Futures and Options Trading Stock Investing Newsletter

FAQ - Frequently Asked Questions.

1. What is www.FNOINDIA.com?
2. Who should subscribe to www.FNOINDIA.com services?
3. Why don’t you provide Intraday calls?
4. I am interested in stock trading but why should I subscribe to www.FNOINDIA.com?
5. Can your advice give me assured profits?
6. What kind of returns can I expect if I subscribe to your service?
7. Do you trade based on your own advice?
8. If you make profits in your own account, why have you started Newsletter service?
9. If I buy stock worth Rs XYZ, how much is my risk?
10. What is Stop Loss and why should I use it?
11. What is Risk Management and Positions sizing?
12. What is drawdown? How does it affect my trading?
13. Should I average my purchase price? If yes, when?

1. What is www.FNOINDIA.com ?
www.FNOINDIA.com is a website dedicated to providing stock trading advisory service for traders and investors trading on Indian Stock Market. Using our proprietary trading system based on Technical analysis of stock trends, we identify the price patterns which are likely to give explosive movement in near future. After identifying the price pattern, we provide precise entry price, initial stop loss and targets for exit to our paid subscribers through Email Newsletter, SMS and Messenger.

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2. Who should subscribe to www.FNOINDIA.com services?
www.FNOINDIA.com provides trading solutions to 3 classes of market participants.
a. High Risk traders: - These kind of traders are willing to take high risk to capture very short term movements and willing to take leveraged positions much larger than their capital. Also, they want to profit from rising as well as falling market. “FUTURES POWER” newsletter is ideal for them.
b. Medium Risk traders: - These traders are willing to hold positions for few weeks for good returns but they don’t want to over leverage their account. They want balance between risk and reward. Also, they want to participate only during rising market. “SWING POWER” newsletter is ideal for them.
c. Low Risk Investors:- These investors and buy and forget kind of investors. They want to buy when stock is very cheap and likely to rise multifold over next few months or years. They are not concerned about daily or weekly fluctuations of market and they are willing to hold stock during intermediate corrections.
“INVESTOR POWER” newsletter is ideal for them.

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3. Why don’t you provide Intraday calls?
We believe that probability of chart patterns being successful on higher time frames is much better than lower time frame. In other words, weekly chart patterns are more likely to performance according to expectations than daily chart pattern. Intraday chart patterns mostly don’t perform according to expectations. We also believe that Intraday Trading requires highest degree of discipline, patience and risk management. These are rare qualities among investors. If you need a proof, try to find out 5 people who are day trading successfully and making profits, year after year. Also, if you carry profitable positions overnight, you may get more profits with gap openings in your favour. In stock markets, surprises often happen in direction of trend and if your overnight position is in profit, you might see a surprise move in your direction next day. You miss these potential profits with Day trading. Considering these issues, we neither provide Intraday calls nor we encourage traders for day trading.

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4. I am interested in stock trading but why should I subscribe to www.FNOINDIA.com ?
Making money from stock markets looks very simple to novice traders as you have to just buy low and sell high to make profits. However, stock market is a game where there are no rules. You have to create your own rules for trading and most important, you need correct psychology and discipline to adhere to those rules. However, basic human emotions of hope, greed, fear and revenge make it very difficult for traders to stick to their system and trade with discipline. Even if you try to learn from past mistakes and decide not to make same mistake again, you can still go wrong. There are thousands of mistakes you can make in markets and each new mistake is brother or sister of original one. Soon, novice trader learns that it requires knowledge and experience to trade Stock Markets successfully. However, by this time, novice trader is either too frustrated to trade the markets or he loses his complete trading capital. By subscribing to our newsletter service, you can profit right away from our trading knowledge & experience of many years. By using our precise entry price, stringent risk management and correct positions sizing, you can be sure to make profits while preserving your capital.

