Technically Speaking, December 2018 – January 2019

They say March comes in like a lion and goes out like a lamb. Well, 2018 came in like a lion and seems to have gone out like a lion, too. Check out this chart of the Dow’s daily true range going back to early 2016. Something is clearly different in 2018.


If there is one thing we can say about the markets, it’s that they’re like a box of chocolates. Okay – Forrest Gump, CMT, might have said that.

As we reach our stride with the new newsletter format, we still need your feedback. What do you like? What would you like to see? Drop us a line at And we could still use some volunteers to help with book, software and seminar reviews.

This month’s member interview is with two-time former past President Bruce Kamich. We’ve got the third, and final, installment of the reboot of Mark Eidem, CMT, CFA’s series on “Lessons from Dead Pilots,” again, which gives a fascinating comparison with traders.

And I did an interview with David Aferiat with a look at how TradeIdeas sees artificial intelligence coming to money management and trading. Don’t worry, you won’t be replaced (at least not yet).

Of course, there is plenty of Association and chapter news, plus a review by Tyler Wood of the recent ETF Global Conference.

Hope your holidays were relaxing, and may your New Year be your best yet!

Michael Kahn, CMT

What's Inside...

President's Corner: Technicians - Fight the Right Fight

As CMTs, we should focus on our contributions to a successful investment process and not get bogged down in philosophical...

Read More

Judgment for Traders: Lessons from Dead Pilots – Part 3

Originally published September 2000

In the past two months, I have introduced the thesis stating that the process of judgment...

Read More

Artificial Intelligence for Traders

Artificial Intelligence (AI) is not the spooky, self-aware robot technology you might think. Certainly, it is the driving force, pun...

Read More

Interview with Bruce Kamich, our Featured Technical Analyst

Please tell us what you do professionally.  I am a technical analyst for Jim Cramer – yeah, that Jim Cramer....

Read More

ETF Global – Portfolio Challenge and ETP Forum

The CMT Association recently partnered with ETF Global, a New York-based data, research and investment analytics platform, on two exciting...

Read More

December in CMT Association history

Friday, December 17, 2004 – Association members David, Krell, Barry Sine, Ken Tower and Ralph Acampora went before the Securities...

Read More

News from Around the CMT Association

Members on the Move

The CMT Association would like to congratulate the following members on their new positions:

  • Lovekush...
Read More

President's Corner: Technicians - Fight the Right Fight

As CMTs, we should focus on our contributions to a successful investment process and not get bogged down in philosophical debates.

Often times investors, and those that advise them, take sides and “fight” to see who is right. For technicians, this can be short-sighted thinking, because anyone can have success in the moment. Fighting the wrong fight takes a lot of energy and usually doesn’t result in much progress in terms of selling your ideas.

It’s not about technical vs. fundamental, or quant, or fusion. When you decide to fight, make sure you pick the right fight. This is especially true in the investment business when the number of technical jobs seems to be withering.

Start by taking a good look at how you and your CMT training can contribute to the investment process. Then consider how your involvement helps produce absolute or relative performance. Or, better yet, how does your involvement provide enhanced risk management?

That is the fight you should be having. Why? Because you will develop a reputation as a valued part of the investment process. You have an understanding of the investment mandate, and you can help get the team to the investment goal.

Make money, raise money, or save money. That’s good for your career.

The next step is figuring out how to fight the right fight. Here’s where I focus on:

Process – Having a process provides consistency. Processes can be explained to others, and this is very important to institutional investors. If you don’t have a process, then you have randomness. No one wants to invest using randomness.

Additionally, the body of knowledge offered in your CMT prep can be used to describe your process to anyone in any discipline – fundamental, technical, quantitative or otherwise. John Bollinger has spoken to the Association many times about being sound with your process, reasoning, and robust data. He’s right! While we’ve come a long way with this effort, we need to make it much more visible to fight the right fight.

