Market Measures Mistake (Part 1)

I am a regular viewer of Market Measures (MM) on the Tasty Trade network and I am a big fan of what Sosnoff, Battista, et. al are trying to do on the show. Unfortunately, I sometimes think they do a poor job of doing it.

Although categorized “optionScam.com,” I do not consider Tasty Trade fraudulent despite some conflicts of interest. I do believe their approach is sometimes flawed. I sometimes wonder whether presenters are intending to deceive or simply victims of the “don’t know what they don’t know” syndrome. I prefer to give the benefit of the doubt wherever possible.

I believe the audience has an opportunity to apply critical thinking in order to see through the mistakes. Doing this can prevent unexpected losses of capital. In this blog, I label this due diligence optionScam.com.

My criticism of MM is two-fold with the first being a failure to report key information.

They begin with an outline of the study, which I sometimes find to be incomplete. In other words, the description is not enough to allow me to replicate their study. I believe this is essential in any scientific research because a failure to do so is carte blanche to report numbers regardless of accuracy.

MM rarely mentions transaction fees, which I consider a major fault. I have demonstrated transaction fees to be capable of making or breaking a backtest. A few years ago Sosnoff talked about “resort fees” as something they included. On December 12 of last year Sosnoff said “and this takes into account all the resort fees, all the commissions, and everything else.” Exactly what did they use for resort fees and commissions? And why associate them with a vacation? Get serious and specific because transaction fees need to be mentioned whenever trade statistics are presented.

Most episodes leave me wondering about key metrics. They present things like average credit, win rate, and average PnL. Sometimes they present largest loss, which I consider mandatory reporting for every single study (drawdown is risk). Rarely do they report number of occurrences: is it a large enough sample to be valid? Seldom do they report buying power reduction: are the results large enough in terms of return on capital to be meaningful?

I will continue next time.