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.
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.
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
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.)
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
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
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
side of the market do I want to be on?
a rally or drop occurred on the opposite side of that direction so I
can look for a price to nail a trade?
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?
I committed to acting only on the correct setups, and seeing them
through to fruition?
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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