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How to Trade with
the Daily Directional Forecast
Trading Manual

"How to read the market like a book"

"The 3 steps to getting started in stock index futures trading"

"Precision Day Trading Mindset and Trade Structure"

Daily Directional

How to Use Mohan's Market Force - Daily Directional Forecast

Our Daily Directional Forecast is sent to you by e-mail early in the morning before each trading day, so you can plan your strategies well before the market opens. It is usually sent before midnight, U.S. Pacific Time.

The purpose of Mohan's Market Force - Daily Directional Forecast is to make precise directional calls for the market, and also to give you setups, numbers, pivot points, reversals, and continuation zones for that day's trading.

But beyond all these numbers and setups, my primary job is to educate you, so you can learn how to become the best trader you can be.

Before I go on, let me share a bit of my background with you. I've been trading the S&P futures for more than a decade, watching each tick nearly every day. I can honestly say I haven't missed many days of watching the S&P 500 ticks, other than during short trips I've taken over the years to the islands around Thailand or to the Virgin Islands, where there were (thankfully) no communication facilities that allowed me to access the markets.

A lot of the recent developments in trading are new, and can be attributed to the rapid rise of the Internet. Yet, in over 10 years of trading the S&P 500, I have never seen a service like the one I provide.

I'm not saying this to brag. I'm saying this so you know what I aimed to accomplish when I started my service. Even if such a service were available back when I was starting out, it would have cost an arm and a leg. At a minimum, it would cost hundreds of dollars a month in subscription fees. But still, I would have given almost anything to have access to a service like this.

To this day, nobody else has stepped up to deliver a service like my Daily Directional Forecast. In this one service, I share the results of what I've learned over the course of a decade making my living trading the S&P 500.

And I know you're wondering, like everybody does: "If your market calls are so accurate, then why are you even providing a service?" And it's true -- I could have kept trading the S&P 500 futures like I always have, and I could have done whatever I wanted. I didn't have to create this service.

But I want to provide this service. For me, there's more to life than sitting in front of a computer screen, racking up trading profits. I absolutely love running this service, and I sincerely enjoy meeting people, and helping them master the fastest game in town -- S&P 500 futures trading. It's fun!

So let's get to it! There are 8 sections in the Daily Directional Forecast, so now we'll go over each part, giving you a feel for what we're trying to accomplish each day.

Section 1: Headline Market Call

First is the Headline Market Call. This is our exact, crystal clear, "no-waffling" call for the day. This is where I put my reputation on the line, every single trading day.

We always give the date of the call under the subject line of the e-mail, as well as the number of each issue. This way you can easily keep an archive, if you want to study our methods in detail. We also keep an archive on our Web site for easy reference.

Section 2: Previous Session Recap

The next section is the recap of the previous day's call and market action. This section is vitally important, so read it carefully. Don't skip this part! I placed it up-front for a reason.

Trading the S&P500 is like an ongoing, high intensity, professional chess game. Or better yet, let's liken it to a FOOTBALL game. You need to know all the moves of the opposing team and observe how the other players reacted to the moves made the previous day. You've got to "study the film," just like a pro football player.

This is absolutely vital to your success, because the market leaves valuable clues that can be used in the next day's action.

In this section we will review in detail whether our call was right, partially right, or flat-out wrong. Unlike most services, I don't mind being wrong, because when I'm wrong it gives me the most valuable possible information about the markets. We also go over what happened, and how you could have interpreted the action that day according to our indicators and setups. By studying this section carefully, you will quickly get into the flow of my recommended trading setups.

Now, you have to remember, our service is running at about 80% accuracy in our Daily Directional Forecast since inception in early 2002. We are making these calls the night before, with very little help from Globex trading, without knowing any of the morning news or seeing the reaction to any economic reports.

But you must realize that 80% accuracy means 2 out of 10 calls are going to be wrong. The recap section will alert you as to how you could have seen the call not playing out as predicted, and will give you the education you need to use the High Five (see the full explanation later in this Handbook) to either not go with the call -- or even to reverse the move!

So please be sure to read the recap of the previous day's action. Don't try to "wing" this S&P500 trading business...or you'll be holding your head in your hands crying. We care about you and your trading results. That means you have to work on your end to learn what our setups are about, and to learn just what is happening in the markets before committing your hard-earned capital.

Remember, there is no hurry. The markets will always be there. People who rush in and don't take the time to learn invariably lose big bucks. So educate yourself, practice, develop skills, take small positions when confident, learn some more, practice more skill development...and also do the Mohan's Market Force - Daily Directional Forecast Magic 7 Internal and External Traders' affirmations. (You'll find these in the Handbook and on our Web site -- don't blow this off! Psychological strength is the single most important facet of futures trading.)

