The Market Technicians Association is an organization incorporated in 1973 as a not for profit with the intention to propagate the study of technical analysis for the mainstream of then present and future market professionals. During this time period however, the study of technical analysis wasn’t the all pervasive study that it is today so its full acceptance took time as market professionals moved from pencil and graph paper to computers.
This may explain part of the reason the first Certified Market Technicians exam was not awarded by the MTA until 1989. Despite a slow beginning, the MTA today claims over 3000 members worldwide, 1900 in the United States with 930 designated with the now coveted CMT moniker beside their name and 817 of those active in the industry as working professionals. Yet approximately 2070 can claim affiliate status as many await their chance to achieve the high status as a Certified Market Technician.
When the MTA confers the honor of CMT this means they certify to the exchanges, the investment community and the public that candidates have the full and comprehensive body of knowledge of technical skills from past and present to be able to conduct research, sign their name to a research report, recommend trades and investment programs from a wide variety of financial instruments and markets and even trade their own accounts with proficiency.
With trillions of dollars flowing through the financial markets on any given day as opposed to millions from days past, the importance of the CMT designation bestows a greater consequence to those that are charged with the management of that money.
The CMT encompasses much more than the ability to read a chart. Candidates will learn to read and fully understand point and figure, line and candlestick charts from price perspectives past, present and future. Candidates will learn the relationship between these prices and price patterns. Candidates will learn trends and what they mean, how to draw trend lines, how to determine if trends will continue or fade.
Candidates will then advance their knowledge to indicators and how they work, how they are calculated and meaning and purpose behind those calculations. Candidates will learn implied volatilities, put/call ratios, and inferential statistics from correlational analysis to t-tests to regression analysis. Candidates will learn volume, breadth, short selling, sentiment gauges and inter market analysis. While these examples name only a small portion of the technical skills learned from the three exams offered to become a CMT, the exams in itself tests a much wider knowledge of technical skills and analysis. Each exam encompasses a level of difficulty so the historical pass rate is about 60 %.
For example, level 1 exams test definitions, measures basic concepts of terminology. charting methods and ethics. Ethics is not only a recent focus due to past scandals but it has been given greater weight to each exam. Failure to pass ethics portions on the CMT level 3 exam will mean failure. Ethics encompasses factors of public trust, inside information and research reports to name just a small portion of the tested ethics for each exam, its comprehensive and shouldn’t be treated lightly by candidates.
For definitions, any idea what is the true meaning of a dead cat bounce, an increase in the VIX, the meaning and purpose of Bollinger Bands or how to read a line or point and figure chart. Any idea how to apply technical analysis to bonds, currencies, options and futures.
The first 132 multiple choice exam of which 120 are graded will ask these and much more within the two hour allotted time period for testing. The cost is $500, $250 covers the whole program fee that allows a candidate five years to complete all three exams. Exams are offered in the Spring and Fall at many locations not only in the US but 300 worldwide sites.
Level 2 is a four hour,160 question of which 150 are graded multiple choice exam that measures application of technical analysis, ethics, Dow Theory and inter market analysis to name a few categories. The cost is $450 and offered Spring and Fall.
Any idea what is the general term for rate of change, the difference between relative strength and the indicator RSI. Relative Strength Indicator, the theories of Charles Dow or phases of cycles. This and much more will be tested as well as ethics.
Level 3 was recently changed from an outside written research project that demonstrated a high level of technical analysis skills to strictly essay exam questions that demonstrate well thought out research opinions, portfolio analysis and theory and ability to integrate a high level of technical analysis skills.
Candidates are allotted four hours to complete this last and rigorous exam. The pass rate is about 60 % historically. The cost is $450 and offered Spring and Fall. Passage of the ethics portion and a 70 % passing score will qualify a candidate to become a CMT. The designation will not be conferred until a candidate has achieved three years of work experience, joins the MTA and maintains $300 a year in annual dues.
To help candidates with their independent study, the MTA recommends books from masters such as Edwards and Magee: Technical Analysis of Stock Trends, Martin Pring: Tehnical Analysis Explained, Charles Kirkpatrick and Julie Dahlquist: Technical Analysis: The Complete Resource for Financial Market Technicians, David Aronson: Evidence Based Technical Analysis, Perry Kaufman: New Trading Systems and Methods and Frost and Prechter: Elliott Wave Principles.
All three exams require independent study. The MTA recommends 100 hours of study for exam 1, 140 hours for exam 2 and 160 for exam three. Yet they offer forums, mentor ships and webinars to help candidates further their comprehension and study.
Passage of exams 1 and 2 qualifies a candidate for a series 86 exemption. A Series 86 is a Research Analyst designation that addresses research reports and a candidate’s ability to conduct research so candidates no longer need to take this exam as of 2005 thanks to the National Association of Securities Dealers submittal of a rule that was accepted by the SEC and recognized by the exchanges.
Many CMT’S have moved forward with rich and rewarding careers. Some invented indicators or a unique trading methodology, some became teachers, analysts, mentors, authors. Some became independent traders while many work for the exchanges, hedge funds, firms and brokerages that cover many different markets. The opportunities are immense, the rewards great.
February 2010 Brian twomey
Brian Twomey is a currency trader and adjunct professor of Political Science at Gardner-Webb University.