To Succeed with Stocks - 10 Things Every New Investor Must Know

Entering the world of stock trading is not just about theoretical knowledge. To develop your skills in stock trading for beginners, you need to practice continuously, monitor market developments, and learn from experienced investors. This article summarizes 10 golden principles that anyone aspiring to succeed in stock investment should thoroughly understand.

Step 1: Define Your Direction - Short-Term or Long-Term Approach?

The way to start stock trading for beginners begins with choosing a strategy that suits yourself:

Short-term investment approach: Using buy/sell strategies within the day, based on technical analysis to identify entry/exit points. Requires deep knowledge of price charts, technical indicators, and continuous monitoring.

Long-term investment approach: Applying buy-and-hold strategies, selecting stocks based on fundamental analysis of the company. Requires understanding financial reports, industry knowledge, and patience.

Each approach has different risk levels, trading frequency, and knowledge requirements. Clearly define your direction, then adhere to your strategy with discipline to avoid impulsive decisions driven by emotions.

Step 2: Don’t Put All Eggs in One Basket

Diversification is a secret advised by most experienced investors. Warren Buffett also advocates this principle. When you spread your capital across various stocks from different sectors, or even different asset classes (stocks, cryptocurrencies, forex), you minimize significant losses when risks materialize.

For example, market indices (S&P 500, VN30) are excellent diversified portfolios. During market downturns, these indices tend to decline less than holding a single stock. For long-term investors, Buffett recommends index investing as a simple and effective method.

Although in a hot market, index investing may not yield as high returns as holding specific stocks, in the long run, profits from this strategy still surpass bank deposits or bonds.

Step 3: Choosing Stocks - Clear Criteria Needed

For those pursuing long-term investment, selecting good stocks is a decisive factor. You need to carefully read financial reports, understand the company’s development strategy, and evaluate market potential for future products.

Characteristics of a quality stock:

• Low debt, short-term solvency ratio above 1.5 is safe
• Revenue and profit growth consistently over 5 years (excluding common crises like pandemics)
• Profitability indicators (profit margin, ROE, ROA) improve annually
• The company regularly pays dividends
• Reputable management, transparent actions, no information concealment

Good leadership is vital. Companies like Vicostone, Vingroup, Vinamilk, Hòa Phát have proven this — all have leadership recognized over many years, and their stocks have seen the strongest growth over 10 years.

Good stocks may not generate huge profits during a hot market, but they are excellent defensive assets when the market turns downward. That’s why seasoned investors often advise newcomers to add a few quality stocks to their portfolio.

Step 4: Adapt to Market Signals

Even annual investors need to periodically review their portfolios. The world changes, human needs evolve, and so does the market.

Take the COVID-19 pandemic as an example: when it broke out, central banks loosened monetary policy, lowered interest rates, making borrowing easier and cheaper. As a result, demand for housing surged, pushing real estate stock prices up. But in early 2022, tightening policies on real estate loans were implemented to curb soaring home prices. Demand declined, profit expectations fell, and real estate stocks reversed downward. A wise investor at this point would reduce their holdings of these stocks.

Warren Buffett is famous for his long-term holding strategy, but if you follow Berkshire’s portfolio, you’ll see stock allocations change frequently in each reporting period. A true investor is not someone who clings to stocks without ever adjusting, but someone who modifies their holdings to suit market conditions.

Step 5: Risk Control - The Key to Survival

Especially for short-term traders, risk control is vital for survival. Tools like stop-loss orders (Sell Stop), stop-buy (Buy Stop), and stop-limit orders (Stop Limit) help automatically protect your assets, avoiding heavy losses when the market suddenly reverses.

A common tactic is to set a stop-loss 10-15% away from the initial position. If the stock rises 15%, you’ve already incurred a loss, but it’s manageable. This helps you control risk on each trade.

Step 6: Master Entry/Exit Timing

Experienced investors use technical analysis to find the optimal entry and exit points. The two most popular indicators are:

RSI (Relative Strength Index): measures price momentum. When RSI drops below 30, the stock is oversold — a buy signal. When above 70, the stock is nearing a peak — caution is needed.

Stochastic Oscillator: helps identify reversal points. Above 80 indicates overbought (about to decline), below 20 indicates oversold (about to rebound).

If you’re not proficient in technical analysis, start by following trading signals provided by analysts, then gradually develop your own skills.

Step 7: Bottom-Fishing Strategies - High Returns but High Risks

Successfully catching the bottom can yield enormous profits. Technical signs of a bottom include:

• Price forms a new bottom but indicators like RSI, Stochastic (show increasing) — signs that selling pressure is weakening
• Price starts forming higher lows — momentum of decline weakens
• Large trading volume during decline — signals investors are returning to buy

However, catching falling knives is extremely dangerous. Use only a small portion of your capital to test, never risk everything. Also, avoid bottom-fishing in speculative stocks or stocks trading below par value, as they tend to fall sharply.

Step 8: Never Borrow Money to Invest

Never borrow money to invest. Only use idle funds that, if lost, won’t affect your long-term stability. In Vietnam, borrowing to invest is extremely risky because many scam companies charge exorbitant interest rates (up to 1000% per month).

However, you can use margin (leverage) to amplify profits with good risk management. For example, with 1:20 leverage, you can buy stocks worth $2,000. In the worst case, you only lose your initial capital, with no debt. But if the stock rises 1%, you earn 20% profit.

Step 9: Continuous Practice - The Key to Perfection

A valuable secret from Warren Buffett is never to lose money. To do this, you must constantly learn, analyze, and practice trading until you master it. The best way is to start with a demo account, trading virtual money to accumulate experience without risking real losses.

Step 10: Stable Mindset - The Final Decision

The stock market is highly volatile. Even a position with big gains can turn into a loss in just a few days. Therefore, keep a calm mindset, analyze the reasons behind market movements, then decide whether to hold or cut losses. Don’t panic and sell impulsively — you might regret this emotional action later.

Summary

The way for beginners to trade stocks does not involve secret tricks, only patience, discipline, and a steady mindset. Learning stock investment is a long journey, but with these principles, you will have a solid foundation to confidently step into the trading world.