Self-learning stock trading from scratch - 10 principles every new investor should know

Are you just starting to self-study stocks and feeling overwhelmed by the vast amount of information? No need to worry; the secret to success doesn’t lie in dense theories but in practical experiences from seasoned investors. Today, I will share 10 golden principles that anyone wanting to self-learn stock trading should understand.

Choosing Your Own Path

Before you start investing, you need to clearly identify which school of thought you belong to: short-term investing or long-term investing.

Short-term investors use technical analysis, day trading, capturing small fluctuations to make quick profits. They need to monitor the market constantly and react quickly to unexpected changes.

Long-term investors choose a different approach: buying quality stocks, holding for years, living off dividends and long-term appreciation. They pay less attention to daily price charts and instead spend time analyzing financial reports of companies.

Each path has its own strategies, requires different knowledge, and offers different returns. The important thing is to choose clearly from the start, because confusion between the two schools can lead to losses.

Don’t Put All Eggs in One Basket

Warren Buffett always reminds us that diversification is the most important protective shield. Instead of putting all your money into one stock or one industry, spread your capital across many stocks, industries, and even different asset classes.

When the stock market enters a recession, a diversified portfolio will decline less than holding a single stock. For example, stock indices like S&P 500 or VN30 are already diversified portfolios. Investing in indices may not generate hot profits like individual stocks in a booming market, but they offer stable and superior performance compared to savings accounts or bonds.

Do Your Homework Before Buying

If you pursue a long-term investment strategy, choosing good stocks is a crucial decision. Don’t buy any stock based on speculation or emotions. Instead, spend time:

• Reading the company’s financial reports and assessing debt levels
• Tracking revenue and profit growth over the years
• Evaluating profitability through indicators like ROE, ROA
• Observing whether the company pays dividends regularly
• Researching leadership—are they reputable or have they ever misrepresented?

Good companies are usually big names with solid market share and leadership that investors consistently trust over many years. The top 10 Vietnamese companies with the strongest stock growth over 10 years, such as Vicostone, Vingroup, Vinamilk, Hòa Phát, are examples. They may not generate high profits during hot markets, but they are excellent defensive assets when the market turns downward.

Flexibly Adjust According to the Times

Even if you are a long-term holder, you still need to periodically review your portfolio performance and adjust weights as necessary. The world changes, and so does the market.

For example, when COVID-19 broke out, central banks loosened monetary policy, and interest rates dropped sharply. This made borrowing easier, housing demand surged, and real estate stocks rose accordingly. But by 2022, policies changed, banks tightened real estate lending. Demand decreased, company profits declined, and stock prices reversed downward.

A smart investor will reduce real estate exposure at this time instead of holding tightly. That’s why Warren Buffett, despite being famous for long-term holding, constantly adjusts his Berkshire portfolio in each reporting period.

Risk Control — An Unmissable Principle

Especially for short-term investors, risk management is vital for survival. The tools for risk control include using stop-loss and stop-limit orders:

• Sell Stop Order: When the stock falls to your preset price, the order automatically sells to limit losses
• Buy Stop Order: Helps you buy at a predetermined price without monitoring all day

Golden tip: Place stop points about 10-15% away from your opening position price. This helps you manage risks effectively—limiting losses to a reasonable level even if the trade goes wrong.

Know the Golden Timing

The exact timing of buying and selling can double gains or halve profits. Analysts often use technical analysis:

RSI (Relative Strength Index): Measures the strength of the price trend. If RSI < 30, stocks are oversold (good to buy). If RSI > 70, stocks are near peak (sell warning).

Stochastic Indicator: Identifies reversal signals. An indicator > 80 indicates overbought, likely to decline. An indicator < 20 indicates oversold, likely to rebound.

If you’re not yet proficient with these tools, start by learning step-by-step or look for trading signals provided by reputable trading platforms.

Secrets to Catching the Bottom

Catching the bottom of a stock can bring extraordinary profits but is very risky. If you want to try, remember:

• When the price hits a new bottom but RSI and Stochastic indicators are rising, it signals weakening downward momentum
• When prices start forming higher lows, selling pressure is easing
• When trading volume spikes during a decline, investors are returning to buy the dip

Important warning: Catching falling knives is very risky. Use only a small portion of your capital to try. Never invest all your assets in this game. And absolutely avoid catching the bottom of speculative stocks or stocks trading below par value—these tend to fall even further.

Do Not Borrow Money to Invest

This is a strict principle that every wise investor follows. Only invest with idle cash—money that losing won’t affect your life. Currently, borrowing to invest is extremely risky, especially with sky-high interest rates.

You can use margin (leverage) to increase profits, but do it smartly: with 1:20 leverage, $100 can control assets worth $2,000. In the worst case, you only lose the initial $100 without debt. In the best case, a 1% increase can yield a 20% profit.

Continuous Practice

Warren Buffett once said his secret is never losing money. To do that, you must keep learning, analyzing, and practicing. Theory is only half the game—the other half is practical experience.

The best way to self-study stocks is through real trading. Start with small capital, record each trade, analyze why it succeeded or failed. Over time, you’ll develop your own skill set.

Maintaining Psychological Stability Is Key

The stock market is unpredictable. A position that is highly profitable can turn into a loss in just a few days. That’s when psychology becomes decisive.

Maintaining psychological stability doesn’t mean holding tightly without letting go. It’s about calmly analyzing the situation, determining whether changes are fundamental or just temporary fluctuations, then making logical decisions to hold or cut losses.

Don’t panic or sell hastily out of fear. You will regret it when the market recovers.

Conclusion: Self-Study Stocks Requires Patience and Discipline

Self-learning stocks demands patience, discipline, and emotional stability. There are no secret notes or magical formulas—only golden principles and continuous practice.

Hopefully, these 10 tips will help you build a solid foundation on your long-term investment journey. Success doesn’t come overnight, but with perseverance, it will arrive.