Conquering the Stock Market - 10 Tips Every Investor Should Know

Starting a stock investment journey without experience is a significant challenge. Many people focus solely on theory, but reality shows that success requires combining knowledge with lessons from the market. To increase your chances of winning, you need to deeply understand the core principles of trading. This article summarizes 10 stock trading secrets that any new investor should equip themselves with.

1. Define your approach before stepping into the market

In the stock world, there are two main paths investors can choose:

Short-term strategy: Day trading aimed at capturing price fluctuations within a short period. This approach heavily relies on technical analysis, precisely identifying entry and exit points.

Long-term strategy: Buying and holding quality stocks over a long period. This method emphasizes fundamental analysis, understanding the company’s financial health and growth prospects.

Each approach requires different skills. Short-term investors must master trading based on news, recognize technical patterns, and understand derivatives. Conversely, long-term investors need the ability to read financial reports, analyze cash flows, and apply dollar-cost averaging strategies.

The fundamental difference between the two methods:

Once you’ve decided on your path, stick to disciplined adherence to that strategy, avoiding impulsive decisions that lead to losses due to emotions.

2. Benefits of a diversified portfolio

Diversifying capital across different assets is a principle that successful investors always apply. Warren Buffett also advises that diversification is a way to minimize risk during market downturns.

Specifically, instead of putting all your money into one stock, you should buy stocks from various sectors. You can even expand further by combining stocks, cryptocurrencies, forex, and other assets. When one sector is in decline, others may still grow normally.

Stock indices like S&P 500 or VN30 are examples of portfolios built from dozens of stocks. When a bear market hits, these indices decline less than holding a single stock. Investing in indices is a safe choice for those seeking stable profit growth without taking on excessive risk.

During hot market phases, returns from indices may be lower than individual stocks. However, long-term statistics show that index returns outperform bank deposits or bonds.

3. Secrets to selecting good stocks

If choosing the long-term investment route, selecting the right stocks is the decisive factor for success. This requires thorough research of financial reports, company development strategies, and market potential for future products.

Characteristics of high-quality stocks:

• Moderate debt: The company doesn’t borrow excessively; the quick ratio (Current Assets / Short-term Debt) always stays above 1.5, indicating safe debt repayment capacity.

• Stable growth: Revenue and profit have increased consistently over the past 5 years, except during general economic crises.

• Good operational performance: Indicators like profit margin, ROE, ROA improve annually.

• Regular dividends: The company is willing to distribute profits to shareholders regularly.

• Reputable management: The company’s leadership is well-known, honest, and transparent, which is very important.

Top companies in Vietnam like Vicostone, Vingroup, Vinamilk, Hòa Phát, Bình Minh Plastic share common traits: large scale, high market share, and management praised repeatedly. Good companies usually do not offer “hot” returns during market booms but serve as effective asset protectors when the market turns. Adding a few quality stocks to your portfolio is a stock trading tip to reduce risk.

4. Adjust your portfolio according to market rhythm

Even long-term investors need to periodically review the performance of stocks in their portfolio and adjust weights to match market developments. Human needs change, so investment strategies must also adapt.

For example: When COVID-19 broke out, central banks loosened monetary policy, lowering interest rates to stimulate the economy. Borrowing became easier, housing demand surged, pushing real estate stock prices up. But in early 2022, policies changed, banks restricted real estate loans to curb housing prices. As a result, housing demand dropped, and real estate stocks declined.

Experienced investors know how to adjust weights to adapt to policy changes and trends. Warren Buffett exemplifies this: although famous for long-term holding, Berkshire’s portfolio is continuously adjusted in each reporting period. Success isn’t just about holding long-term but knowing when to hold with the right weight.

5. Protect assets by risk control

Those trading short-term must prioritize risk management tools to protect capital when the market suddenly changes.

Useful orders:

Sell Stop Order: Automatically sells stocks when the price hits a preset level. This is a way to exit positions when the price falls below a tolerable level.

Buy Stop Order: Automatically buys stocks at a predetermined price. Used to lock in profits or re-enter the market at specific levels.

A effective technique is setting stop-loss points 10-15% away from the opening price. This helps control losses within tolerable limits, avoiding significant losses in a single trade.

6. Correct timing for entry and exit

Professional investors use technical analysis (charts, indicators, price patterns) to find optimal trading moments.

Two most popular indicators:

RSI (Relative Strength Index): Measures price momentum. When RSI drops below 30, stocks are oversold (buy signal). When RSI exceeds 70, stocks are nearing overbought (sell signal).

Stochastic Indicator: Reflects trend strength and reversal signals. Above 80 indicates overbought market - price likely to decline. Below 20 indicates oversold market - price likely to rebound.

These indicators provide clear signals to help investors avoid wrong decisions. Additionally, analysis tools based on these indicators, updated continuously, allow trading without being a technical analysis expert.

7. The art of bottom fishing

Catching the market bottom can generate enormous profits. Here are technical signals to identify bottoms:

• When prices create new lows but momentum indicators (RSI, Stochastic) tend to rise, indicating selling pressure is weakening and reversal is near.

• When successive lows are higher than previous lows, selling pressure is diminishing - a positive sign for an upcoming rally.

• Large trading volume during sharp price declines indicates smart investors are bottom fishing.

However, catching falling knives is extremely risky. Only allocate a small part of your capital for this strategy, never risking all assets. Also, avoid bottom fishing in weak, prolonged decline stocks, speculative stocks, or stocks trading below par value, as these can fall very deep.

8. Avoid borrowing to trade

Using borrowed money for investment is a dangerous turning point. Only use idle cash, savings that, if lost, won’t affect your life.

In Vietnam, borrowing to invest must be approached with caution due to many scam companies impersonating exchanges with interest rates up to 1000% per month.

However, a safe way to amplify profits is using margin trading. Margin allows you to trade with larger capital than your actual funds. For example, trading Alibaba stocks with 1:20 leverage means you only need $100 you can hold a position worth $2,000. In the worst case, you only lose $100 and are not in debt. If Alibaba rises 1%, you earn 20% profit. Margin is a powerful tool when used correctly.

9. Continuous practice is key

Warren Buffett always emphasizes: you never lose money when investing. This requires continuous learning, analyzing stocks, practicing trading to master both theory and practice.

The most effective way is practical training. Start with a demo trading account to accumulate experience without risking real money. In demo mode, you get virtual capital to practice, analyze, trade, and learn from mistakes. Every trade is a valuable lesson.

There’s no shortcut to becoming a good investor—only taking steps each day, learning something new, and accumulating experience with each trade.

10. Psychology is the decisive factor

The stock market is highly volatile; a position with big gains can turn into losses in days. Maintaining stable psychology is a vital survival skill.

Analyze the reasons behind market fluctuations, make decisions to hold or cut losses based on logic, not emotion. Don’t let fear or hope drive impulsive decisions. Cutting losses out of panic may later cause regret when the market rebounds.

Psychological pressure during downturns is intense, but only calm investors find real opportunities. Stable mindset allows clear thinking, executing plans, and avoiding emotional mistakes.

Mastering the stock market requires a combination of knowledge, discipline, and superior psychology. The stock trading tips above are not secret secrets but lessons from centuries of financial trading. Apply them systematically, patiently, and be ready to step into the investment world with greater confidence.