The Complete Guide: Master Stock Market Knowledge from Basics to Practice

In recent years, the stock market has exploded with the participation of millions of new investors. When production and commercial activities face difficulties, stock investment becomes an attractive option to increase income. The year 2022 marked a strong development phase for this market, and to enter the trading floor with understanding, new investors need to equip themselves with comprehensive stock market knowledge for beginners.

What Is Stock Market? Definition and Basic Types

According to the Securities Law No. 70/2006/QH1, securities are defined as documents or evidence confirming the lawful rights and interests of the owner regarding assets or the equity of the issuing organization.

The variety of securities includes:

• Shares: The most common security, confirming ownership of a portion of a company’s equity. Divided into two main types: common shares (linked to business results, with no pre-specified dividends) and preferred shares (with dividend yield or voting rights prioritized). Shares can be in paper form with company information, par value, issuance year, or electronic form stored in a system.

• Bonds: Loan instruments where the issuer commits to pay principal and interest within a specified period. Bondholders receive fixed interest, independent of the borrower’s operational results, but do not have management rights.

• Fund Certificates: Confirm ownership when investors contribute capital to a public fund. This fund raises capital from many investors to jointly invest in securities or other assets to generate common profits.

• Derivative Securities: Contracts that specify the rights and obligations of parties, with value dependent on the underlying asset (securities, index). Includes options, futures, and forward contracts.

• Warrants: Securities with collateral assets, granting the right to purchase the underlying security at a specified price on the maturity date.

• Share Purchase Rights: Granted to existing shareholders to buy newly issued shares at a lower price than the market price.

• Depository Receipts: Issued when shares of foreign companies are deposited at a depository bank, with quantity and price according to regulated ratios.

Stock Market: Structure and Economic Role

Concept of the Stock Market for Beginners

The stock market is a trading space for buying and selling, exchanging stock products at exchanges or through brokerage firms. The market is divided into two segments:

• Primary Market: Organizations or funds raise capital by issuing shares for the first time.

• Secondary Market: After issuance, shares are traded among investors. These transactions do not generate new money but only transfer ownership between parties.

Strategic Role of the Stock Market

The stock market plays an important role in the economy:

• Promoting business development through information disclosure, valuation, securities distribution, and capital raising from investors.

• Providing criteria to evaluate the development activities of enterprises.

• Highly liquid, allowing investors to buy and sell easily.

• Helping the government and enterprises raise foreign capital through bond and stock issuance.

Essential Vocabulary and Concepts in Stock Trading

Basic Stock Market Terms

• Listed Company: A company that issues shares on a stock exchange.

• IPO (Initial Public Offering): The first issuance of securities to the public.

• Market Capitalization: The total market value of all outstanding shares.

• Offer Price: The starting price of the initial issuance.

• Portfolio: The collection of all stocks in an investor’s account.

• Yield/Profit Rate: The total dividends received from owning shares.

• Annual Report: The company’s yearly financial report.

• Alpha Coefficient: Return rate adjusted for risk.

• Beta Coefficient: A measure of the volatility or risk of a stock or portfolio.

• Price to Book Ratio: The comparison between market price and book value per share.

• Dividend Ratio: The relationship between dividends received and the investment value of the stock.

Common Stock Trading Orders

• Limit Order (LO): Buy/sell shares at a specified or better price.

• Market Order (MP): Buy at the lowest available selling price or sell at the highest current bid.

• ATO Order: Trading at the opening price, applied before 9:15 (specifically on Ho Chi Minh Stock Exchange).

• ATC Order: Trading at the closing price at 14:45 (on both Hanoi and Ho Chi Minh exchanges).

• PLO Order: Buy/sell at the closing price after the ATC session (specifically on Hanoi exchange).

• Break: When a stock’s price surges significantly above a specific level.

• Long/Short: Trading strategies to buy up or sell down in derivatives.

• Stock Screening: Using criteria such as upward momentum, accumulation, market capitalization to find suitable stocks.