Communication – Speak to your audience. To compete and cooperate takes knowing the methods and languages of others, including those of other investment methods. Be open-minded and spend some time learning more about the other disciplines so you can work with them to enhance, or supplement, their processes. Even more critical, if you appear in the media, you must be able to reach viewers with content that is understandable, relatable, useful and likeable. If you do, you will be asked back for another interview, or get lots of likes on social media. Seek to learn a little more about what you don’t know, while still communicating what you do know well.

Preparation – Success favors the prepared person. When you’re the most prepared, it will definitely show. Therefore, it is not unusual to dedicate two or more hours of solid preparation to every hour of investment committee, client or media time you get. Never just wing it, and, if possible, have data and visual support for your positions.

Think about your narrative from all sides. Think about the likely questions you will be asked after presenting your points. Know who the biggest opponents to your ideas will be, and find creative ways to address their concerns. Leave nothing to chance! These habits will paint you as a credible and formidable part of the investment process. This is fighting the right fight.

Why do I bring this topic up? Well, I see a lot of our peers fighting the wrong fights. In the end, it’s all about being useful to the investment process, and adding value to the process with actionable ideas.

Thinking forward, there’s also the threat of all the “automated insight” that proliferates by the nanosecond and is cheaper each day. Will you be the one buried by this trend when the algos, machines and artificial intelligence proliferate? If you fight the right fight and add real value, you cannot be replaced.

Scott Richter


Scott G. Richter, CMT, CFA, CHP

Scott Richter, CMT, CFA, CHP is a senior portfolio manager for Westfield, which manages over $4B in AUM.  He is the lead portfolio manager for alternative assets and is also responsible for investments in the energy and utility sectors.  He was formerly...

Judgment for Traders: Lessons from Dead Pilots – Part 3

Originally published September 2000

In the past two months, I have introduced the thesis stating that the process of judgment is identical for pilots and traders.  Furthermore, traders can learn from the errors in judgment that pilots have made which cost many their lives.  Traders can adapt the work done by the Federal Aviation Administration (FAA) on the judgment process to become aware of potential errors in judgment processes and implement the changes needed to correct those errors.

In past articles, I introduced The Five Hazardous Attitudes that each of us possesses to some degree:


Attitude What Someone Possessing This Attitude Might Say


“Don’t tell ME what to do!”
Impulsiveness “Oh no, this looks wrong.  I’ve got to do something RIGHT NOW!”


“That won’t happen to ME!”


“It hasn’t been done because I haven’t tried it yet!”

“Oh well, I guess it doesn’t matter now.”


I examined at the three factors that comprise the Judgment Environment – the framework within which pilots/traders make decisions.  This framework has three components:

  1. Environmental Factors – the big picture factors like weather or the markets.
  2. Mechanical Factors – machinery or systems that either work or do not work.
  3. Human Factors – those things that affect our own readiness for making decisions.

This month, I will introduce the last element in the judgment process: The Poor Judgment Chain.  I will also tie all these concepts together by reviewing the tragic crash that killed John F. Kennedy, Jr., his wife and sister-in-law.

The Poor Judgment Chain

The Poor Judgment Chain concept is based upon the simple premise that by making one error in judgment, an unintended result is the removal of one or more possible solutions.  Making one error in judgment also increases the probability of another error in judgment on top of the first one.  The key becomes breaking the Poor Judgment Chain.  Nearly all pilots can handle one problem or error, but very few can handle as many as three. 

For a pilot, the classic example is continuing a flight into deteriorating visibility, trying to get to his destination. This, in turn, removes his ability to fly by visual references and forces him to fly by instruments alone – which many pilots are not able to use effectively. 

For a trader, a classic example is failing to honor a stop, trying to get a profitable trade, which in turn removes the positive outcome of preserving his capital.  This error in judgment also increases the probability that the trader will make further errors in judgment with regard to exiting a losing trade, thereby preserving less and less capital.  While this sounds straightforward and common sense, how many traders, amateur and professional alike, have “killed” their capital by failing to honor stops? 