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5. Can your advice give me assured profits?
In Stock Market, nothing is assured. Neither the movement of stocks nor the profits. However, through our robust Risk management principles, we can assure you that if you follow our advice strictly and do right things, you will come out ahead and success will follow you over a period of time. Doing right things include entering at exact price point, Always keeping stop loss and diversifying your capital as per our advice. Remember, if you can’t follow our advice strictly, you better not subscribe our or any other service because stock market profit is 80% about your attitude and 20% about trading system. We will provide 20%, you make sure you have remaining 80% to get assured profits.

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6. What kind of returns can I expect if I subscribe to your service?
Stock Market returns are dependent on
1) Whether Market is strongly rising or sideways or falling sharply
2) You ability to diversify in different stocks. Through instruments like Futures you can make money in rising as well as falling markets. However, it’s difficult to make money trading stocks when market is in secular downtrend. This is because short selling of stocks is not permitted in India. However, you can expect to make more than 40% annualized returns trading stocks and more than 60% annualized returns trading futures. But you require higher capital to trade futures as per our system. Please see the “SERVICES” section for more details.

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7. Do you trade based on your own advice?
Yes. We have very good trading system which makes money in real trading, not on paper. That’s why we put our money where our advice is. We trade our “FUTURES POWER” calls for our own proprietary account. We have earned 212% returns on our capital during financial year 2005-06.

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8. If you make profits in your own account, why have you started Newsletter service?
Stock Markets are as old as 16th Century. Although technology has developed tremendously since then and investors now have exposure to vast information, still 90% of investors loose money in markets. The simple reason is that basic human emotions of Hope, Greed, Fear and Revenge have not changed since centuries. These emotions remain a roadblock in investors’ quest for acquiring market knowledge to make profits. They still commit same basic mistakes due to lack of knowledge and lose their hard earned money in stock market. Not only they lose their money, the pain suffered in market disturbs their psychology so much that they and their family suffer for rest of their lifetime. We hope to make these investors prosperous through our knowledge and experience. Stock market is a zero sum game and there are bound to be losers as well as winners. However, it is our vision to see stock market profits distributed evenly among all investors and not remain concentrated in the hands of few rich and knowledgeable investors. We would like to see ratio of stock market losers to winners improve from 90:10 to 50:50.

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9. If I buy stock worth Rs XYZ, how much is my risk?
Investors believe that they are risking the whole amount of money they have invested. However, as per our strategy, we risk only a small fraction of our invested amount to find out whether prices will move in our favour or not. We advise a strict stop loss to be followed which may vary from 2% to 5% of your invested capital. Once prices start going against our position, we close the trade as soon as our stop loss is hit. This way, we can keep our losses small and maintain our trading capital. Also, after closing the trade, we can utilize our money to trade next call which may turn out to be big winner. Hence, your risk is equal to the stop loss we advise.

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10. What is Stop Loss and why should I use it?
Stop Loss is an order to close your trade, profitably or unprofitably, if market goes to certain predetermined price during the day. For example, you buy shares of XYZ company at Rs 200 per share. We advise you to keep a stop loss of 195. It means that after you buy shares at Rs 200, if share price falls to Rs 195 anytime in future, you should sell your stock and take a loss of 5 Rs per share (200 -195).
There are 2 ways to follow stop loss
1) You monitor the price of XYZ scrip actively and as you see price of 195, you place an order to sell your shares at prevailing market price
2) You place order everyday to sell at prevailing market price with trigger as 195.
With this order, your shares will be sold automatically by your broker as and when price falls to 195 during the day. This way, you don’t need to actively monitor the price during the day. Also, it avoids hesitation to execute stop loss.
Our trading strategy is based on old stock market adage of “Cut your losses short and let your profits run”.
We categorize stop loss in two classes
1) Initial Risk Management Stop Loss: - This stop loss is placed as soon as we enter a fresh position. This stop loss is placed to get out of trade with minimal loss, if price doesn’t move in our favour after entering the position.
2) Trailing Stop Loss: - As our trade moves in profit, we should make sure that market corrections against our position don’t take away our profits. For this, as our profits increase, we change our stop loss in direction of our trade to capture large portion of our profits.
You should use stop loss for 2 reasons.
1) It keeps your losses small for trades that don’t work out and protects your profits during corrections against your position
2) It frees your capital to take advantage of new opportunities to make profit.

