Chartered Market Technician (CMT) Program Level III
The CMT Level III exam will test the candidates ability to integrate their understanding of concepts
identified in Level I studies with the practical application learned in Level II studies. The Level III exam
requires candidates to implement critical analysis to arrive at well-supported recommendations in an
investing/trading context. A successful Level III candidate demonstrates they are ready to apply technical
analysis in an institutional setting.
The CMT Level III exam is in short answer format and is computerized. Price information, data, and
charts will be on screen and printed copies will also be provided. All candidates must be pass the Ethics
portion of the exam to be successful.
Exam time length: 4 hours, 15 minutes
Exam format: Short Answer
The curriculum is organized into exam specific knowledge domains that provide a framework for
recognizing and implementing investment/trading decisions. CMT Level III exam tests the candidates
knowledge in seven domains:
1.
2.
3.
4.
5.
6.
7.
Risk Management
Asset Relationships
Portfolio Management
Classical Methods
Behavioral Finance
Volatility Analysis
Ethics
CMT Chartered Market Technician | Level III
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CMT Level III Exam Topics & Question Weightings
1. Risk Management
a. risk management (e.g., basics of probability and
statistics, basics of modeling risk factors, number of
assets and impact on portfolio, managing risk through
correlation, value-at-risk, performance and risk
metrics, market volatility and fat-tailed distributions,
correlation and diversification, managing individual
trade risk, managing risk for an entire portfolio)
b. position sizing
c.
21%
quantitative and statistical analysis
d. system development and testing
2. Asset Relationships
a. intermarket analysis
18%
b. relative strength
c.
3. Portfolio Management
4. Classical Methods
sector rotation
a. portfolio management (performance measurement,
portfolio allocation, asset correlation, asset allocation,
alternative investments, risk management with
alternatives)
a. sentiment
18%
21%
b. market breadth
c.
market forecasting
d. price patterns
e. volume study and analysis
f.
candlestick analysis
g. oscillators or various technical studies
5. Behavioral Finance
a. behavioral finance
10%
6. Volatility Analysis
a. volatility analysis
7%
7. Ethics
a. ethics
5%
CMT Chartered Market Technician | Level III
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CMT Level III Exam - Learning Objectives
1. Risk Management
basics of probability and statistics
basics of modeling risk factors
number of assets and impact on portfolio
correlation and diversification
value-at-risk
performance and risk metrics
Explain how to measure probability of price change and
returns over a given time frame.
Explain how to model various risk factors
Explain the impact of varying the number of assets and
positions in a portfolio.
Analyze and explain the difference of risk between two
different asset classes
Critique diversification approaches based on correlations
Evaluate the application of VaR
Critique the use of performance and risk metrics based on a
given objective
2. Asset Relationships
Analyze fat-tailed distributions among returns data
Calculate the amount of money at risk of being lost in a
specified scenario.
Calculate the amount of money at risk in a portfolio based
on a specified scenario
Explain how to change the risk in a scenario by adjusting
the size of an investment position
Differentiate between random and nonrandom trends in
data from system performance.
Interpret data from a system test to determine lack of
randomness in the results
Analyze and explain the difference of risk between two
different asset classes.
intermarket analysis
Analyze correlations between two or more asset classes
sector rotation
Forecast possible progression of a business cycle model
Analyze and interpret relative strength of asset classes
Analyze and interpret relative strength of Stock sectors
Analyze and interpret relative strength of individual
securities
market volatility and fat-tailed distributions
managing individual trade risk
managing risk for an entire portfolio
position sizing
quantitative and statistical analysis
system development and testing
relative strength
3. Portfolio Management
performance measurement
tactical asset allocation
asset correlation
alternative investments
CMT Chartered Market Technician | Level III
Explain the differences of various performance metrics and
why one is more suitable than another for a given
objective.
Evaluate performance data from returns generated by
investment or trading.