Why do pilots continue to fly into deteriorating visibility then crashing and dying, when it is common knowledge among pilots that this is a deadly error?  There is sometimes an overpowering desire to get to the destination that has come to be known as a state of mind called Get-There-Itis. 

This desire to get to the destination becomes such a powerful force that logic and sound decision-making are pushed aside in the name of reaching the goal.  This desire brings out the worst in a pilot’s Hazardous Attitudes and causes a pilot to fly when he knows he is not fully functional. Once a single error in judgment has been made, the Poor Judgment Chain keeps growing, compounding error upon error until disaster results.

For the trader, the process is identical, except that the overpowering state of mind should be called “P & L-itis.”  Perhaps the most extreme example of P & L-itis is Nicholas Leeson, who as a 28-year-old futures trader single-handedly brought down Barings Bank in February 1995 by losing $1.4 Billion. 

“By trading on a fraudulent account, numbered 88888, Leeson began to buy Nikkei 225 futures on a large scale in an attempt to almost single-handedly push up the Nikkei 225.  This proved unsuccessful and eventually Leeson’s losses were so large the bank eventually collapsed.1

Case Study: John F. Kennedy Jr.

The following information is extracted from the National Transportation Safety Board (NTSB) report and articles from The Washington Post from July 16 to July 31, 1999.

JFK Jr. obtained his private pilot certification in April 1998.  At the time of the crash, he had approximately 310 hours of flight time, which is considered to be relatively inexperienced as a pilot. 

Kennedy had purchased a much higher performance airplane less than three months earlier.  This airplane had a cruising speed of 160 knots as compared to 120 knots on the airplane he had most of his experience with, which means that he had to make decisions faster.  Additionally, it had more complex mechanical systems and instruments including an autopilot system.  This means that he had to deal with more variables in his decisions.  He had only 36 hours in this new airplane, 33 hours with a flight instructor on board, and only three hours by himself and not even a full hour of experience by himself at night. 

Six weeks before the crash, he broke his left ankle. The cast was removed only one day before the crash. Witnesses reported the pilot was using crutches while loading luggage.  After working a full day in New York City, he met his wife and sister-in-law at the airport in Caldwell, NJ.  They had all been delayed by heavy traffic out of New York on a Friday night, which delayed takeoff until after dark. 

He obtained a weather briefing two hours before takeoff, which indicated acceptable weather conditions for the flight.  He did not file a flight plan, which was not required by law.  His last known radio communication occurred less than 30 seconds after takeoff.  This means he did not request in-flight weather updates, nor did he request assistance of any kind from Air Traffic Control (ATC).  He flew along the Connecticut and Rhode Island coastline, then across 30 miles of ocean towards Martha’s Vineyard.  The NTSB recreated the last 7 minutes of the flight from radar tracking data and determined that the airplane began a right turn that resulted in a loss of control of the airplane with “increasing bank angle, rate of descent and airspeed.” 

The NTSB determined the probable cause of the crash to be “the pilot’s failure to maintain control of the airplane during a descent over water at night.”

Lessons from “The Judgment Process”

The following are primarily the opinions of the author.  My purpose is education, by applying The Judgment Process to this case, and not criticism of the pilot.

First, let us examine which of The Five Hazardous Attitudes may be inferred:


Attitude Indicators from this Case
Anti-Authority No Flight Plan.  No requests for Air Traffic Control (ATC) assistance.
Invulnerability Success in other areas of life.  Relatively inexperienced as a pilot, yet had “I can do it” attitude despite late departure and injury.
Macho His flight instructor had offered to fly with him that night and he declined, saying “He wanted to do it alone.” (From NTSB report)
Impulsiveness None
Resignation None


Next, let us examine the three components that comprise the Judgment Environment.

  1. Environmental Factors: The actual weather was far worse than forecast, primarily due to thick haze on a dark, moonless night.  Three pilots flying in the same area that night reported being unable to fly by visual references.  These pilot reports were available from ATC simply by asking over the radio while in flight.
  2. Mechanical Factors: The NTSB reported that all systems on the airplane were operating normally at the time of impact.
  3. Human Factors: There were problems in two of the seven areas of evaluation.  This is certainly enough to raise caution flags and to lean towards aborting the flight.


