10 Tips for Participating in the Stock Market That Every Trader Must Master

Starting your stock investment journey is not just about learning theory. To participate effectively in the stock market, traders need to continuously update market information and learn from those with experience. Here are 10 essential tips that every investor should understand to optimize profits.

1. Always Control Risks First

The first thing any trader wanting to enter the stock market must understand is that risk control is vital. Use tools like (Sell Stop) orders and (Buy Stop) orders to protect your capital. Setting stop-loss points at 10-15% from the opening price is a practical way to limit losses in case the market suddenly reverses.

2. Clearly Define Your Investment Method

There are two main approaches to participating in the stock market:

Long-term investing: Buying and holding based on fundamental analysis of companies. This investor doesn’t need to monitor the market constantly but requires deep knowledge of specific sectors and good financial statement reading skills.

Short-term trading: Day trading or holding for a few days, relying on technical analysis. This method requires continuous price chart monitoring, in-depth knowledge of technical indicators, and strong psychological management.

Once you’ve chosen a method that suits your personality and conditions, strictly adhere to that strategy to avoid wrong buy/sell decisions.

3. Diversify Your Portfolio - The Secret of Successful Investors

Warren Buffett emphasizes the importance of diversification. Do not concentrate all your capital in a single stock or sector. Instead, spread your investments across multiple stocks, sectors, or even different asset classes like securities, cryptocurrencies, and forex.

Stock indices (S&P 500, VN30) are perfect examples of diversified portfolios. For this reason, these indices tend to decline less than individual stocks during downturns. Investing in indices is a simple yet effective approach for long-term investors.

4. Choose High-Quality Stocks

When participating in the stock market via buy-and-hold, selecting good stocks is crucial. Here are characteristics of quality stocks:

• Healthy finances: The ratio (current assets/current liabilities) above 1.5 indicates the company has low debt and good liquidity.
• Stable growth: Revenue and profit have increased consistently over the past 5 years (excluding major crises like COVID-19).
• High returns: Profitability ratios (profit margin, ROE, ROA) increase annually.
• Regular dividends: The company consistently pays dividends to shareholders.
• Reputable management: Leadership with no history of broken promises or investor deception.

History shows large companies like Vicostone, Vingroup, Vinamilk, Hòa Phát… with strong leadership have generated outstanding returns. These stocks may not surge during market booms but serve as excellent defensive assets during downturns.

5. Adjust Your Portfolio According to Market Conditions

Even with a long-term strategy, you need to periodically review and adjust your stock weights. When economic policies change or market trends shift, the proportions of your positions should be rebalanced.

For example, during COVID-19, central banks cut interest rates and loosened monetary policy, making real estate attractive. But when tighter mortgage policies were introduced in 2022, profit expectations in this sector declined, and stock prices fell. Smart investors reduce their real estate holdings at that time.

Warren Buffett is known for long-term holding, but if you follow Berkshire’s portfolio, you’ll see stock weights change constantly. True investing experience is knowing how to hold with appropriate proportions based on market conditions, not just holding forever.

6. Master Key Technical Indicators

To identify optimal entry and exit points, you need to understand basic technical indicators:

Relative Strength Index (RSI): Measures price volatility. When RSI drops below 30, stocks are oversold and may be good to buy. When RSI exceeds 70, the stock may be nearing a peak.

Stochastic Oscillator (Stochastic): Helps identify trend reversals. Above 80 indicates overbought conditions and potential decline; below 20 suggests oversold and possible rebound.

Combining these indicators with volume analysis will help you make more accurate trading decisions.

7. The Secret of Catching the Bottom of Stocks - But Be Cautious

Successfully catching the bottom can yield extraordinary profits, but it is also one of the riskiest techniques. To identify a stock’s bottom, watch for:

• When the price forms a new low but momentum indicators (RSI, Stochastic) rise, indicating selling pressure is weakening.
• When new lows are higher than previous lows, selling pressure has decreased.
• Large trading volume during declines suggests investors are returning to buy the dip.

However, only use a small portion of your capital to test the bottom; never risk all your assets. Avoid catching the bottom of speculative or below-par stocks, as they can fall much further.

8. Do Not Borrow Money to Invest

A common mistake is borrowing money to increase returns. Only invest idle funds that, even if lost, won’t affect your long-term life. In Vietnam, many shady companies are “trapping” investors with investment apps offering up to 1000% monthly interest.

If you want to boost profits, using margin (leverage credit) wisely is safer. With margin, in the worst case, you only lose your initial capital and won’t incur debt.

9. Continuous Practice Is the Key to Success

Warren Buffett offers a valuable piece of advice: never lose money in stock investing. To do this, you must keep learning, analyzing stocks, and practicing trading.

The most effective way is to start with a demo account, trading with virtual money to accumulate real experience. This allows you to test strategies in real market conditions without financial risk.

10. Stable Psychology - The Final Deciding Factor

The stock market is highly volatile; a large profit position can turn into a loss in 1-2 days. Maintaining a stable mindset is essential.

Analyze the reasons behind market fluctuations before deciding to hold or cut losses. Don’t let emotions like panic or fear influence your decisions. Many investors regret impulsive decisions made out of emotion.

Conclusion

Participating effectively in the stock market requires a combination of knowledge, discipline, and psychological control. The investment journey is a long-term learning process. Applying these tips will not only help you avoid common mistakes but also open opportunities to build sustainable wealth in the stock market.