To Succeed in Stock Trading - 10 Investor Rules You Cannot Ignore

Are you just starting to enter the world of investing? What is stock trading and how can you achieve sustainable profits? Many people mistakenly believe that mastering theory alone is enough, but in reality, stock trading requires practical skills, continuous market news updates, and learning from seasoned investors. Based on lessons learned from market participation, I would like to share 10 golden principles that every investor needs to understand.

1. Investment Approach: Choose the Right Path for Yourself

There are two main approaches to stock trading:

Short-term investing: Using buy-sell strategies within the day, based on technical analysis to identify entry/exit points. This method requires constant monitoring of the stock board, keeping up with economic news, and having a high risk tolerance.

Long-term investing: Applying buy-and-hold strategies, selecting quality stocks based on fundamental analysis. This approach suits those who do not have time to follow the market daily.

Each method has different strategies. Short-term investors need to understand technical analysis and derivatives trading strategies deeply. Long-term investors should explore financial statement analysis and dollar-cost averaging strategies.

Once you identify your approach, strictly adhere to that plan. This helps you avoid wrong decisions caused by emotional fluctuations.

2. Risk Reduction Through Diversification

Diversifying your portfolio is a secret that legendary investor Warren Buffett always follows. Holding multiple stocks from different sectors, or combining asset classes such as (stocks, cryptocurrencies, forex), will help minimize losses when the market fluctuates.

For example, stock indices like S&P 500 or VN30 are diversified portfolios. When a bear market hits, these indices tend to decline less than holding a single stock. Warren Buffett advises long-term investors that index investing is the most effective and straightforward way.

In bullish markets, index investing may not increase as sharply as individual stocks. However, this method still yields higher returns than savings or bonds.

3. Choose Good Stocks - The Foundation of Success

If you pursue long-term investing, selecting quality stocks is crucial. Carefully read the company’s financial reports, research development strategies, and evaluate future product potential.

Signs of good stocks:

• Low debt, liquidity ratio (Current assets / Short-term liabilities) over 1.5
• Stable revenue and profit growth over the past 5 years (excluding periods of general crises like COVID-19)
• Profitability ratios (Profit margin, ROE, ROA) increasing annually
• Regular dividends to shareholders
• Reputable management with no history of hiding or deceiving investors

Top companies in Vietnam like Vicostone, Vingroup, Vinamilk, Hòa Phát all have continuously acclaimed leadership. These are the stocks that have surged the most over the past decade. Good stocks often serve as excellent “defensive components” during market downturns.

4. Flexibly Adjust According to Market Trends

The stock market always changes according to economic needs. Even long-term investors need to periodically review portfolio performance and adjust stock weights accordingly.

Take the COVID-19 pandemic as an example: When the State Bank of Vietnam loosened monetary policy and lowered interest rates, borrowing became easier. Many investors borrowed money to buy real estate, causing real estate sector stocks to soar. However, in early 2022, when the State Bank tightened real estate lending policies, demand decreased, and these stocks’ prices reversed downward.

An experienced investor knows how to adjust portfolio weights flexibly according to policies and market trends. Warren Buffett, although famous for holding stocks long-term, still changes his Berkshire portfolio continuously in each reporting period.

5. Control Risks - The Survival Condition

To trade stocks safely, especially for short-term trading, you must use risk control tools:

Stop-loss orders (Stop Loss): Automatically sell stocks when the price drops to a preset level, helping you avoid large losses.

Buy stop orders (Buy Stop): Automatically buy stocks at a preset price.

An effective strategy is to set stop points 10-15% away from the opening price. This helps manage risks and ensures losses stay within your tolerance.

6. Determine Optimal Buy/Sell Timing

Experienced investors use technical analysis to find the best entry/exit points.

RSI (Relative Strength Index): Measures price strength. RSI below 30 = stocks are heavily sold (opportunity to buy). RSI above 70 = stocks are nearing peak (consider selling).

Stochastic Indicator: Measures trend strength. Stochastic above 80 = overbought (ready to decline). Stochastic below 20 = oversold (ready to rise).

If you’re not proficient with these tools, start with basic signals or look for detailed trading technical guides.

7. The Art of Bottom-Fishing Stocks

Accurately catching the bottom can yield extraordinary profits but is also very risky.

Signs of bottoming:

• Stock price forms a new bottom but momentum indicators (RSI, Stochastic) increase = weakening downward momentum
• Price forms higher lows compared to previous lows = selling pressure has weakened
• Trading volume spikes during declines = investors are bottom-fishing

Warning: Use only a small portion of capital for bottom-fishing, avoid risking all assets. Stay away from speculative stocks or stocks priced below par, as they tend to fall deeply.

8. Do Not Borrow to Invest

The biggest mistake many new investors make is borrowing money to trade stocks. Only invest with idle cash—money you can lose without long-term impact.

You can use margin (leverage) to increase profits while controlling risks. For example, with 1:20 leverage, you only need $100 to control a position worth $2000. In the worst case, you only lose $100 what you invested, with no debt. In the best case, a 1% price increase yields 20% profit.

9. Continuous Practice Is Key

Warren Buffett’s secret is never losing money in stock trading. To achieve this, you need to learn continuously, analyze stocks regularly, and practice trading.

The most effective way is to use a demo account (simulated) for practice. Accumulate knowledge from theory to real market experience. Start with small trades to build confidence and experience.

10. Maintain Steady Psychology - The Final Factor

Successful stock trading requires stable psychology. The market is volatile; a position with large gains can turn into losses in just 1-2 days.

Analyze the reasons behind market fluctuations before rushing to cut losses. Emotional decisions often lead to regret later.

Conclusion

What is stock trading? It is not just about making money but also a continuous learning journey, discipline training, and building strong mental resilience. Only by combining these three factors can you achieve sustainable profits in the stock market over the long term.