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6 ways how the CFA designation can help upcoming stocks or derivatives traders.

The majority of candidates pursuing the CFA designation intend to work for a large firm or financial institution. This is why people are often puzzled when they hear about an independent trader who is a Charterholder. Although I started the CFA process as an employee at a large financial institution, I completed it while working independently as a option trader. Although the main benefit pursued by a CFA candidate is the increased employability, there are numerous benefits the professional designation will yield to a trader. I personally know many stock and option traders that would greatly benefit from the knowledge and recognition imparted from the CFA program. I also know a few Charterholders who are independent traders. Therefore, the CFA might still be a good option if you do not wish to pursue a “standard” 9 to 5 job working for a large financial institution.

Here are six ways in which I personally profited from the CFA as an independent trader:

1- Increased Credibility

Even if I do not work with the general public, credibility is always important. Some traders may which to manage assets for investors and having a respected professional designation definitely helps. As a trader you may also interact with other traders/investors and since anyone and even their brother can call himself a trader, being a CFA Chartherholder gives you an aura of authority even if your actual skills could well be same or even inferior.

2- In-Depth Knowledge

The CFA curriculum does not cover many tools and strategies used by actual traders such as technical analysis and complex option spreads. However, I guarantee that you will learn material that will make you a more balanced trader that you probably wouldn’t have learned elsewhere. It is true that virtually all the material included in the CFA can be learned online absolutely for free. The reality is that most people would not make the effort to sift through the gargantuan amount of information online. Besides this arguement can be said for all areas of studies, I could potentially acquire the same knowledge as a brain surgeon by spending hours studying online. The truth is a study program such as the CFA gives you a structured, detailed and complete package to acquire the vast majority of knowledge you would need when operating in the investment field.

3- Useful Skills

In addition to the investment related knowledge imparted in the CFA program, there are numerous skills that can potentially benefit any trader. Specifically, your business as a trader could become more professional and structured by implementing proper performance measurement and a more methodical investment/trading approach. The CFA curriculum covers materials that are underestimated (and often overlooked) by many traders who lack a proper structure. This could impact your longevity as a trader considering the short life expectancy of this career path.

4- Broader Knowledge

In addition to increased knowledge in investments and useful trading skills, the CFA includes, especially at level 1, material in an array of topics outside of asset management and investments. These include quantitative analysis, economics and financial reporting. Although most traders may not need to master these domains in order to be successful, I personally believe that the more you know on related fields, the better trader you can become. For example, a better grasp of economics can help you better understand the impact of economic news on stocks and therefore improve your decision making process. Understanding quantitative analysis will help you better calculate your risk and test the historical performance of your trading strategies. Being aware of behavioral biases may steer you away from irrational decisions that would be financially detrimental to you and your portfolios.

5- Backup Plan

I know I said in a previous post that pursuing the CFA designation as a backup plan is generally a bad idea. However, if you are and independent trader, you are already benefiting from the CFA. If you are passionate about gardening and you are studying for the CFA as a backup plan in case you cannot find a job as a gardener, I would strongly advice against it. On the other hand, if you are already working independently in the investment field, the CFA gives you recognition that you can use to find a well respected job in the financial world if trading does not work out. As long as you continue being a CFA member, you can always benefit from the credibility of this designation to return to the job market.

6- Networking Opportunity

I mentioned earlier that I know other CFA members who trade for a living. This type of connection is very important in any career, but crucial in a such a lonely endeavor as trading. When you become a member, your local CFA society will bombard you with invites to events where you can meet and mingle with other CFA members. I found the potential for networking and the feeling of being part of a respectable community to be an invaluable assets to a trader.

I remember that when I decided to become a full time trader, I was hesitant to continue fighting for the CFA designation. I spent some time debating if it is worth the trouble since I wouldn’t need to use it to impress a potential employer. Although the decision was made easier by the fact that I only had the third exam to go through at that point, I am certainly glad I made that choice.

I felt it was valuable to share my views since I know there is a significant amount of  people out there who enjoy finance but also enjoy independence and do not plan on working for someone else for the rest of their careers. I hope it was useful in deciding whether or not the CFA adds value to you as a current or future trader.

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This Post Has One Comment
  1. Hi , thanks for the article.

    I am independent retail trader that moved into an office with a ex-banker partner / pension fund trustee. As you written in the article , CFA is not necessary for trading . I am looking forward to it when my allocations become 8 or 9 digits or when we meet institutional prospectives.

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