Section 3: Today's Call

In this section you'll find more detailed commentary on today's Headline Market Call. This is where we really get into the details of what the market is going to do that day, and how you need to respond. 

In this section, look for the reasons why we expect today's call to happen; what to look for on both sides of the market; probable trade setups for that day; and most important, what to do if the High Five or other intraday elements are in conflict with the call.

We will try to give you every important ingredient for getting on the right side of the market, right here in this section. Remember: Don't focus on the money -- just focus on getting on the right side of the market, and the money will take care of itself. It took me many, many years to figure out this simple concept!

Section 4: Value Area

The next section features the Value Area, which is a very important part of trading the S&P500. It is part of a method of watching and trading the market, similar to candlestick methods or bar charts. The Value Area is closely watched by floor traders and professionals, so you need to always have it on your radar screen, too.

At Mohan's Market Force - Daily Directional Forecast, we provide the Value Area range every day on our site, so you can use it to "bracket off," or benchmark, the market action. You can also use the Value Area to determine if the underlying momentum of the hour or half hour is bullish or bearish. With time and practice, you'll learn that the Value Area can also be a great way to size up what the whole day will look like.

Combining the Value Area and the High Five is a killer combination for getting and keeping on the right side of the market. But, you must learn how to synthesize this and all the other indicators given to you in the Daily Directional Forecast.

Here's how to use the Value Area. Keep it simple!

If the S&P500 is trading above the top number of the Value Area, this is generally bullish.

If the S&P500 is trading below the bottom number of the Value Area, this is generally bearish.

If the market is trading above the Value Area, "dips" into the Value Area and HOLDS there for 3-5 minutes it will usually, but not always, retrace 75% of the Value Area depending on what side it dipped in from. 

For example, if the market was above the Value Area and then dipped into it and held there for 3 minutes or more, then the market has a high probability of going down to 75% of the range of the Value Area.

The opposite is true if it comes from below.

Here are some examples:

Let us say, for example, that the Value Area is 1111.50 to 1119.25. The

futures are trading at 1122.25 and the High Five is neutral to bearish. The TRIN has just gone from being around 0.85 and now it's 1.15, the VIX was down -.50 and now it's up +.80, MER was up $1.50 during the first hour of trading and now MER is down $0.80. This is a bullish /neutral market that is going sour.

(Remember this is an example.)

If the S&P500 now drops down to the Value Area price of 1119.25 and holds below that number for 3 to 5 minutes, there is a very high probability that it will trade down to 1113.50. Why 1113.50? Here is the math.

Range of Value Area: 1119.25 - 1111.50, which is 7.75

75% of the Range: 7.75 * 0.74, which is 5.80, which we round to 5.75 handles

Downside target: 1119.25 - 5.75, which gives us 1113.50

Now that you are becoming an expert mathematician with all these calculations, you have to realize, of course, that none of these movements are in any way guaranteed and that futures trading is risky. Only risk capital should be used! When we discuss the futures markets, compliance language is not only important and ethical, it is necessary to help novice futures traders understand how especially volatile the markets can be, and how quickly one can rack up losses in these treacherous markets.

Okay, to get back to the example: If the High Five get bearish at this point, the futures could go down to the bottom of the Value Area of 1111.50 and find support temporarily, or even stop there a minute and then blow right through the number to the downside. If the tape turns neutral again or even moves back to the bullish side with the TRIN improving and moving down to say the 0.75-0.80 area, then we could see the market retrace all the way back to the top of the Value Area again.

Beginners or relatively new traders are saying right now (I can hear your thoughts), "But Mohan, how do we know which way it will act at those numbers." We don't know! We can only know how the market usually reacts in this situation.

There is no way of entirely knowing how the market will react here. All those begging for a "perfect, risk free system" are going to be perpetually disappointed. A perfect system does not exist.

I will say this for the 1,008th time, and I'm going to repeat it for the rest of my life:

Professional S&P500 futures trading is about skill development, experience, patience, and getting stopped out a lot!

It's better to decide right now that you will learn from your mistakes, and just use each experience to further develop your skills. There's no point in living in frustration and anger. Besides being stressful on you and your loved ones, it won't make you any money, either.

After you have participated in our service for a while and you've seen these setups occur over and over again, I am sure you will eventually develop your own way of trading and dealing with our recommended setups, allowing you to grab and accumulate huge amounts of S&P 500 handles.

You have to trust me. The trading setups I'm giving you in the Daily Directional Forecast work. The Mohan's Market Force - Daily Directional Forecast Morning Call is not a trading system per se -- it's a daily road map that allows you to read the market in a unique way, develop your skills, and hone your trading abilities to the point where you can make a handsome living trading the S&P 500 futures. Ultimately, it's up to you!

