Chartered Market Technician

Trading is a perfectly legitimate way to make money. It just requires a different skill set. I personally think it is harder to do right, but that’s probably because of my emotional makeup and educational background that prioritizes more fundamental (typically macro) types of thinking.
I’ve been thinking about doing the CMT, not for the letters, but just to have a better structured understanding of how technical analysis works. I think there are plenty of asset classes - currencies, commodities, and broad equity indices for which TA is a highly plausible system.
 
How many of you have ever purchased a stock without looking at a chart first? Very few.
 
CFA and CMT charterholder here. I can’t believe there’s anyone that believes fully in rational markets after the real estate bubble and the dot com bubble. Unless, of course, you never actually watched the markets on a full-time basis.
At a minimum, TA gives fundamentally-biased investors some checkpoints on their analyses…if a stock is such a good investment, why is it going down, huh? hmm? well?
 
#1 Gunner Wrote:
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> How many of you have ever purchased a stock
> without looking at a chart first? Very few.
You’re my #1 Gunner because I agree.
 
Both aren’t mutually exclusive. You should be able to do both. Right now I’d say the CMT requires half the study time of the CFA, but I expect in a couple of years that’s going to change dramatically. There is a trend towards statistical evaluation of trading systems and rules.
 
#1 Gunner Wrote:
——————————————————-
> How many of you have ever purchased a stock
> without looking at a chart first? Very few.
I’m guilty of looking at charts before I buy. But its always over a long period. how the stock trades within the year or 3 years i can ignore and I do.
However, i look at the chart to see guage the market value changes of the firm and how well the fundamentals have tracked the stock. i can basically do without this piece of information.
However, i do look at how how the P/E multiple has changed and guage sentiment over the years.
TA from my understanding, uses the chart as the main source of information in buying a stock. Their definition of “expensive’ or “cheap” is based purely on the trading pattern. I’m not guilty of this whatsoever.
 
just in the same way you can’t assume that a CFA charterholder is a value investor, you cannot assume a CFA charterholder believes in EMH, whether it be weak, semi or strong form. technical analysis is taught in the CFA cirriculum and my year’s books (2007-2009) included maybe 100 pgs of TA material. compared to my boss’s books (1991-1993), which had none allocated to TA, its a big step up. i agree with CFAI’s stance to keep TA as a small portion as in the greater scale of investing, it should be a minor part of the decision making process.
sure, momentum might tell you to sell a stock, but if its trading at 20% of fair value, it’d be stupid to sell if there is a good probability of it returning to fair value within a reasonable time frame. the bottom line is that the big money needs to focus on the fundamentals b/c they’re moving millions and billions, not thousands like us normal folks in our trading accounts, or for us more talented traders, a few million in our prop trading accounts, and their market impact can often change momentum.
fundamentals will almost always fail in bubble and depressionary periods (times of investor panic and euphoria), but will almost always prevail in normal periods. if you’re trading bubbles and panics, technical is best. if you’re trading a normal market, fundamental is best.
 
This past decade…how many periods of “normal” did we have? Correlations changed, and almost went to 1 last year. Accounting practices have been under scrutiny. Firms that had a positive fair value went out of business. MPT & EMH have been criticized, asset allocation called into question.
I don’t think we need to throw all these things out, but perhaps we need to rethink how we manage our investors’ risk especially during periods of market volatility. For example…in a conservative portfolio there are now wealth advisors who add small VIX components…taking a small bet on volatility could help to create alpha in a low rate environment.
I’d be curious to know what components of fundamental analysis have changed or are being changed given the past decade? Or do we assume that the past decade can be eliminated from required or expected return calculations as it was simply an outlier?
Thanks in advance for your thoughts…
 
In general, i don’t think anything has really changed except for the time the market took to recover. Warren Buffet is still right and the value approach still works.
there were basement bargain prices for stocks in march, too bad the markets didn’t stay at those valuations forever.
 
“The value approach still works”
It does, well, until it doesn’t. Wait’ll you try selling a value methodology to someone when the market is in go-go mode (1993-2000). You will starve, just like your clients, if they don’t leave you. They are probably hedging their bets by investing with a growth manager, though, while still listening to you spout happy cr@p about your philosophy.
 
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