains. It involves the establishment of robust mechanisms for enforcing
adherence to ethical guidelines and overseeing compliance among practitioners. This principle underscores theimportance of regulatory bodies and governing institutions in ensuring that ethical standards are upheld, andviolations are addressed promptly and effectively. Through proactive enforcement measures, such as audits,investigations, and disciplinary actions, regulatory bodies play a crucial role in maintaining integrity and trust
within the profession, thereby safeguarding the interests of clients and the public. Additionally, oversightmechanisms serve to promote accountability and transparency, fostering a culture of ethical behavior andprofessionalism among practitioners while upholding the credibility and reputation of the profession.
•

Disciplinary Measures:

The principle of Disciplinary Measures serves as a crucial component in maintaining ethical standards andensuring accountability within professional domains. It involves delineating clear consequences for ethicalviolations, establishing a framework of sanctions to address misconduct effectively. These disciplinary
measures are designed to uphold the integrity of the profession and deter practitioners from engaging in
unethical behavior. Sanctions may include warnings, fines, suspension of certifications, or, in severe cases,
revocation of certifications. By outlining these consequences, regulatory bodies and professional organizations
create a system of accountability where practitioners are held responsible for their actions, thereby fostering aculture of ethical conduct and professionalism.
Furthermore, disciplinary measures play a pivotal role in preserving the credibility and trustworthiness ofcertified professionals. They serve as a deterrent against unethical behavior and underscore the seriousness
with which violations of ethical standards are regarded. Through transparent and consistent application of
disciplinary measures, regulatory bodies and professional organizations demonstrate their commitment to
upholding the highest standards of integrity and ethics within the profession. Moreover, these measures help
protect the interests of clients and the public by ensuring that practitioners adhere to ethical guidelines andmaintain the trust placed in them. Ultimately, the enforcement of disciplinary measures reinforces theimportance of ethical conduct and accountability, contributing to the overall reputation and credibility ofcertified professionals and the profession.
•

Regulatory Compliance:

The principle of Regulatory Compliance underscores the critical importance of ensuring that technical analysts
adhere to regulatory requirements and industry standards to uphold integrity and professionalism within thefield. It entails a comprehensive approach to navigating and complying with the myriads of regulations andstandards governing the financial industry. Technical analysts are tasked with staying abreast of evolving
regulatory frameworks and industry guidelines, ensuring that their practices align with legal mandates andindustry best practices. By meticulously adhering to regulatory requirements, analysts mitigate risks associated66Certified Financial Technician (CFTe) I & II Syllabus & Reading Material(Last updated: 19 August 2024)with non-compliance, thereby safeguarding the interests of clients and the broader financial ecosystem while
upholding the integrity and reputation of the profession.
Furthermore, regulatory compliance serves as a cornerstone of ethical conduct and responsible stewardshipwithin the financial sector. It necessitates a proactive commitment to transparency, accountability, andadherence to established norms and regulations. Technical analysts play a pivotal role in maintaining market
integrity and investor confidence by ensuring compliance with regulatory mandates and industry standards. Byprioritizing regulatory compliance, analysts demonstrate their dedication to ethical behavior andprofessionalism, fostering trust and credibility among clients, stakeholders, and regulatory authorities.
Moreover, a culture of regulatory compliance enhances the resilience and stability of financial markets,
contributing to the overall health and sustainability of the global economy.
•

Continuous Education:

The principle of Continuous Education underscores the significance of promoting ongoing education andtraining initiatives aimed at enriching ethical awareness and compliance among technical analysts within thefinancial advisor industry. It emphasizes the dynamic nature of the financial landscape, wherein practitioners
must continuously update their knowledge and skills to navigate evolving ethical challenges and regulatory
requirements effectively. Continuous education initiatives provide technical analysts with opportunities todeepen their understanding of ethical principles, regulatory frameworks, and industry best practices. By
participating in relevant training programs, workshops, and seminars, analysts can enhance their ethicalawareness, cultivate a culture of compliance, and develop the competencies necessary to address emerging
ethical dilemmas within their professional roles.
Moreover, continuous education initiatives play a pivotal role in fostering a culture of lifelong learning andprofessional development within the financial advisor industry. By investing in ongoing education, technicalanalysts demonstrate a commitment to personal growth, excellence, and ethical conduct. These initiatives not
only equip practitioners with the knowledge and skills needed to navigate complex ethical challenges but also
empower them to uphold the highest standards of integrity and professionalism in their interactions withclients and stakeholders. Additionally, continuous education fosters a sense of accountability and responsibility
among technical analysts, instilling a mindset of continuous improvement and ethical leadership within theindustry. Through ongoing education and training, practitioners can strengthen their ethical competencies,
contribute to a culture of ethical excellence, and uphold the trust and confidence of clients and the broader
financial community.

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