Section 5: Buy Pivot

The next section discusses the Buy Pivot. These are floor trader numbers calculated in a certain way to give you important support areas. The way we work with this important number is not as cut-and-dried as the old days, when the concept was first developed. It has taken years of practice to learn how to use these numbers correctly.

What you will notice daily is our + or - 4.25 stop on the pivot. The 4.25 stop is not an actual stop on an automatic trade that you are supposed to make every day at these numbers. We use these pivots as guidelines only. The 4.25 stop is an additional number above or below the pivot to determine if the pivot is validated or rejected. 

Let's say we are calling for a bullish day on drops in the market; the market opens at 1111.50 and the Buy Pivot is at 1103.00. The Dow drops a quick hundred on the open, and it's likely you'll see this 1103 number show up. What does the rest of the High Five look like? Is the NAZ getting creamed, down -20 or more? What does the TRIN say? Is the TRIN +1.30? Where is MER? Down 1.50? Forget it. This pivot is most likely not going to hold. Will the stop at -4.25 hold? How the heck should I know, unless I'm there in real time? Hey, put on a trade to buy at 1099.25 and see what happens!

If it blows through the 1098.75 (1103.00-4.25), then the long position has a problem. So get out. Big deal. That is S&P500 futures trading.

But what if it holds, smokes back to our 1103.00 Buy Pivot and never even touches that price again? What if the High Five recover to Bullish and they rally the market +10 handles? This is exactly the kind of action we see all the time -- all the time! And I want you to be a part of it.

Section 6: Sell Pivot

The next section is the Sell Pivot.

This is the same as the Buy Pivot, only in reverse. You must be able to take any scenario and simply reverse the idea based on the direction of the High Five, the trading near the Sell/Buy Pivots, and the Value Area.

Section 7: The 10-day Moving Average

In the article I wrote for Bridge Trader, I wrote about this important indicator. It's really very simple and powerful. 

It is simply the sum of the last 10 days' closing prices of the S&P500 big contract, divided by 10. Okay, okay, for those of you getting technical on me, Marty Schwartz (in the book Pit Bull) uses a slightly more complicated figure, as he uses an exponential moving average. But after more than five years working with this number, I find that the simple moving average is awesome in its application. All that matters in this business is something that works to make you money!

We provide this number daily in our Daily Directional Forecast and we tell you exactly how to use it.

Here is a brief synopsis to help you interpret it. Keep in mind that, like everything in the markets, it is dynamic, ever-changing and subject to complete interpretational change at every second. Therefore you should immediately sign up for a five-year prepaid subscription to Mohan's Market Force - Daily Directional Forecast Daily Directional Forecast. And if you are not laughing right now, you're just going to have to lighten up to make it in the treacherous world of S&P 500 futures trading. Hey, it's still not a bad idea anyway.

Okay, if you see the S&P500 numbers starting to approach the 10-day moving average, within 10-15 handles, you need to start preparing yourself for what I call a "crossover." Personally I start marking in red pen all over certain sections of my homework where I calculate and hand-record the 10-day moving average each day...CROSSOVER ALERT!

That tells me that the market is getting ready to bump into the "Pit Bull" (our affectionate name for the indicator named after Marty and his wisdom). It's either going to hit a thick wall of resistance there, or blow through it to the opposite side starting a whole new mini-trend. You just have to watch the High Five carefully every day and have a subscription to the Mohan's Market Force - Daily Directional Forecast Daily Directional Forecast.

Together we will catch these "crossovers" on the right side of the market, or be smart enough to "fade them" and go the other way when it hits the number and a thick wall of resistance.

Section 8: Pro Trader's Action

The concluding section is Pro Trader's Action. This is a recap of what we've talked about, some conditional changes to look for to fade our call if necessary, some confirming reasons why we are making our call, and occasionally some good old-fashioned encouragement.

By this point I've already put my reputation on the line by giving you a crystal-clear call on that day's market action, doing my best to keep you on the right side of the market. By now I've also given you the numbers, setups, and information to enable you to make the best possible trades.

Here is what you should be looking for each day, no matter what trading techniques you use, or how you end up interpreting the Mohan's Market Force - Daily Directional Forecast Morning Call.

  • What side of the market do I want to be on?
  • Has a rally or drop occurred on the opposite side of that direction so I can look for a price to nail a trade?
  • What is the number or area at which I need to act to nail this contrary move, AND can I place a reasonable stop there that is relatively painless?
  • Am I committed to acting only on the correct setups, and seeing them through to fruition?

Now it's up to you. You too can develop a trading style that fits your personality, emotions and risk tolerance. GO FOR IT!

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