I was curious to see if the extra points gained by using the mcgyver outweighed the points lost on stopped out mcgyvers. The attached spreadsheet shows that on mp trades, the benefits of a mcgyver are questionable. Compare "mp only" with "no mcg".

I've created a separate column in my trading records spreadsheet to record the results of using the MacGyver technique (when I do) and I am "just" ahead of the game by 1 trade which means that it has not been working out for me so far.

Again it comes down to a probability of success calculation and I have not collated the data to work out when a MacGyver is a good idea and when it is not.

Also, when I MacGyver I double my position size whereas JP triples his size. This could be a crucial factor in calculating the success of the MacGyver. But if this is part of the success then one could argue: Why not quadruple or quintuple your position at the MacGyver level? If triple works better than double then a larger multiple must work even better than that...

If we are just looking for better prices, what if we just went with the same position? The goal would be an extra point out of a trade which is still an interesting benefit depending on your scale outs, etc.

I have begun to keep track using the M4 column of the Matrix to note how many Macg trades stop out. Since I didn't begin collecting this data until recently, it will probably take awhile for the %'s to work themselves out.

The problem statistically with a MacGyver that stops out completely is that it becomes, in essense, two trades. One that stopped out at the wiggle/stop, and one that stopped out a point better. While this lowers the avg stop total (ie: stop 2.00 and stop 1.00 on the mac = 1.50 avg), overall, it still adds up to a loss of 3 points on whatever your initial load was. If you trade multiples, it's even a greater number.

So unless you're going to take the extra macg contracts off way late to cover the added risk ... I dunno ... unless JP takes the second or third portions and takes big chunks off at 1-2 pts?

Not sure here ... maybe someone can ask JP? ;)

From what I can see, the benefits of a successful mcgyver are outweighed by the increase in loss when stopped out. When scaling out, the greatest exposure is at the time of entry. This is increased significantly by the mcgyver technique. The risk is subsequently reduced by scratching the original entry, if possible, but the subsequent profit is only increased by 1 point per partial scale out. So, the profit achieved on a successful mcgyvered trade will be marginally more than a non-mcgyvered trade due to the effect of scaling out, but the potential loss is significantly greater. The spreadsheet seems to support this observation.

Well I think that you have to consider how the MacGyvered portion is scaled out. Remember that it's a double package and the first scale out is likely to be at 1.5 or 2 points. Rarely (if I understand this correctly) is any of the MacGyver portion taken off at 1 point.

The loss is a double loss on the initial trade and not an extra 50%. Remember that you put on double the size at the MacGyver. So the initial trade shows a loss of 2 points on 20 contracts. The MacGyver portion shows a loss of 1 point on 40 contracts (which equals 2 points on 20 contracts). (That is if we get stopped out.)

Now once you have a MacGyver on, assuming that we're not stopped out, when the MacGyver hits 1 point of profitability then the initial trade is scratched, nothing is taken off the MacGyver. I may be wrong here and perhaps JP does take something off the MacGyver part of the trade. If we assume that he doesn't then he is now trading double size (or you can look at it like a double position) and his first scale out will be 1.5 or 2.0 points etc.

So the net results of a successful MacGyver trade (assuming the above is accurate) is more than double a standard trade without a MacGyver because (1) scale outs on MacGyver part start later and hence more profits and (2) double the position in play.

So the risk of loss if we MacGyver is 2 points of a double position.

The reward is more than double the standard reward.

Now the next questions that we need to answered are:
What % of MacGyvered trades go to 5 and 10 points?

And then we need to go from there...

I think that it is becoming apparent that the money management of JP's techniques, and the understanding of how they benefit his trading, is every bit as important as the MP techniques that he uses and teaches. It is fairly easy to learn his techniques and rules for entry but a lot more difficult to apply a similar money management technique because he does not disclose the number contracts that he is scaling and MacGyvering at each level.

I think that JP is correct in not disclosing the number of contracts that he trades because this is something that is personal and if he does disclose this I think that it will compromise his ability to trade and teach as well as he does.

An alternative would be for him to use percentages to let us know how many he's putting on or taking off. The problem with this though is that he would keep on having to calculate percentages on the fly in his head which would be difficult and error prone and he already has a lot on his plate.

Sometimes JP says that he's "going in light." What would be useful is if he defined (for himself) what a standard sized package is and called that 100%. When he says that he's going in light he could then call out 20% or 40% etc. to give an indication compared to a standard sized number of contracts.

Likewise, once he's MacGyvered then we know that he's running 300% of a standard position.

quote:

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Originally posted by day trading

Well I think that you have to consider how the MacGyvered portion is scaled out. Remember that it's a double package and the first scale out is likely to be at 1.5 or 2 points. Rarely (if I understand this correctly) is any of the MacGyver portion taken off at 1 point.

The loss is a double loss on the initial trade and not an extra 50%. Remember that you put on double the size at the MacGyver. So the initial trade shows a loss of 2 points on 20 contracts. The MacGyver portion shows a loss of 1 point on 40 contracts (which equals 2 points on 20 contracts). (That is if we get stopped out.)

