10 Stock Investment Tips That Professional Traders Always Apply

Want to learn how to invest in stocks effectively but don’t know where to start? Theoretical knowledge is only the tip of the iceberg—true success comes from correctly applying proven principles by the market. This article summarizes 10 stock investment experiences that experienced traders and long-term investors recommend beginners master.

1. Choose the Right Investment Path from the Beginning

There are two basic approaches when learning how to invest in stocks: short-term investing and long-term investing.

With short-term investing, you will use day trading strategies, technical analysis to find optimal buy and sell points. This approach requires continuous chart monitoring, quick market news absorption, and a high risk tolerance.

Long-term investing employs a “buy and hold” strategy. You will spend time analyzing fundamentals to find quality stocks, then hold them for many years. This approach requires less daily price tracking, suitable for busy individuals or those unwilling to accept high risks.

Comparison table of the two approaches:

Once you clearly define your path, stick to that strategy with discipline. This helps you avoid impulsive buy/sell decisions influenced by emotions.

2. Don’t Put All Eggs in One Basket

Diversifying your portfolio is one of the most repeated pieces of advice in investing—and for good reason. Warren Buffett, the legendary investor, always emphasizes the importance of risk diversification.

What does diversification mean? Not just buying many different stocks, but also:

• Buying stocks from various industries (technology, energy, retail…)
• Investing in stock indices instead of individual stocks (like S&P 500, VN30)
• Combining different asset classes (stocks, cryptocurrencies, forex, commodities)

For example, when the market receives negative news, a single stock might lose 30-50% of its value. But a diversified portfolio or a market index usually only drops 10-15%, as growth in other sectors offsets some losses.

However, diversification also has downsides: during bull markets (bull market), a diversified portfolio may not rise as sharply as holding a few winning stocks. But in the long run, index investment returns generally outperform savings accounts or bonds.

3. Know How to Identify Quality Stocks

If you choose the long-term investment route, selecting good stocks will determine your success or failure.

Signs of a quality stock:

• Financial balance: Low debt ratio, short-term liquidity ratio (current assets/current liabilities) > 1.5
• Sustainable growth: Revenue and profit growth over the past 5 years (excluding global crises like COVID-19)
• Profitability: ROE, ROA, profit margin indicators consistently increasing annually
• Regular dividends: The company always pays dividends, indicating genuine profitability
• Trustworthy management: No deception, avoidance, or concealment of information

Major Vietnamese companies like Vicostone, Vingroup, Vinamilk, Hòa Phát, Bình Minh Plastic have surged over the past decade because they have good management and sustainable growth. These stocks may not generate huge profits during strong bull markets, but they serve as a “good shield” during downturns.

4. Adjust Your Portfolio According to Market Cycles

Being a long-term investor doesn’t mean “buy and forget.” Over time, economic needs change, the State Bank’s policies are adjusted, and your investment portfolio must adapt.

Real-world example: When COVID-19 broke out, central banks cut interest rates and loosened monetary policy. This made real estate investment attractive, causing real estate stocks to soar. However, in early 2022, as policies tightened, housing demand dropped, and real estate stocks plummeted.

A savvy investor will reduce the proportion of real estate stocks after policy shifts and shift into trending sectors.

Warren Buffett is famous as a “buy-and-hold” investor, but if you follow Berkshire’s reports, you’ll see the stock proportions are continuously adjusted each period. The secret is holding with an appropriate proportion, not just holding whatever.

5. Always Have a Safety Net - Risk Control

Whether you’re a short-term trader or a long-term investor, risk management is vital.

Basic tools to protect assets:

• Stop Loss order (Sell Stop): If stock price falls to a preset level, the order automatically sells to prevent large losses
• Stop Buy order (Buy Stop): Activates a buy when the price surpasses a certain resistance level

Practice rule: Set stop-loss points 10-15% away from your entry price. For example, if you buy a stock at 100 units, set stop loss at 85-90 units. This minimizes losses if the market unexpectedly reverses.

Professional traders never skip this step—they know losses are inevitable, but large losses can be prevented.

6. Use Technical Analysis to Find Optimal Entry and Exit Points

Technical analysis (charts, patterns, indicators) is a tool used by professional traders to determine the ideal timing for entering trades.

Two most common indicators:

• RSI (Relative Strength Index): Measures momentum. When RSI < 30, stocks are oversold (buy opportunity). When RSI > 70, stocks are near overbought (sell opportunity).

• Stochastic Oscillator: Identifies reversal signals. >80 indicates overbought, about to correct. <20 indicates oversold, likely to rebound.

If these indicators seem complex, don’t panic. You can start by learning basic price patterns (double top/bottom, support-resistance) and gradually improve your analysis skills.

7. Bottom-Fishing Strategy - Playing It Smart

Catching the bottom (buying at the lowest price) can generate extraordinary profits, but it’s also one of the most difficult skills.

Signs that the price is near bottom:

• Stock prices repeatedly make new lows, but momentum indicators (RSI, Stochastic) start rising—showing selling pressure weakening
• Prices form higher lows or double/triple bottom patterns (- indicating decreasing selling pressure)
• Trading volume surges as prices fall—indicating buyers are returning

Warning: Bottom fishing is very risky. Only invest a small part of your capital in this strategy. Never risk all your assets. Avoid bottom-fishing “speculative” stocks or companies trading below par—these can fall sharply or even go bankrupt.

8. Beware of Excessive Margin Trading

Borrowing money to invest is one of the most common mistakes for beginners.

Golden rule: Invest only with money you can afford to lose entirely without affecting your life. Avoid borrowing from non-bank credit companies with sky-high interest rates (up to hundreds of percent per month).

Regarding margin (using margin trading): It’s a legal tool, but must be used cautiously. If margin is 1:5 (deposit 100 units, buy 500 units), you can amplify profits fivefold. But losses also increase fivefold. Excessive margin use is the fastest way to bankruptcy.

A smart strategy is to use moderate margin (1:2 or 1:3) instead of extremely high leverage (1:20), balancing attractive gains with risk control.

9. Continuous Practice - The Key to Success

Warren Buffett once said his secret is never losing money while learning. To do this, you must:

• Keep learning: Read financial reports, follow market news, explore new strategies
• Analyze systematically: Before investing real money, practice analyzing stocks on paper or using demo accounts
• Keep records: Write down your decisions, reasons, and outcomes. This helps you learn from mistakes

Start with a demo trading account (virtual account) to practice with virtual funds without risking real assets. Once experienced, switch to a real account with a small amount.

10. Maintain Psychological Stability - The Winner Is Not Always the Smartest

Stock markets are highly volatile. A position with big gains can turn into losses in 1-2 days. Bad news can cause stocks to plunge. This is when psychology becomes critically important.

Common psychological mistakes:

• Overfear: When prices fall, panic and sell at the lowest point, then prices rebound two weeks later
• Greed: Move stop-loss orders higher, telling yourself “just a little more up.” Result: reversal and high losses
• Chasing trends: Everyone is buying stock A, so you buy without analysis, then the bubble bursts and you suffer heavy losses

How to stay psychologically stable:

• Always remember step 5 (risk control)—you set stop-loss, so losses are always manageable
• Analyze reasons for market decline instead of reacting emotionally
• Stick to your strategy, avoid changing decisions based on feelings

Successful investors are not necessarily the most analytical or luckiest. They are disciplined, patient, and capable of controlling their emotions.

Conclusion

Learning how to invest in stocks is a long journey. The 10 experiences above are not magic formulas but proven principles tested over decades by millions of investors. Discipline, patience, and continuous learning will lead you to long-term success in the stock market.