10 Tips You Can't Miss When Exploring Stock Trading - From Theory to Practice

You are starting to step into the world of stock investing but don’t know where to begin? To learn how to invest effectively in stocks, you not only need to master the theory but also learn from practical experiences of seasoned investors. This article will summarize 10 essential tips that anyone interested in stock trading should know.

1. Stable Psychology - The Foundation of Success

Before diving into strategies, the first thing to remember is psychology is key. The stock market is unpredictable - a position that is making big profits can turn into losses in just 1-2 days. Maintaining a steady mindset helps you avoid hasty, emotional decisions. Instead of cutting losses out of fear, analyze the market reasons to make rational decisions on holding or cutting losses. Psychological discipline will help you avoid costly mistakes that many beginners often encounter.

2. Define Your Investment Style

Learning to invest in stocks starts with choosing a style that suits you. There are two main approaches:

Long-term investing: Applying a buy-and-hold strategy based on fundamental analysis of companies. You need to understand the industry, business model, and sustainability of the company. This style requires lower risk tolerance, less frequent market monitoring, and offers average - low but stable returns.

Short-term trading: Using day trading strategies based on technical analysis and market signals. This style demands higher risk tolerance, continuous price monitoring during trading hours, and may involve leverage to increase profits, but also increases the risk of losing capital.

Once you’ve identified your style, stick to it strictly to minimize wrong decisions influenced by emotions.

3. Risk Management - Survival Skills

To learn stock trading safely, you must always prioritize capital protection. Use tools like stop-loss orders (Sell Stop) and stop-buy orders (Buy Stop) to automatically close positions when prices hit preset levels.

An effective strategy is setting stop-loss points from 10% to 15% of the opening price. This helps you manage risk systematically - if you incur losses, they stay within your tolerance. Never bet all your assets on a single trade, no matter how confident you are.

4. Diversify Your Portfolio - Insurance for Your Assets

Warren Buffett, the legendary investor, always advises that diversification is the best way to minimize risk. You should not put all your money into one stock or one sector. Instead, buy multiple stocks from different industries - industrials, retail, energy, technology…

Stock indices (S&P 500, VN30) are perfect examples of diversification. When a bear market hits, these indices decline less than holding a single stock. Investing in indices is a simple yet effective way for long-term investors interested in stock trading without spending too much effort on analysis.

5. Choosing Good Stocks - The Long-term Investor’s Arsenal

If you opt for long-term investing, selecting quality stocks is crucial. Look for companies with these characteristics:

• Limited debt: The ratio (Current assets / Short-term debt) ≥ 1.5 indicates good financial health.
• Sustainable growth: Revenue and profit increase consistently over the past 5 years (excluding major crises like COVID-19).
• Profitability: Increasing profit margins, ROE, ROA annually show effective management.
• Dividend policy: Companies paying regular dividends are reliable indicators.
• Reputable leadership: Companies with honest, transparent leaders and a good track record tend to sustain success.

Looking at the top 10 Vietnamese companies with the highest stock price growth over the past 10 years like Vicostone, Vingroup, Vinamilk, Hòa Phát, Bình Minh Plastic - all are large companies with solid market share and widely recognized leadership. These good stocks may not give “hot” profits like stocks at peak levels, but they are excellent defensive assets during market downturns.

6. Technical Analysis - Tools to Determine Entry and Exit Points

To learn short-term stock trading, you need to familiarize yourself with technical analysis. The two most popular indicators are:

Relative Strength Index (RSI): Measures price volatility. When RSI < 30, stocks are oversold (oversold). When RSI > 70, stocks are nearing peak.

Stochastic Oscillator (Stochastic): Measures trend strength. When > 80, stocks are overbought and may reverse downward. When < 20, stocks are oversold and likely to rebound.

If you’re just starting, these tools may seem complex. But with regular practice, they become powerful weapons to accurately identify entry/exit points.

7. Catching the Bottom - Advanced Technique, High Risk

Catching the bottom - buying when prices are at their lowest - can generate extraordinary profits. However, it is also one of the riskiest strategies.

Signs indicating a stock is bottoming out:

• Price continuously makes new lows but indicators RSI, Stochastic show (positive divergence).
• Price forms higher lows over time, indicating selling pressure is weakening.
• Large trading volume appears during declines, signaling bottom-fishing by investors.

Important note: Use only a small portion of your capital for bottom-fishing. Do not risk all your assets on this game. Avoid speculative stocks or companies on the verge of bankruptcy.

8. Adjust Your Portfolio According to Market Conditions

An experienced investor knows how to flexibly change portfolio weights as market conditions shift. Warren Buffett is famous for long-term holding, but if you follow Berkshire funds, you’ll see stock allocations change continuously each quarter.

Real example: During COVID-19, the central bank loosened monetary policy, lowering interest rates, making loans easier. Housing demand increased, real estate stocks surged. But in early 2022, tightening policies reduced real estate lending, causing sector stock prices to fall. Smart investors reduce real estate holdings when they see these signals.

Regularly reviewing portfolio performance and adjusting weights is essential to learn stock trading practically.

9. Never Borrow to Invest - Lessons from the Past

A common mistake many beginners make is borrowing money to invest in hopes of multiplying profits. Don’t do this.

Only invest with idle cash, money you can lose without affecting your life. Currently in Vietnam, many unofficial “investment” apps lure people into borrowing at interest rates up to 1000% per month - a dangerous trap.

Instead, you can use **margin (borrow from the exchange) smartly. Margin amplifies profits with managed risks. For example, with 1:20 leverage, you can buy assets worth $2,000 with just $100 your initial capital$100 . In the worst case, you only lose your initial investment and are not in debt. In the best case, a 1% price increase yields 20% profit.

10. Continuous Practice - The Path to Mastery

A valuable tip from Warren Buffett is: never lose money. To achieve this, you must constantly learn, analyze stocks, and practice trading.

The most effective way is starting with a demo (simulated) account, where you trade with virtual money. This allows you to accumulate real experience without risking real money. Practice analyzing stocks, testing strategies, learning from mistakes. When your gains and losses stabilize on the demo account, you’ll be ready to switch to real money.

Conclusion

To learn stock trading effectively, patience, discipline, and a strong mindset are essential. There is no magic formula, no indicator that is 100% accurate. Success in stocks comes from adhering to principles, managing risks systematically, and continuously improving skills. Start today, step by step, and you will get closer to your goals.