Passing FINRA Regulatory Exams: My experience with the Series 3 and Series 34 tests

Recently I came to a point in my trading career where managing significant amounts of third party trading capital became a necessity. Managing personal, family-and-friends and small amounts of third party capital – as allowed by law before registration in the US for example – has been enough for me up until now but now that I have established a much more powerful algo trading methodology and have the potential to easily manage much more complex setups it became clear that the next step is to obtain the Commodity Trading Advisor (CTA) designation to be able to manage large amounts of third party trading capital in the US (although the US, CTA designation is recognized under other jurisdictions as well). The first step to achieve this goal was to pass the Series 3 and Series 34 FINRA exams, which fulfill the proficiency requirement for what I want to do: management of trading accounts in the Forex market.

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First let me talk a bit about the exams. The Series 3 and Series 34 exams measure your proficiency in general futures/options market knowledge and regulations (Series 3) and your knowledge about Forex trading, regulations and calculations (Series 34). The first exam has around 120 questions and takes 2 hours to take while the second exam has only 40 questions and is taken in around 1 hour. In the first exam there are two main sections, one about futures/options trading and the second about regulations, you need to get above 70% on both of these sections to pass the exam while on the Series 34 you just need a global score above 70% for passing.

The actual content for these exams is not very challenging although a significant amount of time is required to gain the confidence needed to pass the exams. I would say that if you plan to take these exams start studying with 3-4 weeks notice. In my experience the studying materials and practice exams also made a big difference so make sure you get yourself some nice books and practice tests. In the case of the Series 3 there is a bunch of material available online. I bought this book and these practice exams (only the practice exams, the book they sell is not worth it), I also took the 10 USD practice test offered by Kaplan and took the free practice test available from investopedia. None of these materials were extremely close to what was asked within the test but together they do encompass most of what you will find on the actual Series 3 exam. In particular I read the book’s regulatory section around 3 times through a space of 3 weeks, to properly assimilate all the content that you should memorize.

For the Series 3 exam for me the most difficult part were the option calculations (which I had never done) and learning terminology such as bull call spreads, strangles, straddles, credit spreads, debit spreads, etc. Make sure you know your options well as well as when an option spread is bullish, when it’s bearish, when it’s a credit/debit spread, etc. Futures calculations and hedging calculations are also quite important so make sure you know how to calculate these and also know your basic stuff well. You should easily be able to tell whose long/short the basis, who needs to buy/sell futures to hedge a given position, etc. When it comes to regulations you can often make an educated guess if you don’t know the answer by guessing what is most strict or benefits the customer the most. This will not be correct 100% of the time but if you don’t know the answer then this is a good technique to increase your chances of guessing right.

The series 34 has much less material available online. I bought these questions and also this practice test plus studying material and just made sure I read the studying material several times to get everything right. The first link contains around 180 practice questions while the second link contains several small quizzes plus two final 40 question exams you can use to judge your progress. I read the material first, then did the quizzes from this material, then the 180 questions from the first link and then the two practice exams for the second test. I repeated the taking of the final 40 question exams and the 180 questions around 5 times, spaced by a couple of days so that I wouldn’t fall into the trap of memorizing the test.

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When doing practice exams for the Series 3 and Series 34 this is also an important piece of advice, do not take the practice exams very frequently until you get 100% because this won’t measure your ability to pass the exams but your ability to memorize questions. Try not repeating the practice tests until a few days have passed so that you forget the questions/answers and then repeat the tests. Also leave an exam for the Series 3 and the Series 34 unused until you have taken all other exams several times and are scoring in the high 80s, this way you can use these final practice exams as a closer proxy for your final test. However once you take them make sure you also take advantage of them and take them a few times spaced by a few days as well.

I scheduled both of my exams earlier this month in Miami. You can take the series 3 and series 34 on the same day. The Series 3 takes longer so it’s usually harder to find a date for this exam so if you want to take both exams on the same day schedule your Series 3 and then your Series 34 exam. Remember to fill your Forms and schedule your exam at least 3 weeks prior to the date when you want to take the exam, otherwise you run the risk of not finding a spot to take them. Remember that the test centers where you take these exams also allow the taking of a variety of other exams (not only FINRA exams but exams for many other government and private entities) so make sure you schedule with ample time.

Happily I was able to pass both of these exams :o). I got an 82 on the Series 3 and an 84 on the Series 34, meaning that I now fill the proficiency requirements to register for the CTA designation to manage Forex trading accounts. This will probably happen sometime within the next 12 months as other things also need to happen (such as the registration of my trading firm, etc). I hope that you find the above useful if you want to take and pass the Series 3 and 34 exams. If you would like to learn more about how I trade and the algo trading software I use please consider joining Asirikuy.com, a website filled with educational videos, trading systems, development and a sound, honest and transparent approach towards automated trading.

 

 

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7 Responses to “Passing FINRA Regulatory Exams: My experience with the Series 3 and Series 34 tests”

  1. FC says:

    Hi, may I what are the study material you use for series 34 exam? Could you also provide a link? Thanks.

  2. Andrea says:

    Hi, thank you for your info. I failed my series 7 twice. Do you think I will be able to pass these exams or I should just not go any further and change careers?

    Thank you!

    FSA

    • admin says:

      Hi Andrea,

      Thanks for posting. I definitely cannot advice you in this regard. There are many reasons why people fail exams – studied too little, being nervous, studied using the wrong techniques, studied using the wrong material, etc – that do not represent their true ability to succeed at the job. I would just encourage you to analyze why you failed those exams and ask if those reasons are related with your ability to succeed at this or not (for example if you failed because you just didn’t have the time to study or because you didn’t understand the material). In any case, it’s perfectly acceptable if you want to change your career if you feel that this is not for you, if these exams are torture then you may not want to put yourself through this a third time. If you feel that you can give it a better shot using better materials and studying harder then by all means do that! I hope you find this helpful,

      Best Regards,

      Daniel

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