Chartered Market Technician Practice Exam 2025 – Complete Prep Guide

The Efficient Market Hypothesis (EMH) posits that asset prices reflect all available information, suggesting that it is impossible to consistently achieve higher returns than the overall market through either fundamental or technical analysis. In this framework, technical traders focus primarily on price movement and chart patterns rather than the inherent value of a security or fundamental indicators.

The assertion that technical traders are not rational aligns with the idea that their methods may not necessarily be based on the efficient processing of all available information. Instead, they might rely on psychological factors and market sentiment, which could lead to decisions driven by emotion rather than purely rational analysis. This differentiates them from traditional notions of rational, informed trading.

In contrast, the other options suggest additional attributes or methods that do not accurately characterize technical trading. Technical traders do not exclusively use fundamental analysis, nor do they only follow stock news, which indicates a broader approach that may not apply to their primary focus on price and volume patterns. Thus, recognizing that technical traders may indeed operate outside the bounds of rational analysis provides clarity on their distinctive role in the context of EMH.