Chartered Market Technician (CMT) is a designation for technical analysts awarded by the CMT Association. Those who earn a CMT demonstrate mastery of investment risk in portfolio management, including quantitative approaches to market research and rules-based trading system design and testing.
In the article below, we will review the steps to earning a CMT designation.
- A Chartered Market Technician (CMT) is a designation for professional technical analysts awarded by the CMT Association.
- CMT holders possess the knowledge and skills to be able to conduct research, author research reports, and recommend trades from a variety of financial instruments and markets.
- Candidates must pass three levels of exams to earn a CMT designation.
- Candidates who pass CMT Levels I and II qualify for an exemption from the Series 86, which is one of two exams to become a registered research analyst.
Understanding the Chartered Market Technician Designation
The CMT certifies that its holders possess a comprehensive body of knowledge of technical skills to be able to conduct research, author research reports, recommend trades and investment programs from a wide variety of financial instruments and markets, and even trade their own accounts.
The CMT encompasses more than the ability to read a chart. Preparation for the CMT Level I exam takes in subject matter such as: the basic principles of technical analysis; Dow Theory; breakouts, stops and retracements; moving averages; bar chart patterns; volume analysis; confirmation; point-and-figure charting; wave principle; and Elliot Wave Theory, among other areas.
From there, with preparation for the CMT Level II exam, candidates begin to concentrate more on theory and analysis. This includes chart development and analysis; volatility measures; behavioral finance; statistical applications for technical analysts; technical methods and market selection; and designing and testing technical trading systems.
By the time candidates are preparing for CMT Level III, they are learning to integrate what've they learned from several knowledge areas. This includes risk management; asset relationships; portfolio management; behavioral finance; volatility analysis; and classical methods of technical analysis.
What is described above covers only a small portion of the technical skills learned from the three exams needed to become a CMT. The exams in themselves test a much wider knowledge of technical skills and analysis.
Passing the CMT Exam
Official curriculum for the CMT exams are available through Wiley. While not all of the material in the readings are covered in the exams, all questions are drawn from the curriculum. Candidates are not required to memorize all the formulas for the technical analysis indictors. However, they should have a critical understanding of the price and volume inputs for each formula, the core of the formula's calculation, and how similar indicators differ.
In addition, all three levels of the CMT exam covers the CFA Institute's Code of Ethics and Standards of Professional Conduct. To prepare, candidates are encouraged to review the CFA Institute's Standards of Practice Handbook. Ethics encompasses factors of public trust, such as the handling of research reports and inside information. The ethics questions are comprehensive and shouldn't be treated lightly.
The CMT Level I exam tests introductory concepts and terminology in technical analysis. The exam is 132 multiple choice questions, of which 120 are scored and the remaining 12 are under trial for use in future exams. Candidates have two hours to complete the exam.
The CMT Level II exam covers theory and analysis of applied technical analysis. The exam is a grueling 170 multiple choice questions, of which 150 are scored. Candidates have four hours to complete the exam.
The CMT Level III exam tests the candidate's ability to integrate concepts and tools into the application of technical analysis. The exam is organized into groups that require candidates to combine two or more areas of knowledge. Each group contains three to seven questions. Some questions are multiple choice. Others require short answers, in which candidates must state and justify their analysis in a written response. Candidates have four hours to complete the exam.
All three exams require independent study. The CMT Association recommends 80-120 hours of study for Level I; 100-140 hours for Level II; and 120-160 hours for Level III. The association does not offer or endorse any prep courses. However, it does offer forums, mentorships and webinars to help candidates further their comprehension and study.
In the past, the exams had a pass rate of about 70%. However, pass rates may vary by one to three percentage points, as questions are reviewed for accuracy and comprehensibility. The Level III exam takes longer to score because of the written response format, which is graded by two sets of subject matter experts.
After passing all three exams, candidates must obtain three sponsors, only one of whom may come from the candidate's current firm. In addition, candidates must become a member of the CMT Association and achieve at least three years of work experience before receiving their designation.
Series 86 Exemption
In 2005, the Financial Industry Regulatory Authority (FINRA) submitted a rule filing with the Securities and Exchange Commission to accept passage of CMT Levels I and II as an alternative to the Series 86 exam. To qualify for the exemption, you must have worked continuously as a technical research analyst since passing your Level II, or you passed your Level II within two years of your application for registration as a research analyst.
The Series 86 and 87 exams test a candidate's ability to perform the four major job functions of a research analyst, which are: information and data collection; analysis, modeling and valuation; preparation of research reports; and dissemination of information.
CMT Exam Fees
There is a one-time fee of $250 to enroll in the CMT Program, which is paid when you plan to take your first test. Holders of a Chartered Financial Analysts (CFA) designation may skip CMT Level I. However, they still are required to pay the $250 enrollment fee.
Curriculum fees cost $225 and up. The annual membership to join the CMT Association is $325 for affiliates and professionals and $100 for college students.
Registration fees for CMT Association members are as follows:
|Members||Level I||Level II||Level III|
Registration fees for non-members are as follows:
|Non-members||Level I||Level II||Level III|
Source: CMT Association.
The Bottom Line
Many CMTs have moved forward with rich and rewarding careers. Some invented indicators or a unique trading methodology. Others became teachers, analysts, mentors and authors. Some became independent traders, while many work for stocks exchanges, hedge funds, firms and brokerages that cover many different markets. The opportunities are immense and the rewards are great.
CMT Association. "Regulatory Recognition."
Financial Industry Regulatory Authority. "Series 86 and 87 – Research Analyst Exams."
CMT Association. "CMT Level I 2021 Exam Information & Learning Objective Statements," Pages 2-6.
CMT Association. "CMT Level II 2021 Exam Information & Learning Objective Statements," Pages 2-10.
CMT Association. "CMT Level III 2021 Exam Information & Learning Objective Statements," Pages 2-10.
CMT Association. "Policies and Procedures."
CMT Association. "Policies and Procedures - Exam Prep."
CMT Association. "Policies and Procedures - CMT Designation."
CMT Association. "Enroll in the CMT Program."
CMT Association. "Policies and Procedures - Program Fees."