A broken ankle certainly counts as an illness.
M Medication None reported
S Stress None Reported
A Alcohol None reported
F Fatigue Probably.  A late departure AFTER a full day of work.
E Eating Cannot determine from information available.


Finally, let us examine with the benefit of hindsight, The Poor Judgment Chain. 

The first link in the chain was to take off at all, given the Hazardous Attitudes and Human Factors involved.  The next links were the decisions to not file a flight plan and not request ATC weather advisories en route.   Had the pilot known of the worse-than-forecast weather, he MAY have decided to divert to another airport on the mainland and NOT continue across 30 miles of ocean at night. 

Of course, “Get-There-Itis” was a significant factor in that decision.  The final link was the pilot’s inability to maintain control of the airplane solely by reference to instruments. 

I trust this case study illustrates how these concepts are intertwined.  In this case, the Hazardous Attitudes of “Macho” and “Invulnerability” were the driving forces in making the flight at all and declining a flight instructor’s assistance, despite the late departure, his injury and inexperience with his new airplane. 

The Hazardous Attitude of “Anti-Authority” caused the pilot to cut off the only source of weather information that might have caused him to divert to a safe airport.  The Environmental Factor of worse-than-forecast visibility proved to be a critical problem.  The Human Factors of “Illness” and “Fatigue” certainly contributed to the unfortunate outcome.  “Get-There-Itis” was a silent partner in forging The Poor Judgment Chain to the point where it could not be broken.

A Trading Analogy

In order to parallel the case of JFK Jr., the analogy must come from the ranks of amateur investors.  However, The Judgment Process applies equally to all, professional or amateur, pilot or trader.

An individual has been successful in his professional life and wants to take up investing.  He/she completes an investment course at the local college (private pilot).  He joins an investment club and is successful buying and holding stocks over a few months (relatively inexperienced).  He begins trading options on his own (new high-performance airplane).  He experiences the 2nd Quarter of 2000, sustains heavy losses and margin calls that wipe out his accounts (fatal crash).  Many of the same elements of The Judgment Process would apply, although space does not permit going into greater detail.

I hope this series has been enlightening and that it will add value to your trading efforts.  Good luck, good trading and most of all, good judgment!


1 Gross, Felicia, “Systemic Risk in the Financial Markets,” Duke Journal of Economics, Spring 1996, Volume VIII.

Note:  This article is adapted from a publication “Pilot Judgment,” by the Federal Aviation Administration, now out of print.



Mark Eidem, CMT, CFA

Mark Eidem, who holds the Chartered Market Technician (CMT) designation, is a Regional Manager with Charles Schwab Trading Solutions. He is a 1978 graduate of West Point and was previously a retail broker in Anchorage for over a decade. He has served as...

Artificial Intelligence for Traders

Artificial Intelligence (AI) is not the spooky, self-aware robot technology you might think. Certainly, it is the driving force, pun fully intended, in autonomous vehicles, a.k.a. self-driving cars. The software and sensors essentially replace humans in assessing the environment and making decisions concerning the operation of the vehicle. AI can make decisions much faster than humans, but its body of experience is still lagging. In other words, its creators cannot possibly program every possibility that might arise, and it will be up to the software to learn from its mistakes – or near misses – in order to cope.

Of course, self-driving cars cannot make mistakes except perhaps for hitting a small pothole. Traders cannot make big mistakes either but have the luxury of trading small, or even just on paper, while they learn.

Trading AI runs simulations for every possible condition, then back tests and optimizes the results. It can cover far more of the market than a human can and take external factors into account, as well.

As with all new technologies, AI creates fear from uncertainty. But as Paul Tudor Jones said, “No man is better than a machine, and no machine is better than a man with a machine.”

