Start Stock Trading: 5 Things New Investors Must Understand

The stock market is currently a hot spot in Vietnam’s financial scene. When production and commercial activities face difficulties, many people turn to stock investment to seek profit opportunities. But to avoid “wasting money,” new investors (F0) need to understand the basic principles clearly. This article will guide you step by step to explore the world of stocks.

What Is the Essence of Stocks?

According to the Securities Law No. 70/2006/QH1, securities are a type of document or digital proof confirming the legal rights and benefits of the owner regarding assets or equity of an organization issued.

In other words, securities are tools that give you ownership rights to a part of a company or benefit from a loan issued by a company/organization.

Types of Common Securities

Stocks for beginners are the easiest to understand. Stocks confirm that you own a share of the company. Depending on the type:

• Common shares: dividends depend on the company’s actual business results
• Preferred shares: carry priority benefits, fixed dividend rates, or voting rights secured

Stocks can be paper-based or electronic, with all information stored on computer systems.

Bonds (debt certificates) are another form. When you buy bonds, you are lending money to the issuer (company, government). They will repay the principal plus interest over a certain period. The difference: bond interest rates are fixed and do not depend on business results, and you do not have management rights.

Fund certificates are issued when you contribute capital to a public fund. This fund pools capital from many investors to invest in securities or other assets, aiming to generate shared profits.

Derivative securities are contracts whose value depends on underlying assets like stocks or indices. Types include: options, futures, forward contracts. They are traded on separate derivatives markets, with no limit on issuance volume, settlement on a specific future date.

Warrants are securities backed by collateral issued by securities companies. They give the right to buy the underlying securities at a predetermined price at maturity.

Share purchase rights are issued by companies to current shareholders, giving them priority to buy additional shares at a lower price than the market listing.

Depository receipts are created from foreign stocks deposited in a depository bank. The bank then issues these receipts with quantities and prices depending on the exchange rate.

Stock Market: The Playground and Rules

Primary Market vs. Secondary Market

Primary market is where organizations or investment funds issue securities for the first time (IPO) to raise capital from the public.

Secondary market is where previously issued securities are bought and sold among investors. Transactions here do not generate new money, only transfer ownership between buyers and sellers.

Impact of the Stock Market on the Economy

The stock market is not just a trading venue but also:

• Promotes the development of joint-stock companies through information dissemination, enterprise valuation, and attracting investors
• Provides investors with criteria to evaluate business performance
• Highly liquid, facilitating easy buying and selling
• Supports government and enterprises in attracting foreign capital through bond and stock issuance

Vocabulary & Stock Market Terms You Need to Know

Basic Concepts

Listed company is a company that has publicly offered shares, with shares registered on the stock exchange.

IPO (Initial Public Offering) is the first time a company issues securities to the public.

Market capitalization is the total market value of all shares a company is issuing (share price × number of shares).

Offering price is the listed price when shares are first sold on the market.

Securities portfolio is the collection of all stock codes you currently hold in your account.

Yield or rate of return is the total profit (dividends, capital gains) that investors receive from holding stocks.

Annual report is the financial report issued annually by the company, helping investors assess financial health.

Alpha coefficient indicates the rate of return of a stock after adjusting for market risk.

Beta coefficient measures the volatility of a stock relative to the overall market.

Price to Book Ratio (P/B) compares the current market price with the book value of the stock.

Bankruptcy risk is calculated to help predict a company’s financial difficulties.

Dividend yield relative to stock price shows the relationship between dividends received and the purchase price of the stock.

Types of Trading Orders

Limit order (LO) allows you to buy/sell at a specified price or better.

Market order (MP) is an order to buy immediately at the lowest available selling price, or sell at the highest available bid.

ATO order (only applicable on Ho Chi Minh Stock Exchange) is an order executed at the opening price determined before 9:15 AM.

ATC order (on both Hanoi and Ho Chi Minh exchanges) is an order executed at the closing price at 2:45 PM.

PLO order (only on Hanoi exchange) allows buying/selling at the closing price after ATC ends.

Break occurs when a stock price jumps significantly above a specific price range.

Stock filtering is the skill of using criteria (uptrend, accumulation, market cap, liquidity) to find stocks that meet your investment standards.

Safety margin is the difference between the current market price and the stock’s intrinsic value.

