CMT Level III Exam Study Guide (2026)
Everything the CMT Level III Exam (Chartered Market Technician) tests, topic by topic: what each section covers, the facts that come up most, and how to study it. Pair it with the free 15-question practice test.
The exam at a glance
| Questions | Grouped items (3 to 7 per group): some multiple choice, most short written answers |
|---|---|
| Time | 4 hours |
| Passing score | Not published. The CMT Association sets the passing standard; practise to 70% or higher |
| Format | Closed book, computer-based |
| Certifying body | CMT Association |
| Test provider | Prometric (test center or ProProctor remote proctoring) |
Mind map: the whole exam on one screen
Read the complete CMT Level III study notes for “Risk Management and Position Sizing”
Our first full set of comprehensive notes, about 14 minutes of reading: Sizing by risk, not by dollars · The drawdown math · Choosing the stop and the order type · Thinking at the portfolio level · Writing the answer, a worked exam example, the traps examiners use and a one-minute recap. Create a free account to read it and see how premium notes work before you decide.
1. Risk Management and Position Sizing
Managing the money at risk: sizing methods, stops, drawdowns and portfolio-level risk. Level III often asks you to calculate and then justify a sizing decision.
Key facts
- Fixed-fractional sizing risks the same share of equity per trade; volatility-adjusted sizing uses ATR or standard deviation to set the stop and size.
- Drawdown recovery is asymmetric: −20% needs +25%, −30% needs about +43%, −50% needs +100%.
- Stop market orders guarantee execution, not price; stop-limit orders guarantee price, not execution.
- Correlated positions add up: five highly correlated longs behave like one large position.
- Value at risk estimates the loss not exceeded at a given confidence over a period, but says nothing about the size of tail losses.
- A written trading plan sets entry, stop, target and size before the trade, which limits emotional decisions.
Flashcards
Exam tip: Short-answer risk questions want a number and a reason. Show the calculation in one line, then one sentence of justification.
2. Asset Relationships and Intermarket Analysis
How asset classes and sectors interact through the business cycle, and how to use those links when building an analysis.
Key facts
- The classic sequence at turning points: bonds, then stocks, then commodities.
- A strong dollar tends to weigh on commodities and on US multinationals' overseas earnings.
- Credit spreads widening usually signals rising risk aversion and often leads equity weakness.
- Sector leadership rotates through the cycle: early cyclicals, late-cycle commodities, defensives in contraction.
- Correlations change over time; a relationship that held for a decade can break in a different inflation regime.
- Intermarket signals give context and probabilities, not precise timing.
Flashcards
Exam tip: When asked to justify an intermarket view, name the relationship and the condition it depends on (for example, a disinflationary environment).
3. Portfolio Management and Strategy
Turning technical analysis into portfolio decisions: trend filters, relative strength rotation, rebalancing and fitting strategies to client needs.
Key facts
- Trend-following filters (for example a 200-day average) cut drawdowns in long bear markets but whipsaw in ranges.
- Relative strength rotation holds the strongest assets; its main risk is sharp leadership reversals.
- Rebalancing controls risk drift; calendar and threshold-based rebalancing are the common methods.
- Recommendations start from the client's objectives, time horizon, constraints and risk tolerance.
- Benchmark choice matters: performance should be judged against a benchmark that matches the strategy.
- Combining uncorrelated strategies can lower total portfolio volatility.
Flashcards
Exam tip: Strategy questions reward balanced answers: state the benefit, the cost and when the strategy fits.
Test yourself on these topics
Take the free 15-question CMT Level III test, then save your results to unlock your Readiness Score and the mistakes bank.
4. Behavioral Finance in Practice
Recognizing biases in yourself, clients and markets, and using sentiment extremes in analysis.
Key facts
- Loss aversion and the sunk-cost effect lead traders to average down on losers.
- Overconfidence leads to over-trading and oversized positions.
Flashcards
Exam tip: Name the bias and the behavior that shows it. Level III answers score on the link between the two.
5. Classical Methods and Integrated Analysis
Combining patterns, trends, indicators, volume, point-and-figure and time frames into one coherent view of a market.
Key facts
- Weight evidence by time frame: longer-term signals carry more weight than short-term ones.
- Confirmation from volume, breadth or momentum strengthens a price signal; non-confirmation weakens it.
Flashcards
Exam tip: Structure every written answer the same way: what you see, what it means, what you'd do and where you'd be wrong.
6. Ethics and Professional Standards
The CMT Code of Ethics and Standards of Professional Conduct, applied to research, client dealings and personal trading.
Key facts
- Act with integrity and competence, and put clients' interests before your own.
- Have a reasonable and adequate basis for every recommendation and keep records supporting it.
Flashcards
Exam tip: Ethics answers follow one test: does this protect the client and tell the truth? If not, it's a violation.
How to pass
- Most items are short written answers: make a list, state and justify your analysis, or show a calculation. Practise writing answers in a few clear lines.
- Each group weaves domains together, for example a chart reading plus a position-sizing calculation plus an ethics point. Read the whole group before answering.
- Answer exactly what's asked. If a question asks for two reasons, give two; extra points don't earn extra marks.
- Our practice questions are multiple choice on the same reasoning. After each one, explain the answer to yourself in one or two sentences, as you would on the exam.
Frequently asked questions
How long should I study for the CMT Level III exam?
Most working candidates need 4 to 8 weeks at 45 to 60 minutes a day. Book your exam once your Readiness Score has stayed at 80 or higher for about a week.
Can I take the CMT Level III exam online?
Yes. CMT exams are delivered at Prometric test centers or online through Prometric's ProProctor remote proctoring. Format: closed book, computer-based. Check the current CMT Program Guide for the rules.
What score do I need to pass the CMT Level III exam?
Not published. The CMT Association sets the passing standard; practise to 70% or higher. The exam has grouped items (3 to 7 per group): some multiple choice, most short written answers and a time limit of 4 hours.
What are the most tested topics?
The outline covers risk management and position sizing, asset relationships and intermarket analysis, portfolio management and strategy, behavioral finance in practice, classical methods and integrated analysis, ethics and professional standards. Use the free practice test to see which ones you need most.
The premium CMT Level III study path
Premium CMT Level III prep is studied one topic at a time. Each step starts with that topic's key notes and flashcard deck, then its own question sets of 25, so you master one topic before you move to the next. When every topic is strong, the 6 full mock exams show you're ready.
Your step-by-step study path
- 1Risk Management and Position Sizing10 key notes, 135 flashcards, then 500 practice questions in 20 sets of 25Notes free with an account
- 2Asset Relationships and Intermarket Analysis10 key notes, 135 flashcards, then 500 practice questions in 20 sets of 25Premium
- 3Portfolio Management and Strategy10 key notes, 135 flashcards, then 500 practice questions in 20 sets of 25Premium
- 4Behavioral Finance in Practice10 key notes, 135 flashcards, then 500 practice questions in 20 sets of 25Premium
- 5Classical Methods and Integrated Analysis10 key notes, 130 flashcards, then 500 practice questions in 20 sets of 25Premium
- 6Ethics and Professional Standards10 key notes, 130 flashcards, then 500 practice questions in 20 sets of 25Premium
- Final step: 6 full mock exams50 questions each, timed like test day. Pass them, then book your exam.Premium
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- Video lessons as they release
- Content updates during your access
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Renews once a year until you cancel. We email you before each renewal. Cancel any time from your account; you keep access until the end of the year you've paid for.
Summarized from the CMT Association's official candidate information and the rules cited, checked October 2026. Confirm current requirements with CMT Association.