How Useful Is the CFA For A Day Trading Career?
The Chartered Financial Analyst is one of the most sought after and well-recognized credentials in the financial community. The program is notorious for its high attrition rates, level of difficulty, and time commitment necessary to successfully pass and earn the coveted designation of CFA. However, for anyone looking to begin a career day trading, the CFA program's scientific approach to investment analysis may seem largely at odds with the fast-paced world of speculation. While the CFA is by no means necessary for a career in day trading, the wealth of information learned through the CFA program will not hinder a potential day trader, and it can serve as an additional tool in their arsenal to tackle the challenges of navigating markets.
The CFA Curriculum and Careers.
The CFA program is known for its academic rigor and thorough presentation of the tools and techniques necessary to become a financial analyst. There are three levels of the CFA exam that must be completed, along with four years of applicable work experience in order to earn the designation of Chartered Financial Analyst. The breakdown of the three CFA exam levels are as follows:
2015 Exam Topic Weights.
Ethical and Professional Standards.
Financial Reporting and Analysis.
Portfolio Management and Wealth Planning.
As you can see, the Level I curriculum covers a fairly equal weight of topics with an emphasis on ethics (which is throughout all three levels) and financial reporting and analysis (FRA). FRA in Level I is focused on learning the terms, techniques, and analysis of financial statements as reported by a company. It lays the groundwork for equity analysis, forecasts, and portfolio management in the following levels. While Level I covers abroad array of financial topics, Level II expands upon the major topics of Level I with an emphasis on the valuation of assets. Finally, Level III consists of applying all that was covered in the last two levels to successfully manage a portfolio consisting of multiple asset classes. This emphasis on portfolio management is evident by the fact that the most popular career choice of CFA charterholders is that of portfolio manager (22%), with research analyst coming in second (15%). It is worth noting that traders compromise of just 3% of all charterholders. Below is a table from the CFA Institute that highlights the broad career paths of its member charterholders as of 2014:
Day Trading Principles and Techniques.
Day trading is speculative in nature, and occupies the shortest time frame when compared to swing traders and investors. Since day traders rarely (if ever) hold their positions overnight, they must have a thorough understanding of price and volume data and technical analysis. Because of technical analysis’ all-encompassing nature, day traders can easily transition between asset classes, as long as these assets adhere to the overarching laws of supply and demand. Thus, day traders can feel pretty comfortable trading equities, derivatives, and forex. Some common strategies employed by day traders are:
Candlesticks : Day traders usually employ candlestick charting techniques in their analysis within ranges between 30 seconds to five minutes. Furthermore, day traders generally follow candlestick patterns such as dojis and hammers (signaling a trend reversals), “piercing” patterns, and “engulfing” patterns. Moving Averages : Depending on the trader’s style, there can be several moving averages employed to determine the trend of a stock. A common usage of both simple and exponential moving averages are their crossovers, for both buy and sell signals, and using the moving averages as support and resistance guidelines. Indicators and Oscillators : The moving average convergence divergence (MACD), Bollinger Bands and the Relative Strength Index (RSI) are common indicators that can lead to buy and sell signals. Patterns and Support and Resistance : Day traders may employ any of the various types of patterns common in technical analysis. Common patterns used include the head and shoulders, cups and handles, flags/pennants, and double and triple tops and bottoms. Support and resistance can be calculated in a number of ways, but the most commonly used methods are Fibonacci retracements and pivot points.
As day traders utilize technical analysis almost exclusively in lieu of the fundamentals, there is neither the time to ascertain the “why” behind an asset’s movement within such short time spans, nor is there a need, as technical analysis emphasizes that all information about the asset is already reflected in its price and volume. The CFA curriculum follows a contrasting philosophy, with a heavy emphasis on diligent fundamental research geared towards portfolio management—a world in which trading such short time spans is neither encouraged nor generally accepted. Moreover, all the information presented in the CFAI materials has been thoroughly researched or validated and developed through empirical means. The CFA curriculum consists of hard science and calculations that focus on objective data. Technical analysis is subjective in nature and controversial in its validity. Although this is not to say that it is ineffective . Technical analysis can be viewed as an art as opposed to the CFA curriculum’s science.
Therefore, the day trader would be better served learning the nuances of technical analysis straight from specialized sources that deal in the matter and actually day trading (or sim trading), as opposed to trying to hone their craft through the CFAI materials. In fact, the CFAI devotes a very small (and basic) section to technical analysis in Level I only. Furthermore, there are certain crucial concepts that a day trader must understand that can only be learned through actual day trades, or through resources dedicated to these concepts. The CFAI curriculum, while incredibly thorough in its material, simply does not have time to include all the common concepts that day traders may encounter on a daily basis, such as stock scalping, short squeezes, high-frequency finance and the properties of trading algorithms, option pin risks and volatility around option expiration dates, level II analysis, and general order placements. Most importantly, the CFA requires a recommended commitment of 300 hours of studying per level to pass each exam, as well as four years of applicable work experience. If you are committed to becoming a successful day trader, these 900 + total hours, along with the years of experience, would be better served actually day trading and studying the materials directly applicable to day trading as opposed to the CFA exam, especially during the initial stages of one's career.