AI, robots, self-driving cars and more might displace some functions of the human, but they free that human up to perform more higher-level thinking.

The Disruption Timeline

Traders are quite familiar with the disruption of new technology and changes in standards.

  • 1970s-80s – Early technical indicators (RSI, MACD, Bollinger Bands) changed price analysis and early stock bond futures trading changed risk management
  • 5/1/75, also known as May Day, was the end of fixed trading commissions
  • 1990s – Electronic day trading starts, ETFs become popular
  • 2001 – Decimalization. Stocks went from trading in 1/8s to pennies.
  • 2010 – High Frequency Trading
  • Today and beyond – AI, Robo-management (Robo advice will reach $2-3 trillion AUM by 2020 from $18.7 billion today)

Why use AI?

Portfolio managers and traders seeking to secure alpha in today’s complex regulatory, technology, and competitive landscape are moving beyond algorithms to advanced artificial intelligence tools. David Aferiat, Managing Partner at Trade Ideas LLC, said that his company’s software delivers specific trading strategies daily based on simulations across 50 trading scenarios and 10 million trades.

Trade Ideas’ AI decision tool, HOLLY, analyzes the U.S. equity market; setting and optimizing strategies across multiple data sets (e.g., technical, fundamental) and non-structured ones (i.e., news, social, earnings, etc.); and simultaneously predicting likely outcomes.

Performing over 10 million simulated trades overnight, it chooses six to seven of the best probable algorithms likely to produce alpha.

The beauty of AI is that unlike humans, its calculations pick up on changing market conditions. Traders joke that they “pray in the church of what’s working now.” With AI, that church is always changing, and therefore always “working.”

Of course, we humans do not like to be replaced and fortunately machines and software need instructions. They’ve not yet evolved to being able to program themselves, like in the movies. The important point is that humans can use AI as a tool to implement their strategies better and to stay abreast of market changes.

In fact, Aferiat reported that 56% of traders surveyed use AI to inform decisions: 1/3 of that group uses AI for executing trades, while 2/3 use it for idea generation.

This article only brushed the surface of how traders might interact with AI. Members are encouraged to first, keep an open mind, and second, learn more about artificial intelligence and how it can augment, not replace, what they already do.


Michael Kahn, CMT

Michael Kahn, who holds a Chartered Market Technician (CMT) designation, is a seasoned financial services strategist, analyst, columnist, educator and speaker.  Michael has been working with charts and technical analysis since 1986. He is the author of three books on technical analysis...

ETF Global – Portfolio Challenge and ETP Forum

The CMT Association recently partnered with ETF Global, a New York-based data, research and investment analytics platform, on two exciting initiatives to support education and industry professionals.

After a successful launch three years ago, the ETF Global Portfolio Challenge expanded to include thousands of students from six continents and 400 schools. The Portfolio Challenge is a web-based simulated investment competition designed to serve as an educational tool to help students understand market dynamics and learn about investing in Exchange-Traded Products. The CMT Association proudly supports the practical experience of a portfolio competition.

How it works…

Student investors construct a portfolio of four to 10 ETPs based on nominal assets under management (AUM) of one hundred thousand dollars ($100,000). Throughout the semester-long competition, players attempt to pick the top-performing ETPs. Each participant is evaluated on the investment performance of their respective virtual portfolio. Given the focus on ETP products, student competitors must understand technical concepts such as relative strength, sector rotation, trend and momentum to outperform their peers.

The ETF Global Portfolio Challenge takes place semi-annually. The top five winners from each contest are recognized in person at the leading ETF industry conference.

The most recent ETP Forum was held at the New York City Athletic Club on November 29. This comprehensive one-day program was built upon the premise of allowing advisors & institutions the opportunity to take a deep dive into the most relevant investment themes of the current market environment. Students from Keuka College and Professor Steven Barber were recognized in front of more than 500 industry professionals for their impressive skill in this semester’s Portfolio Challenge.