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11. What is Risk Management and Positions sizing?
We define Risk Management as simply managing the risk on open positions using proper stop loss, so that during adverse market movements, positions are closed with minimum loss in losing trade or most of the profit is captured in winning trade. Position Sizing tells you naked risk you should take on open positions at any point of time. There are many methods available for Position Sizing; however, we prefer the “Fixed % of Equity” method for Position sizing. Let’s take an example. You have Rs 100000 in your account and you don’t want to risk more than 3% i.e. Rs 3000 at any point of time. Suppose you get a buy signal for 3 different securities X, Y, Z on a day and each involves setting of initial stop loss of 5% from its purchase price. Now, how much of each stock you should buy? Since acceptable risk on total account is Rs 3000 and you have three trades X,Y, Z available for trading, you should risk Rs 1000 (3000/3) for initial stop loss of each stock. And since initial stop loss for each scrip is 5% below purchase price, we should invest Rs 20000 (Rs 1000 / 5%) on each scrip. This way, you will invest 60000 Rs out of 100000 Rs available, so that you don’t risk more than 3% of your total account.

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12. What is drawdown? How does it affect my trading?
There are period during trading when no matter how hard you try, you get continuous losing trades in a row before you find a profitable trade. It happens frequently with all most all traders. The reduction in your account size during this losing period is termed as Drawdown. For example, you have Rs 500000 in your account and during next 10 trades, you lose on every trade after which you are left with Rs 400000. Now, your drawdown is Rs 100000 or 20%. As the % drawdown increase, it becomes harder to get back to your original account size. Look at the following table to gain clear understanding.

Drawdown Gain to Recovery

10% 11.1% Gain

25% 33% Gain

40% 67% Gain

60% 150% Gain

75% 300% Gain

90% 900% Gain

You can see that beyond 60% drawdown, you require huge, improbable gains in order to just get back to original account size. Hence, Drawdown should always be limited to small amount by stringent risk management and position sizing.

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13. Should I average my purchase price? If yes, when?
Yes. We strongly advice to average your position to take benefit of larger position size. But, we strongly believe in averaging the position which is in profit, not the position which is in loss. Let’s take an example:- Mahesh buys 100 shares of Telco at 700 Rs as per advice. We also ask him to put a stop loss at Rs 680 and our target is 900.
Case1: Telco Share price start drifting down next day and hits our stop loss of Rs 680. What do we do? Do we buy more shares to average the purchase price or do we close position? It’s in your best interest to close the position immediately once stop loss is hit. If you are tempted to average losing position instead of closing position as per stop loss, please don’t subscribe to our service. You won’t make profits in long run by averaging the loosing position. Averaging losses is like speeding the car when you are certain to collide with obstacle.
Case2: Telco Share rises to 730 in next 2 days. We increase our stop loss to 710. Now our stop loss is above our purchase price of 700, which means that there is no risk in trade and we are likely to earn at least 10 Rs in trade. Mahesh is still left with money which he wants to invest. We advice him to buy 100 more shares at 730 Rs with stop loss at 710. This way, Mahesh is holding 200 shares but his risk is only on newly added 100 shares. This means if our target of 900 is achieved, he will make money on 200 shares instead of 100 but his risk during trade is on 100 Shares only. This is called pyramiding technique. It is always beneficial to average your price once trade is in profit and your initial purchase price is above current stop loss.

Futures and Options Trading Stock Investing Newsletter.

FAQ - Frequently Asked Questions.