A-Z Guide to Stocks: From Theory to Practice for Beginners

In recent years, the stock market has become very vibrant. When production and commercial activities face difficulties, investing in stocks has opened up profit opportunities, attracting millions of investors. To succeed in this market, new investors (who are just starting) need to understand the basic rules, master concepts, and appropriate trading strategies.

What Is the Stock Market? Basic Definitions and Classifications

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

Basic knowledge about securities includes many different types:

Stocks - This is the most common and easiest-to-understand type of security. Stocks confirm that you own a part of the company’s capital. There are two types of stocks: common shares (with variable dividends depending on business results) and preferred shares (with priority rights to dividends or voting). Stocks can be in paper form or electronic, stored on computer systems.

Bonds - Also called debt certificates, these are commitments to pay by the issuer (a company, organization, or government). When purchasing bonds, you will receive fixed interest periodically, regardless of the issuer’s operational results.

Fund Certificates - This type of security confirms your ownership in a public fund. A public fund is a place where many investors pool capital to invest in various assets to generate profits.

Derivative Securities - Contracts whose value depends on the underlying asset (stocks, indices, etc.). These include options, futures contracts, and forward contracts. The key difference is that they are traded on the derivatives market, settled at a specified future time, with profits calculated daily.

Warrants, Stock Purchase Rights, Depository Certificates - These are other specialized securities, each with its own operation methods and rules.

How Does the Stock Market Operate?

Basic Concept

The stock market (exchange) is where investors buy and sell securities. In Vietnam, there are three main exchanges: Ho Chi Minh City Stock Exchange (HOSE), Hanoi Stock Exchange (HNX), and Upcom for unlisted companies.

The market is divided into two types:

• Primary Market: Where organizations issue securities for the first time to raise capital
• Secondary Market: Where investors buy and sell already issued securities. This transaction does not create new money but only changes ownership rights

The Important Role of the Market

The stock market plays a vital role in the economy:

• Helping companies raise capital for business development
• Providing valuation information for investors to assess enterprises
• High liquidity - you can quickly buy and sell securities
• Helping governments and businesses attract foreign capital

Vocabulary and Stock Market Terms You Need to Know

Basic Concepts About the Market

• IPO (Initial Public Offering): The first public issuance of securities
• Listed Company: A company whose shares are officially traded on the exchange
• Market Capitalization: The total value of all the company’s outstanding shares
• Portfolio of Securities: The collection of stock codes in an investor’s account
• Yield/Return Rate: Total profit including dividends and gains from price differences
• Alpha Coefficient: Return rate adjusted for risk
• Beta Coefficient: A measure of the risk of a stock or portfolio
• P/B Ratio (Price to Book): Comparing market price with book value
• Bankruptcy Risk Coefficient: Helps assess a company’s financial difficulty potential

Types of Trading Orders

• Limit Order (LO): Buy/sell at a specified or better price
• Market Order (MP): Buy at the lowest selling price or sell at the highest current price
• ATO Order: Trading at the opening price (only applicable on HCM Stock Exchange, before 9:15)
• ATC Order: Trading at the closing price (14:45, applicable on both exchanges)
• PLO Order: Buy/sell at the closing price after the ATC session (only on Hanoi Stock Exchange)

Stock Price Terminology

• Par Value: The value printed on the certificate at issuance
• Listing Price: The initial announced price on the market
• Matching Price: The actual price at which transactions are matched
• Opening Price/Closing Price: The first/last price of the trading session
• Floor Price/Ceiling Price: The lowest/highest price during the trading day
• Settlement Date: T+3 (3 working days after matching)
• Price Trend: The market has 3 types - uptrend (Uptrend), downtrend (Downtrend), sideways (Sideway)

Other Trading Concepts

• Index (Index): A statistical measure based on a list of stocks according to a certain ratio (VN-Index, VN30, etc.)
• Margin: Margin trading - borrowing money from a securities company to buy stocks
• Trading Volume: The number of shares traded within a period
• Short Selling: Selling securities you do not own by borrowing from others
• Price Fluctuation Range: HOSE allows +/-7%, HNX allows +/-10% compared to the reference price

Who Participates in the Stock Market?

Issuer: Issues securities to raise capital for business development

Individual Investors: People with capital participating to earn additional income

Institutional Investors: Investment companies, insurance, finance, commercial banks trading with large capital

Securities Companies: Support management, consulting, brokerage, underwriting

Supervisory Organizations: Securities Commission, stock exchanges, credit rating agencies

The Ten Principles You Must Know

Principle of Competition: Issuers compete to sell securities, investors compete to buy at good prices

Principle of Fairness: All participants must comply with the same regulations

Principle of Transparency: Issuers must provide complete, regular information about securities

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

Principle of Centralization: Transactions only occur on monitored exchanges

Trading Hours and How to Read Price Boards

Trading Hours

The three exchanges (HOSE, HNX, UPCOM) operate from 9:00-11:30 AM and 13:00-15:00 PM, Monday to Friday (excluding weekends and holidays).

How to Read Price Boards

• Green: Price increased compared to reference price
• Red: Price decreased compared to reference price
• Yellow: Price unchanged compared to reference price

How to Open an Account and Trade

First Step: Choose a Securities Company

Before opening an account, research and compare:

• Transaction fees
• Margin ratio (leverage)
• Margin loan interest rate
• Reputation and operational history

You can open an account directly at a securities company, bank, or through a brokerage firm.

Necessary Information to Prepare

• Permanent address
• Email
• Phone number
• Bank account information

After opening an account, the company will provide an account number and guide you on depositing funds. You need at least 500,000 VND to start trading.

Two Ways to Trade

• Place orders manually on trading software
• Place orders through a broker

Tips for New Investors

Choose a reputable exchange: Select a trading platform with a long operational history, managed by domestic or international securities authorities (ASIC, FCA, SEC, CySEC).

Master the three basic orders: New investors should focus on learning ATO, ATC, LO before moving on to complex orders like MP, MTL, MOK, MAK.

Always manage risks: Do not invest beyond your capacity, especially when using margin.

Continuous learning: The market is always volatile. You need to constantly update knowledge, technical analysis, and learn from experienced investors.

Patience and discipline: Avoid emotional trading, stick to your planned strategy.

Conclusion

Understanding the basic knowledge of securities is the foundation for success in the market. However, learning theory is just the first step - you need to practice continuously, gain experience, and always update market information. The stock market, though challenging, also offers many profit opportunities for investors with knowledge, skills, and strong psychology. Start your journey wisely and with a plan!