While the conference was predominantly investment professionals, ETF Global recognizes that academic theories and research are often at the forefront of financial breakthroughs and paradigm shifts. Tyler Wood moderated a panel discussion on ETF Thought Leadership in Academia with Ayan Bhattacharya, Assistant Professor, Dept. of Economics & Finance, Baruch College; Henry T. C. Hu, Allan Shivers Chair in Law of Banking and Finance, University of Texas at Austin School of Law; Ronnee Ades, Master of Quantitative Finance Program, Rutgers Business School; and Vladyslav Sushko, Economist, Committee on the Global Financial System, Bank for International Settlements. 

This panel of academic experts in Exchange-Traded Products (ETPs) discussed their most recent studies, analyses, observations and findings to offer perspectives on where the industry is heading.

  • Hu put forth a new regulatory framework for ETP issuers in June which would minimize overall regulatory and compliance hurdles while making disclosures uniform for these unique products.
  • The conversation around liquidity issues and dislocations at periods of volatility and sentiment extremes was a key debate for the panelists and the audience.
  • The panelists also discussed the threshold for passive index-tracking funds given that less than 10% of all ETPs are actively managed investment vehicles.
  • Opportunities for new products in both the active category and across emerging markets were key takeaways for attendees as well.

For CMT Association members involved in academia or in contact with schools in their local area, we encourage participation in this program as a practical exercise for students to learn about markets and money management. For more information, please visit:

As a preferred partner, ETF Global would also like to extend an exclusive offer to CMT Members for access to their data services. CMTs are afforded access to ETFG ( and the DDI for 6 months free and then a preferred rate of $20/month (50% discount from the published subscription price). Subscriptions may be annual or quarterly.

Photos From the Event

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Tyler Wood, CMT

Tyler Wood serves as Managing Director of CMT Association with the aim of elevating investors’ mastery and skill in mitigating market risk and maximizing return in capital markets through a rigorous credentialing process, professional ethics, and continuous education. He is a seasoned business...

December in CMT Association history

Friday, December 17, 2004 – Association members David, Krell, Barry Sine, Ken Tower and Ralph Acampora went before the Securities and Exchange Commission (SEC) to defend technical analysis against the Sarbanes-Oxley Law that was passed in January of that year. This historic event led to the SEC accepting technical analysis as a legitimate body of knowledge in March 2005. Now the technical CMT designation is on par with the fundamental CFA certification.


Michael Kahn, CMT

Michael Kahn, who holds a Chartered Market Technician (CMT) designation, is a seasoned financial services strategist, analyst, columnist, educator and speaker.  Michael has been working with charts and technical analysis since 1986. He is the author of three books on technical analysis...

News from Around the CMT Association

Members on the Move

The CMT Association would like to congratulate the following members on their new positions:

  • Lovekush Kumar, Assistant Manager at Motilal Oswal Financial Services Ltd
  • Tim Foli, CFP®, CMT, Portfolio Manager, Vice President at Regions Bank
  • Bryan Baratian, Analyst at Talson Capital Management LP
  • Steven E. Orr, Portfolio Manager at Elevate Capital Advisors
  • Aleksandar Bozic, Wiley Campus Ambassador at Wiley

CMT News

Over 1,130 candidates sat for the CMT exams during the December 2018 test administration.  Prometric will email the results to the candidates in mid-January.

The next test administration will take place May 31 to June 9, 2019.

  • Levels I & II – May 31 – June 9, 2019
  • Level III – June 6, 2019

Registration for the June 2019 test administration will open on January 3rd and closes on May 9th.

  • Early registration is from 1/3 to 2/4
  • Standard registration is from 2/5 to 4/1
  • Late registration is from 4/2 to 5/9

The CMT Association would like to congratulate the following members who received their CMT Designation in November of 2018:

  • Ber Ato
  • Rod Barit
  • Walker Heagney
  • Andrew Litzerman
  • Muhammad Majeed
  • Gregory Meitler


Marie Penza

Marie Penza serves as the Director of Member Services for the CMT Association.