Prospective personal finance and portfolio management professionals have an assortment of designations that can improve their expertise in their respective fields. Foreign exchange traders, on the other hand, do not always have similar access to the same types of comprehensive skills improving programs, such as the Certified Financial Planner and Chartered Market Analyst designations.

Nonetheless, there are several advanced education alternatives that forex traders can take advantage of to improve their efficiency in the field.

Key Takeaways

  • Several educational programs help forex traders enhance their skills and broaden their knowledge within their field.
  • The Chartered Financial Analyst program includes learning objectives focused on forex topics.
  • The CMT program emphasizes practical applications of chart patterns, which most forex traders understand.
  • The Commodities Futures Trading Commission requires that certain traders pass the Series 34 Retail Off-Exchange Forex exam.

Chartered Financial Analyst (CFA)

Although the CFA program is primarily focused on equity valuation and portfolio management, some of the most important learning objectives are dependent on a working knowledge of forex-related concepts.

For example, CFA candidates must learn how to consolidate the financial statements of a corporation which generates income in foreign markets, how currency movements affect equity risk, forecasting exchange rates, and the basics fundamentals which drive the forex market. Based on its difficulty and diverse objectives of the CFA program, charter holders have proved their ability to learn complex financial material and hold a solid understanding of the overall industry.

Managing forex exposure is an integral component of the portfolio management process. While some managers may take a passive approach to foreign exchange rate risk optimization, major institutions will often actively employ a qualified manager to hedge the currency risk associated with holding international investments.

As international diversification becomes a growing component of the portfolio management process, the CFA program addresses many of the key issues investors must be familiar with.

Financial Risk Manager (FRM)

The FRM program also covers a diverse spectrum of quantitative topics, such as valuation and risk modeling, risk management, credit risk measurements, and market risk measurement.

Those who obtain the Financial Risk Manager designation become exposed to a wide variety of career opportunities, such as investment risk management and risk analysis. Bank, government, and hedge fund operations are heavily impacted by the forex market and thus require experts in risk management.

Almost every major multinational organization devotes efforts to mitigate the effects of adverse foreign exchange fluctuations. Wal-Mart, for example, might buy its inputs from China in yuan and sell those goods to Mexican buyers, receiving pesos.

If the yuan appreciates while the peso depreciates relative to the US dollar, Wal-Mart would experience a double foreign exchange loss on the purchase and subsequent sale. Firstly, more dollars would have to be spent to buy the Chinese goods, and less would be received from Mexican buyers. Since such fluctuation would significantly hinder the performance of the company, the risk exposure must be hedged appropriately.

Chartered Market Technician (CMT)

Being able to understand Fibonacci patterns, Bollinger Bands®, pivot points, candlestick formations, Elliott Waves, and other charting patterns is a common trait among successful forex traders.

Speculators, who typically implement such technical analysis strategies, comprise the largest component of daily forex trading volumes. The Chartered Market Technician program aims to improve the technical analysis skills of those who hold the designation. Similar to the CFA and FRM programs, the CMT exams place a heavy emphasis on understanding practical applications of chart patterns.

Technical analysis can be used either for personal portfolio purposes or for complimenting the fundamental strategies of institutions. Charts may often help analysts understand the unique behavioral components of currency pairs, which can be used to predict and forecast future forex movements. After learning how to integrate charting patterns with various economic signals, charter holders gain a strong competitive edge when implementing complex trading strategies.

Doctor of Philosophy (Ph.D.)

A Ph.D. in almost any quantitative discipline, such as mathematics, statistics, finance, or economics, can prove to be extremely useful for forex traders. Many forex risk management models rely heavily on an excessive number of calculations and sensitivity inputs.

A Monte Carlo simulation, for example, often requires thousands of possible variable manipulations to most effectively model the performance of a position. Even fully understanding more basic analysis tools, such as value at risk models, requires a strong mathematical foundation.

Those who obtained a Ph.D. in economics will often be familiar with econometrics and economic trend forecasting. These skills are transferable to improving one's abilities in the forex market due to the close correlation between economic policy and exchange rates. If, for example, an economist predicts that European inflation is likely to fall due to strict monetary policy, the appropriate position can easily be determined.

Series 34

Passing the Series 34 Retail Off-Exchange Forex exam is nowhere near as difficult as obtaining any one of the three aforementioned designations or completing a Ph.D.

Series 34 comprises 40 multiple choice questions that cover topics such as forex trading calculations, forex regulatory requirements, and basic forex indicators. Although this exam covers only the basics of the forex market, it is a requirement for those working with retail customers.

The Commodities Futures Trading Commission (CFTC) requires that individuals who sell forex products to retail customers need to pass the Series 34 exam. This includes "persons who solicit orders, exercise discretionary trading authority, and operate pools with respect to off-exchange retail forex."

The Bottom Line

The forex market offers many diverse career opportunities that will often dictate the required extra credentials to break into the field. Brokers will typically seek the series 34, hedge fund quants are likely to hold PhDs, risk managers tend to pursue the FRM designation, institutional investors are likely to benefit from the CFA designation, and traders frequently take the CMT path. Ambitious finance individuals may even combine numerous designations and programs to best suit their needs.