Education focused on technical analysis better enables financial advisors to assess sophisticated investment strategies grounded in rules-based parameters.

W​hen it comes to actively managed investment portfolios, expertise in fundamental analysis isn’t enough to be successful. A substantial grounding in technical analysis is also important.

An article in U.S. News and World Report noted the growing importance of understanding technical analysis for financial advisors:

“Technical analysis is covered briefly in financial advisor and broker licensing exams. But understanding the critical role it plays in today’s public markets takes further investigation.

“In the past, advisors could get away with dismissing charting as some sort of mystical practice. But it’s becoming more apparent that technical analysis, or the art and science of making investment decisions based on price-chart patterns, is driving markets like never before.

“Algorithmic traders, hedge funds and other new players that dominate day-to-day buying and selling activity are employing a heavy dose of price-trend analysis. So, in minding your clients’ assets, you can either get in sync with what those market forces are watching, or you can put your clients at their mercy. You don’t want to be the last one in the know, but the good news is you don’t have to be.”

According to the CMT Association, technical analysis provides the tools to successfully navigate the gap between intrinsic value and market price across all asset classes through a disciplined, systematic approach to market behavior and the law of supply and demand.

For financial advisors offering actively managed portfolios to their clients—whether primarily managing investments themselves or leveraging the expertise of a third-party manager—a strong grasp of both fundamental and technical analysis enhances their ability to evaluate modern, sophisticated, rules-based strategies. This knowledge is particularly important when assessing the strategic offerings of various third-party investment firms.

Fortunately, current and aspiring financial advisors can take advantage of various educational programs centered around technical analysis. This article will focus on the Chartered Market Technician (CMT) credential offered by the CMT Association and Golden Gate University’s technical analysis concentration in its Master of Science (MS) in Finance program.

The philosophy behind the CMT program

The Chartered Market Technician (CMT) credential, offered by the CMT Association in New York City, is the global designation for practitioners of technical analysis. The credential is awarded to those who demonstrate mastery of a core body of knowledge of investment risk in portfolio management settings. The program consists of three comprehensive study and examination levels.

The CMT Association describes its mission as follows:

“The Chartered Market Technician (CMT) designation marks the highest education within the discipline and is the preeminent designation for practitioners of technical analysis worldwide. Our market philosophy is grounded in behavioral economics and extends beyond classical pattern recognition techniques to include quantitative approaches to market research and rules-based trading system design and testing. Technical analysis provides the tools to successfully navigate the gap between intrinsic value and market price across all asset classes through a disciplined, systematic approach to market behavior and the law of supply and demand.”

David Lundgren, CMT, CFA, member of the CMT Association’s board of directors, and the founder and chief strategist at MOTR Capital Management & Research, shared his insights into the role and benefits of technical analysis:

“Technical analysis is an expression of the opinion of the market with respect to the fundamentals of the underlying security. If fundamentals are positive, then the security over time will trend higher. If the fundamentals are negative, the security over time will trend negatively. So, at the end of the day, I’d like to think that the market is the best fundamental analyst in the business, which is why it’s so hard to beat.

“The whole premise is to not necessarily change who you are as a fundamental investor but to add the market’s opinion to your workflow so that you can incorporate the opinion of one of the smartest investors in the business.

“The idea is to try to find companies that are compelling to you in your own framework, whatever that may be from a fundamental perspective—whether it’s growth or value or some combination. Then find companies on your list that you want to buy where the market agrees with you vis-à-vis a positive price trend.

“By just incorporating the opinion of the market, you’re ultimately trying to ensure that you don’t have left-tail events in your portfolio, which are stocks that go down a lot and undermine all the good things you’re doing in your portfolio. It’s about guarding yourself against those moments when your fundamental analysis is either wrong or, at least, early—if not very early—which is expressed by the markets as a downtrend in the security price.

“You’re just looking for confluence—where you’re already comfortable owning the security, but then finding agreement between your opinion and the markets.

“When you have a bear market, it’s not surprising to see low volatility sectors and industries go down less than the market—that’s the base case assumption heading into a bear market.