Prepare a recommendation or other response based on
asset correlation data
Explain the characteristics of different alternative
investment types and why a portfolio manager might
consider using them
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4. Classical Methods
sentiment
Interpret investor sentiment from a given set of charts and
data
market breadth
Identify and Interpret measures of market breadth
price patterns
Evaluate and interpret price patterns of a given chart
volume study and analysis
Interpret volume signals from given charts and data
candlestick analysis
Identify and interpret candlestick patterns to help in building
a forecast or recommendation
6. Volatility Analysis
Identify and Interpret signals from various oscillators from
given charts
Forecast market trends and trend changes based on given
charts displaying any combination of classical methods
Discuss cognitive limitations investors often face
Critique a given investment selection process for influence
of behavioral biases
Distinguish between cognitive errors and emotional biases
Contrast different measures of volatility Interpret changes
in volatility as a signal useful for forecasting Explain how
volatility can be an integral part of a market forecast
7. Ethics
Code of Ethics and Standards of Professional Conduct
oscillators or various technical studies
market forecasting
5. Behavioral Finance
CMT Chartered Market Technician | Level III
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Listed below is an alternative reading list for the CMT Level III exam. The official readings are
contained in the forthcoming custom text published by Wiley due out in July. The CMT candidate is
responsible for knowing and understanding the entire list of reading assignments.
As part of our ongoing re-investment in the CMT Program, we have entered into a publishing agreement with
John Wiley & Sons to publish a custom text for each level of the CMT exams. Each level-specific text will be
available through Wiley in eBook format in July 2015. As our publisher, Wiley is working diligently to produce a
top quality offering as quickly as possible. We will continue to update you as we receive more detailed
information.
With any change to established practices, there are some challenges. Making the transition simple and easy
for candidates currently enrolled is one of our highest priorities. For candidates who have already purchased
some of the books from the required reading lists or for those interested in starting their preparation for the
October administration immediately, we have detailed a modified reading list below.
Please note, the content and curriculum topics covered in the books listed for each level will correspond to the
same learning objectives and topics as seen in the custom text that will be published by Wiley. The specific
readings and authors may vary from the reading list below. Both methods of study are equivalent and will
cover the same topics and prepare you for the exams.
**************************************************************************************
CMT LEVEL III Alternative Reading List
CMT Chartered Market Technician | Level III
OR
Wiley Custom Curriculum
Page 5
CMT Level III Exam Alternative Reading List
1. Elder, Alexander: The New Trading for a Living, John Wiley & Sons, Inc., c. 2014, ISBN: 978-1-118-44392-7
Chapter:
39
2.
Kaufman, Perry J: Trading Systems and Methods, 5th Edition, John Wiley & Sons, Inc., c. 2005, 2013, ISBN:
978-1-118-04356-1
Chapters:
13-23
3. Katsanos, Markos: Intermarket Trading Strategies, John Wiley & Sons, Ltd., c. 2008, ISBN: 978-0-47075810-6
Chapters:
1-9
4. Ciana, Paul: New Frontiers in Technical Analysis, John Wiley & Sons, Inc., c. 2011, ISBN: 978-1-57660-376-5
Chapter:
2
5. Weigand, Robert A.: Applied Equity Analysis and Portfolio Management, John Wiley & Sons, Inc., c. 2014,
ISBN: 9781118630914
Chapter:
1
6.
Aronson, David R.: Evidence-Based Technical Analysis, John Wiley & Sons, Inc., c. 2006, 2007, ISBN-13:
978-0-470-00874-4, ISBN-10:0-470-00874-1
Chapter:
7
7. Burton, Edwin T and Shah, Sunit N.: Behavioral Finance, Understanding the Social, Cognitive, and
Economic Debates, John Wiley & Sons, Inc., c. 2013, ISBN: 978-1-118-30019-0
Chapters:
12-13
8.
Montier, James: Behavioral Investing: A Practitioners Guide to Applying Behavioral Finance, John Wiley &
Sons, Inc., ISBN-10: 0470516704, ISBN-13: 978-0470516706
Chapters:
15 and 17
CMT Chartered Market Technician | Level III
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9.
Brown, Constance M.: Technical Analysis for the Trading Professional 2nd Edition, McGraw-Hill, c. 2012,
ISBN-10: 007175914X; ISBN-13: 978-0071759144
Chapters:
1-2
10. Nison, Steve: Japanese Candlestick Charting Techniques, 2nd Edition, New York Institute of Finance, c.
2001, ISBN: 0-7352-0181-1
Chapters:
10-17
11. Asness, Clifford S. and Frazzini, Andrea and Israel, Ronen and Moskowitz, Tobias J., Fact, Fiction and
Momentum Investing (May 9, 2014). Journal of Portfolio Management, Fall 2014 (40th Anniversary Issue).
12. Code of Ethics and Standards of Professional Conduct
CMT Chartered Market Technician | Level III
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