• Safety Margin: The difference between the market price and intrinsic value.

Stock Price Levels

• Par Value: The amount written on the security at issuance.

• Market Price: The buying/selling price on the trading market.

• Listing Price: The initial price listed on the market.

• Matching Price: The price at which buy/sell orders are matched.

• Opening Price: The previous day’s closing price.

• Floor Price / Ceiling Price: The lowest/highest price within a trading session.

• Settlement Date (T+3): Three days after matching, where money/securities are transferred.

• Price Trend: The three main types—uptrend (Uptrend), downtrend (Downtrend), sideways (Sideway).

Core Concepts of Trading

• Index (Index): A statistical measure from a list of stocks based on certain ratios. For example, VNIndex represents all stocks on HOSE, VN30 is an index of the top 30 stocks by market cap.

• Margin Trading (Margin): Investors borrow money from securities companies to buy stocks.

• Trading Volume: The number of shares traded within a specific period.

• Short Selling: Selling securities not owned, by borrowing from others.

• Price Fluctuation: On HOSE, ±7%; on HNX, ±10% compared to the previous reference price.

Main Participants in the Market

• Issuer: Issues securities to raise capital.

• Individual Investor: People with capital who want to participate to earn extra income.

• Institutional Investor: Investment companies, insurance, financial, and banking firms with large capital.

• Securities Company: Supports management, consulting, brokerage, and underwriting.

• Related Organizations: State Securities Commission, stock exchanges, credit rating agencies, infrastructure providers.

Principles of Stock Market Operation for Beginners

Ten basic principles investors need to understand:

• Principle of Competition: Issuers compete to sell securities; investors compete to buy at good prices and high profits.

• Principle of Fairness: All participants must comply with common regulations.

• Principle of Transparency: Issuers must regularly, publicly, and fully disclose information.

• Principle of Intermediation: Transactions between investors and issuers are mediated through securities companies.

• Principle of Centralization: Transactions only occur at the exchange under strict supervision by authorities.

Trading Schedule

The (Ho Chi Minh, Hanoi, UPCOM) exchanges operate from 9:00 to 11:30 in the morning and 13:00 to 15:00 in the afternoon from Monday to Friday (excluding weekends and holidays).

Understanding Stock Price Tables

The price table is an essential tool that new investors need to master:

• Green color: Price increased compared to reference price.

• Red color: Price decreased compared to reference price.

• Yellow color: Price unchanged compared to reference price.

How to Buy and Sell Stocks

Investors have two ways to place orders:

• Manually placing orders via trading software.

• Through a brokerage firm.

Guide to Opening a Stock Trading Account

Before opening an account, investors should:

• Research and choose a securities company with reasonable transaction fees.

• Pay attention to margin ratios and applicable interest rates.

Accounts can be opened at:

• Directly at securities companies.

• Partner banks.

• Securities brokerage firms.

Information required includes fixed address, email, frequently used phone number, and bank account details. After opening, the company will provide an account number and instructions for depositing funds to start trading. With a balance of 500,000 VND or more, investors can begin buying and selling stocks.

Important Notes When Trading

• Choose reputable exchanges: In Vietnam, there are three main exchanges—HOSE (Ho Chi Minh City), HNX (Hanoi), UPCOM (unlisted companies). There are also many international exchanges operating, but select reputable ones with long histories, managed by domestic authorities or international organizations like ASIC, FCA, SEC, CySEC.

• Master basic orders: New investors should understand the three basic orders—ATO, ATC, LO—before learning advanced orders like MP, MTL, MOK, MAK.

Conclusion

Mastering stock market knowledge for beginners is the first step to participating in the market with understanding. However, to develop trading skills and generate sustainable profits, investors need to continue learning, accumulate practical experience, and stay updated with market fluctuations. The investment journey is not only about knowledge but also about discipline, risk management, and adaptability to the ever-changing market environment.