“Try to find those industries and stocks that have high volatility but are actually doing better than might be expected during a bear market. That’s the market’s way of telling you that when the bear market is over, these industries and stocks should outperform in the next bull market.

“For example, in the last bear market that started in early 2022, industrials, generally a higher volatility sector, began outperforming almost on the day that the bear market started, and this has lasted through 2024. In hindsight, we see that the sector’s outperformance during the bear market was driven by the industries that now benefit from all of that legislation that was passed through Congress, including the Infrastructure Investment and Jobs Act and the Inflation Reduction Act.

“That’s how you listen to the market.

“One of the most important categories of analysis that you learn about in the CMT program is behavioral bias—recognizing those moments in time where the impulse to do the thing that feels the most right at that moment is almost always the wrong thing to do. These tendencies, over long periods of time, can undermine the investment decision-making process and therefore strongly deteriorate a client’s returns.

“There’s an entire section in the CMT program geared toward helping advisors and investors recognize and guard against those behavioral biases. You can’t get rid of them—nobody should be striving for that—but you need to be able to recognize those moments when you’re being most human—when you’re more likely about to undermine your long-term returns.”​

The value a successful advisor found in technical analysis and the CMT program

One advisor who completed the CMT program is Adam Koos, CFP, CMT, president and portfolio manager at Libertas Wealth Management Group Inc. based in Columbus, Ohio. Koos explains how learning about technical analysis can help advisors—whether or not they actively manage portfolios themselves:

“After almost two decades in money management, completing the CMT program was probably the most intense but rewarding experience I’ve ever put myself through.

“The CMT program is grounded in behavioral finance and extends well beyond classical pattern-recognition techniques to include quantitative approaches to market research and rules-based trading-system design and analysis. The curriculum is challenging, to say the least.

“After completing the program, I was far more prepared to understand how to evaluate and implement a technical-analysis-based, tactical portfolio-management approach, with a strong emphasis on trend following and relative strength.

“Do I think technical analysis is a superior method of portfolio management compared to others in the industry? Yes. But whether you are a financial advisor or wealth manager, treating your money-management philosophy as an inflexible and omniscient science is not the answer. I have come to understand over the years that managing every single portfolio model exclusively using technical analysis was not always going to work.

“Almost every portfolio manager, wealth manager, and financial advisory firm offers ‘buy and hold’ strategic models that diversify by asset class, sector, country, market cap, and style. But what if you could offer both strategic and active investment management, providing an additional layer of diversification by ‘management style?’ Tactical strategies, combined with more strategic portfolio approaches, can offer the potential for lower drawdowns and volatility, multiple layers of diversification, and enhanced risk-adjusted returns.

“And the best part? You don’t have to tackle this task on your own, as I tend to do. Several experienced and reputable third-party investment managers exist that can handle all or part of this wealth-management solution for your clients and your firm—with you providing due diligence and comprehensive portfolio review and oversight.

“These managers can offer access to modern analytical strategies, emphasis on risk mitigation, and the ability to make client portfolios more responsive to changing market conditions over full market cycles.”

Golden Gate University’s specialized degree program

The technical analysis concentration within the Master of Science in Finance program at San Francisco-based Golden Gate University (GCU) focuses on using chart analysis, technical indicators, and statistical analysis to identify patterns and make investment decisions. The disciplined application of these methods is used to analyze past market data and evaluate the potential for future price movements.

Golden Gate University’s course description says, “Technical analysis is often used in conjunction with other forms of analysis, such as fundamental analysis, to make informed investment decisions. This concentration covers the disciplines of chart pattern analysis, trend identification, momentum indicators, oscillators, moving averages, sentiment, and risk management. Investment methodology development and peak performance trading are studied. This concentration prepares students to become skilled in interpreting financial data and making informed investment decisions.”

Anitha Manohar, chair of the GGU’s finance and economics department, explains how the program can benefit both newcomers to the discipline and seasoned financial advisors:

“With fundamental analysis, essentially you’re assuming the markets are going to be rational in some form. But behavioral finance has shown us that markets do behave irrationally, and that’s where technical analysis serves a role. It helps you to judge market sentiment to check whether you’re going in the right direction.