The Benefit of a CFA for Day Traders.
Although day traders may very well be on the opposite end of the finance spectrum from portfolio managers and analysts, the CFA does contain a wealth of information about the financial topics, and this extra information can never be a hindrance. Any trader that wishes to be a student of the markets can find incredible value in the CFAI materials that can be immediately added to their trading repertoire or as a reference point to guide their decision making. For instance, if an earnings report was released in the pre-market, the day trader can use any of the FRA techniques from the CFA to make sense of how this will play out for the stock during the day. Furthermore, successful completion of the CFA exams can showcase a trader’s knowledge of a broad array of financial concepts that can impress future employers or mentors.
Traders employed in professional firms, may also have to use economic, equity valuation, and fixed income concepts to make sense of the orders they receive from the portfolio management teams. The tools from the CFA curriculum can also be used by day traders to conduct diligent equity research for investments that span a longer time period, and even the most die-hard market technician may find concepts that align with their beliefs, such as the CFAI’s coverage of behavioral finance.
The CFA program is focused on conducting diligent research on a variety of asset classes, which is reflected by the majority of charterholders pursuing careers in portfolio management or research positions. By contrast, day traders have little time to conduct research, nor are they concerned with the fundamentals behind an asset’s movement. Therefore, the CFA program may seem slow and rigid compared to the fast-paced world of charts and chaos that the day trader thrives in. However, because of the CFAI’s thorough presentation of financial topics, it can be beneficial to day traders to pursue the CFA Charter, especially for future career transitions or to simply acquire more knowledge about the markets.
Foreign Exchange.
6. Financial Statements 7. Financial Ratios 8. Assets 9. Liabilities 10. Red Flags.
16. Alternative Investments 17. Portfolio Management.
Direct and Indirect Methods of Foreign Exchange Quotations.
With the direct method of foreign exchange quotation, the exchange rate is expressed as the number of units of the domestic currency needed to acquire one (1.0) unit of the pertinent foreign currency. Within the U. S., this method is also referred to as quoting exchange rates in American (U. S.) terms.
With the indirect method of foreign exchange quotation, the exchange rate is expressed as the number of units of the pertinent foreign currency needed to acquire one (1.0) unit of the domestic currency. In the U. S., this method is referred to as quoting the exchange rate in foreign terms.
Memorize these definitions! Note that the two methods are reciprocals of one another.
Forex Trading.
The foreign exchange market (forex, FX, or currency market) is a global decentralized market for the trading of currencies. This includes all aspects of buying, selling and exchanging currencies at current or determined prices. In terms of volume of trading, it is by far the largest market in the world.
©2016 Forex Trading.
Forex Trading.
XAF to EUR.
Exchange rate, the price for which Central African CFA Franc BEAC is exchanged for Euro.
As of 2017-12-14, 100 XAF = 0.15 EUR which also means 100 Central African CFA Franc BEAC = 0.15 Euro.
100 Central African CFA Franc BEAC to Euro exchange rates.
100 Central African CFA Franc BEAC to Euro chart.
Currency converter.
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CFA Institute – 2018 Level I Curriculum.
CFA Institute – 2018 Level I Curriculum.
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Product Description.
CFA Institute – 2018 Level I Curriculum.
Clear, concise instruction for all CFA Level I concepts and competencies for the 2018 exam.
The same official curricula that CFA Program candidates receive with program registration is now publicly available for purchase. CFA Program Curriculum 2018 Level I, Volumes 1-6 provides the complete Level I Curriculum for the 2018 exam, delivering the Candidate Body of Knowledge (CBOK) with expert instruction on all 10 topic areas of the CFA Program. Fundamental concepts are explained in-depth with a heavily visual style, while cases and examples demonstrate how concepts apply in real-world scenarios. Coverage includes ethical and professional standards, quantitative analysis, economics, financial reporting and analysis, corporate finance, equities, fixed income, derivatives, alternative investments, and portfolio management, all organized into individual sessions with clearly defined Learning Outcome Statements. Charts, graphs, figures, diagrams, and financial statements illustrate concepts to facilitate retention, and practice questions provide the opportunity to gauge your understanding while reinforcing important concepts.
Learning Outcome Statement checklists guide readers to important concepts to derive from the readings Embedded case studies and examples throughout demonstrate practical application of concepts Figures, diagrams, and additional commentary make difficult concepts accessible Practice problems support learning and retention.
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