Price Types

Par value is the face value printed on a bond or stock at issuance.

Market price is the actual buying/selling price on the trading market.

Listing price is the initial price at which a stock is listed on the market.

Matching price is the price at which your buy/sell order is successfully matched on the exchange.

Opening price is the closing price of the previous trading session.

Floor price is the lowest price during a trading session.

Ceiling price is the highest price during a trading session.

Settlement date (T+3) is 3 days after order matching (excluding holidays). If you buy, the money is deducted immediately but stocks are transferred to your account after 3 days. If you sell, the proceeds are transferred to your bank account after 3 days.

Price trend has 3 types: upward (Uptrend), downward (Downtrend), or sideways (Sideway).

Important Concepts About Trading

Stock index (Index) is a statistical measure of the performance of a selected group of stocks based on a certain ratio. For example: Vnindex represents all stocks on HOSE, Vn30 represents the top 30 stocks by market cap and liquidity.

Margin trading (Margin) allows you to borrow money from a securities company to buy stocks with a higher capital than your own.

Trading volume is the total number of shares traded within a specific period, such as in one day.

Short selling is a method where you sell stocks you do not own by borrowing from others, expecting the price to fall so you can buy back cheaper.

Price fluctuation limits: on HOSE ±7%, on HNX ±10% compared to the reference price (closing price of the previous day).

Market Participants

Issuer is an organization that issues securities to raise capital.

Investors include:

• Individual investors: those with personal capital seeking additional income
• Institutional investors: entities trading with large capital such as investment firms, insurance companies, commercial banks

Securities companies support account management, consulting, brokerage, and underwriting.

Regulatory organizations include the State Securities Commission, stock exchanges, credit rating agencies, and technology infrastructure providers.

5 Principles of Market Operation

Competition: Issuers compete to sell securities, investors compete to buy at favorable prices for higher profits.

Fairness: All participants must comply with the same regulations.

Transparency: Issuers are obliged to provide complete, regular, and public information about securities.

Intermediary: Transactions between investors and issuers must go through securities companies acting as intermediaries.

Centralization: Transactions only occur at the stock exchange, closely monitored by government agencies.

Trading Hours & How to Read Price Boards

Trading Hours

Ho Chi Minh Stock Exchange (HOSE), Hanoi (HNX), and UPCOM trade from 9:00 to 11:30 AM and 1:00 to 3:00 PM, Monday to Friday (excluding holidays and weekends).

How to Read Price Boards

When viewing stock price tables, you will see:

• Green: price increase compared to the previous day’s reference price (yesterday)
• Red: price decrease compared to the reference
• Yellow: no change compared to the reference price

How to Buy and Sell Stocks for Beginners

Two Ways to Execute Transactions

Method 1: Place orders directly on your securities company’s trading software.

Method 2: Place orders through a broker (representative of the securities company).

Opening a Securities Account

Before opening an account, you should:

• Research securities companies with reasonable transaction fees
• Pay attention to margin ratios and interest rates applied
• Choose where to open the account: directly at the securities company, at a bank, or via a brokerage firm

Information to provide:

• Permanent address
• Email
• Phone number
• Bank account

After opening, the company provides your account number and instructions for depositing funds. You only need over 500,000 VND to start trading stocks as a beginner.

Important Notes When Trading

Choose a Reputable Trading Platform

In Vietnam, there are 3 main exchanges:

• HOSE (Ho Chi Minh City)
• HNX (Hanoi)
• UPCOM (for unlisted public companies)

Additionally, many international stock exchanges operate in Vietnam. Regardless of the platform chosen, prioritize:

• Reputation, long-standing operation history
• Being managed by domestic securities authorities or international regulators (ASIC, FCA, SEC, CySEC, etc.)

Understand Basic Orders

New investors should clearly understand 3 basic orders: ATO, ATC, LO. Then can learn more advanced orders like MP, MTL, MOK, MAK…

Summary

To succeed with stocks as a beginner, you need:

1. Understand the definitions and types of securities
2. Grasp the market operation mechanisms
3. Familiarize yourself with common terms
4. Choose a reputable trading platform
5. Continue learning and gaining experience to be agile with market fluctuations

The journey of stock investment requires patience, discipline, and continuous knowledge updates. Start small, learn gradually, and expand steadily—this is a safe strategy for any new investor.