“Our classes are being taught by industry professionals, so our students get hands-on experience from veterans in the field.

“In addition to our MS program in finance, we also have MS programs in financial analytics and financial planning, and some students in those other programs take the technical analysis courses as electives.”

A GGU student shares his experience with the program

Nick Chong, a Golden Gate student pursuing an MS in finance with the technical analysis concentration, shares why this particular area of study will boost his skills and enhance his career development:

“I’m currently a pension program manager for the California State Teachers Retirement System in West Sacramento, and I divide my time between there and GGU in San Francisco. My Golden Gate education has helped me foresee great and impactful career opportunities at work, but I’m also open to whatever life may offer me, including possibly serving as a financial advisor.

“When investing, you at some point hear and learn about the fundamentals of a stock, but fundamentals alone don’t provide a completely clear picture because of how quarterly earnings may change the fundamental outlook and resulting stock price. As quarterly earnings reflect specific time segments within a company’s trading history, I appreciate that technical analysis provides additional clarity to how investors view stock price action and identify price trends and signals. From a viewpoint of price action, I appreciate how technical analysis clarifies and reduces noise.

“My professors at Golden Gate University have been great and are the embodiment of caring adjunct professors because all of them work within the finance sector in addition to teaching finance courses. I sincerely appreciate their pragmatic style of teaching, which really resonates with me.

“In addition to being great course instructors, many of my Golden Gate professors have become finance mentors. I can talk shop with them about their own experiences in their financial careers, which further makes the course material resonate.

“I see myself obtaining the CMT credential in the future. By the time I finish this concentration, I should be ready to take the Level 1 exam, before going on to the other levels.

“The connections that I’ve made so far during my two years at GGU have opened so many networking doors. The mentors I’ve met through GGU and networking in New York City and the East Coast are very impressed with the depth of learning in the MS in Finance program, including the technical analysis concentration. It’s affirming to have the opportunity to work towards something that is widely recognized, especially within the membership of the CMT Association.”

An industry veteran’s perspective on technical analysis

Peter Mauthe, an investment and business consultant and strategist with 50 years of experience in a variety of significant positions in the investment industry, shared his background and experience with technical analysis and investment management:

“My career in finance started in 1974 when I began trading for a living to help pay my way through college. Since then, I’ve been an independent market maker on the Chicago Board Options Exchange; cofounded and led many financial firms across the nation; served as president of the American Association of Professional Technical Analysts; and was president, chairman, and director of the National Association of Active Investment Managers (NAAIM).

“I describe myself as ‘an evangelist for active investment management.’ A key underpinning of today’s sophisticated active investment management is the application of advanced technical analytical principles.

“While there are many worthy organizations in the field of technical analysis, professional investment education, and active investment management, I am pleased to comment on the programs at Golden Gate University and the CMT.

“I know several of the instructors in the master’s program at Golden Gate University and know they bring a wealth of technical knowledge and valuable real-life experience to their courses and students. I also am very familiar with the CMT organization, having personally contributed to their monthly publication. Their conferences have a very strong reputation in the industry, featuring a diverse array of highly accomplished speakers. I have had long professional relationships with many CMT members and speakers. The CMT has a proud history as a preeminent educational and credentialing organization.

“Over the years, I have worked with hundreds of financial advisors all across the U.S. I can say with certainty that financial advisors who advance their professional knowledge in the area of technical analysis have a distinct advantage over their peers in evaluating the sophisticated active strategies offered by today’s elite third-party investment management firms.”​

The opinions expressed in this article are those of the author and the sources cited and do not necessarily represent the views of Proactive Advisor Magazine. This material is presented for educational purposes only.

CMT and Chartered Market Technician are registered trademarks owned by CMT Association. CFA and Chartered Financial Analyst are registered trademarks of the CFA Institute. CFP is a registered trademark of the Certified Financial Planner Board of Standards Inc. (CFP Board).