First steps on the stock exchange: From zero to hero for new investors

In recent years, the stock market has become an attractive destination for millions of investors in Vietnam. When production and business activities face difficulties, stock investment opens up new profit opportunities. However, to safely enter this world, new investors need to master fundamental knowledge and understand the market’s rules. This article will help you systematize core concepts about stocks from A-Z.

What is stock? Common types of stocks

According to the Securities Law No. 70/2006/QH1, stocks are documents or electronic certificates confirming the lawful rights and interests of the owner regarding assets or the equity of the issuing organization. They are not only a type of asset but also a means to raise capital in the modern economy.

Stocks include various forms:

• Shares: The most common type of security, confirming ownership of a part of a company’s capital. Common shares are linked to business results, while preferred shares have special rights such as fixed dividends or voting rights.
• Bonds: A form of borrowing, where the issuer commits to pay both principal and interest as agreed. Bond buyers receive fixed interest regardless of the issuer’s business performance.
• Fund certificates: Confirm ownership when investors contribute capital to a public investment fund.
• Derivative securities: Include options, futures, and forward contracts, with values dependent on the underlying asset.
• Warrants and stock purchase rights: Grant investors the right to buy the underlying securities at a predetermined price in the future.
• Depository certificates: Issued when foreign stocks are deposited at banks.

Stock market: Operating mechanism and role

Concept and classification

The stock market is where investors conduct buying and selling transactions of securities. It is divided into two main types:

• Primary market: Organizations issue securities for the first time to raise capital. This is where companies offer shares to the public to expand capital.
• Secondary market: Where investors trade previously issued securities. Transactions here do not generate new money but only change ownership rights between parties.

Important economic role

The stock market plays a crucial role:

• Promoting the development of joint-stock companies through capital mobilization from investors.
• Providing tools for investors to evaluate business activities and potential.
• High liquidity, allowing investors to easily buy and sell assets.
• Helping companies and the government attract foreign capital through bond and stock issuance.

Essential terms that new investors must know

Market indicators and concepts

• Listed company: A company that has offered shares on the exchange.
• IPO (Initial Public Offering): The first issuance of securities to the public.
• Market capitalization: The total value of a company, calculated by multiplying the stock price by the number of outstanding shares.
• Index (Index): A statistic derived from a list of stocks based on certain ratios. For example, Vnindex represents all codes on HOSE, Vn30 is the index of the 30 largest-cap stocks.
• Alpha: Return rate adjusted for risk.
• Beta: A measure of the risk of a stock or investment portfolio.

Trading orders

• Limit order (LO): Buy/sell stocks at a specified price or better.
• Market order (MP): Buy at the lowest selling price or sell at the highest current price.
• ATO order: Trading at the opening price determined by the matching order (only applicable on Ho Chi Minh Stock Exchange).
• ATC order: Trading at the closing price determined by the matching order at 14:45 (applicable on both exchanges).
• PLO order: Buy/sell stocks at the closing price after ATC (only applicable on Hanoi Stock Exchange).
• Break: Stock price rises sharply beyond a certain price range.
• Long/Short: Trading strategies to buy up or sell down in derivatives.

Price types

• Par value: The face value printed on the security at issuance.
• Market price: The actual buying/selling price in the trading market.
• Listed price: The initial price listed on the exchange.
• Opening/closing price: Price at the start or end of a trading session.
• Floor/ceiling price: The lowest/highest price within a trading session.
• Settlement date (T+3): Three working days after the order is matched, where money and securities are transferred to accounts.

Other trading terms

• Margin: Margin trading, where investors borrow money from securities companies to buy stocks.
• Trading volume: The number of shares traded within a period.
• Short selling: Selling securities that you do not own by borrowing from others.
• Price fluctuation range: The permissible fluctuation within a session (+/-7% on HOSE, +/-10% on HNX).
• Stock portfolio: The collection of stock codes in an investor’s account.

Main components of the stock market

The stock market includes participants:

• Issuers: Organizations and companies issuing securities to raise capital.
• Individual investors: Private capital owners participating in trading to earn additional income.
• Institutional investors: Investment firms, insurance companies, pension funds, commercial banks with large capital.
• Securities companies: Provide management, consulting, brokerage, and underwriting services.
• Management organizations: State Securities Commission, stock exchanges, supporting service companies.

Principles of stock market operation

Investors need to understand five basic principles:

• Competition principle: Issuers compete to sell securities, investors compete to buy at good prices.
• Fairness principle: Everyone must comply with the same regulations.
• Transparency principle: Issuers must regularly, publicly, and fully disclose information.
• Intermediary principle: Transactions are conducted through securities companies (intermediary parties).
• Centralized principle: Transactions only occur on official exchanges under government supervision.

Trading hours and how to read price boards

Trading hours

The three main exchanges (HOSE, HNX, UPCOM) operate within:

• Morning: 9:00 - 11:30
• Afternoon: 13:00 - 15:00
• From Monday to Friday (excluding weekends and holidays).

How to read the price board

• Green: Price increased compared to the previous reference price (day).
• Red: Price decreased compared to the reference.
• Yellow: Price remains the same as the reference.

How to open an account and start trading

Preparation before opening an account

New investors should:

• Research and choose a securities company with reasonable transaction fees.
• Check margin ratio and interest rates applied.
• Confirm that the company has a license from securities regulators.

Account opening process

You can open a securities account in three ways:

• Directly at a securities company
• At a partner bank
• Through a brokerage firm

Information to provide:

• Permanent address
• Email and contact phone number
• Bank account number

After opening an account, the company will provide the account number and guide you to deposit money. With at least 500,000 VND, you can start buying and selling stocks.

Two ways to execute transactions

• Self-order placement: Use trading software to place orders directly.
• Order via broker: Contact the securities company for support.

Important notes for new investors

Choosing the right trading platform

In Vietnam, there are three main exchanges:

• HCM Stock Exchange (HOSE): The main exchange with large companies.
• Hanoi Stock Exchange (HNX): The exchange with small and medium-sized companies.
• UPCOM: The trading point for public companies not yet listed.

Additionally, there are many international exchanges. Regardless of the platform chosen, select a reputable, long-standing exchange managed by domestic or international securities authorities (ASIC, FCA, SEC, CySEC,…).

Master basic orders

New investors should focus on learning three basic orders first:

• ATO: Opening price order
• ATC: Closing price order
• LO: Limit order

After mastering these, you can learn advanced orders like MP, MTL, MOK, MAK…

Risk management

• Do not invest too much capital in a single stock.
• Always have a clear stop-loss plan.
• Keep updated with market information and company activities.
• Do not trade based on emotions but on analysis.

Conclusion

To succeed in the stock market, investors need to master fundamental stock knowledge, understand the market’s operation mechanisms, and continuously learn from experience. Starting with basic trading orders, understanding each type of security, and choosing a reputable trading platform will help you build a solid foundation to step into investment safely. Remember, knowledge and experience are keys to quickly adapting to market fluctuations.