Now once you have a MacGyver on, assuming that we're not stopped out, when the MacGyver hits 1 point of profitability then the initial trade is scratched, nothing is taken off the MacGyver. I may be wrong here and perhaps JP does take something off the MacGyver part of the trade. If we assume that he doesn't then he is now trading double size (or you can look at it like a double position) and his first scale out will be 1.5 or 2.0 points etc.

So the net results of a successful MacGyver trade (assuming the above is accurate) is more than double a standard trade without a MacGyver because (1) scale outs on MacGyver part start later and hence more profits and (2) double the position in play.

So the risk of loss if we MacGyver is 2 points of a double position.

The reward is more than double the standard reward.

Now the next questions that we need to answered are:
What % of MacGyvered trades go to 5 and 10 points?

And then we need to go from there...

I think that it is becoming apparent that the money management of JP's techniques, and the understanding of how they benefit his trading, is every bit as important as the MP techniques that he uses and teaches. It is fairly easy to learn his techniques and rules for entry but a lot more difficult to apply a similar money management technique because he does not disclose the number contracts that he is scaling and MacGyvering at each level.

I think that JP is correct in not disclosing the number of contracts that he trades because this is something that is personal and if he does disclose this I think that it will compromise his ability to trade and teach as well as he does.

An alternative would be for him to use percentages to let us know how many he's putting on or taking off. The problem with this though is that he would keep on having to calculate percentages on the fly in his head which would be difficult and error prone and he already has a lot on his plate.

Sometimes JP says that he's "going in light." What would be useful is if he defined (for himself) what a standard sized package is and called that 100%. When he says that he's going in light he could then call out 20% or 40% etc. to give an indication compared to a standard sized number of contracts.

Likewise, once he's MacGyvered then we know that he's running 300% of a standard position.

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I agree, the money management is key here ... the entries are all pretty simple and straight forward really ... it's how we best scale out and honor are stops that seem to really be the difference makers.

I will say that I do believe JP lightens some off of the MacGyver's once he scratches the initial trade ... so yes, he does take a few off +1.00 ... what I would think is that he scales the 'additional package' earlier in the game -- front heavy ... and he scales the original package as he normally would.

Regardless, JP seems to carry plenty enough to take him to 5,7,8,10 points without too much issue.

I don't understand some of the data on the sheet, but it looks like it has been profitable to me ... 491 points on 20 contracts in a month-ish? That's a good piece of change imo.

quote:

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Originally posted by brokebackbernie

... 491 points on 20 contracts in a month-ish? That's a good piece of change imo.

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An average of just over 1 point per contract per day.

it's already been mentioned, but i agree - money management and trade management become VERY important in McG Trades. the main things that determine whether or not a McG is successful are:

1. multiplying size
2. reduce overall risk (quickly)

below is how i understand a typical McG:
(Size X Price (L)ong / (STC) Sell to Cover or (S)hort / (BTC) Buy to Cover) and cc = contract or lot

20 X 1250 L
40 X 1249 L
20 X 1250 STC = scratch
10 X 1251 = 30 remainder cc = 10 X 2pts = 20pts

at this point, JP has reduced his risk to 1pt on 30cc. if his original entry with 20cc was a 1.5 - 2pt stop, his situation carries the same risk or less.

20 X 1250 L
60 X 1249 L
20 X 1250 STC = scratch
10 X 1250 = 50 remainder cc = 10 X 1pts = 10pts = 10pts tally
10 X 1251 = 40 remainder cc = 10 X 2pts = 20pts = 30pts tally

at this point, JP has reduced his risk to 1pt on 40cc. depending on his stop on his original 20cc entry, he will have approximately the same or less risk on 40cc.

obviously, if the McG fails, he takes a 1.5 - 2pt stop on 20cc plus a .5 - 1pt stop on 40-60cc. this is why he is so strict about scratching the first package. he wants better prices, and to do that he has to basically get rid of and forget about his first 20cc entry. he won't McG a McG, so if he scratches the original package and then the trade reverses and he gets stopped out, the trade is over. he won't average down.

i think it's easy for people to get sidetracked by the size of trade JP puts on, when the important thing to note is the proportion. if you put on a 1cc trade, then you would want to McG with 2 or 3cc. you'll have the same effect and experiences as JP does with a 20 or 40 or 50 initial package. you won't be able to scale out the same as JP, but the trade itself will be contsructed with the same level as risk as JP's trade. so for the smaller trader it would look something like this:

1 X 1250 L
2 X 1249 L
1 X 1250 STC = scratch
1 X 1251 = 1 remainder cc = 1 X 2pts = 2pts

so now you would have less risk than you did on your original package, which would be the same size as your current position. if price drops to 1248.50 or 1248 you should be gone and you would still be up 1pt for the trade.

1 X 1250 L
3 X 1249 L
1 X 1250 STC = scratch
1 X 1250 = 1 remainder cc = 1 X 1pts = 1pts = 1pts tally
1 X 1251 = 1 remainder cc = 1 X 2pts = 2pts = 3pts tally

again, if price drops to 1248.50 or 1248 you would be gone and up at least 2pts on the trade. or you could scratch the remainder and be up 3pts. not bad for a 'failed' trade.

i hope all that made sense.

obviously, everyone wants to make money. i think to stand a better chance to consistently make more money over the long haul, traders have to first become experts at risk management.

have a great holiday

enjoy!