Entering the Market: 10 Things Investors Need to Know When Participating in Stocks

Want to succeed in participating in the stock market, you not only need to study theory but also accumulate practical experience. Experienced investors always emphasize that the market is a living book—where you learn things no book can teach. Here are the 10 golden rules that anyone interested in stock trading should understand clearly.

1. Define your goals and trading style

Before entering the stock market, the first question you must answer is: what kind of investing do you want?

Long-term investing based on fundamental analysis involves holding stocks from year to year, from decade to decade. This style requires a clear understanding of the industry, corporate finance, and long-term growth potential.

Short-term investing emphasizes high-frequency trading, chart monitoring, technical analysis, and market psychology every second, minute, and hour. This approach suits those who have time to constantly observe the market and can withstand psychological pressure.

No style is better than the other—what matters is choosing a method that fits your personality, financial capacity, and available time. Once chosen, stick to it strictly and avoid changing strategies due to temporary emotional decisions.

2. Psychology is the decisive factor

Failures in the stock market are often not due to lack of knowledge but poor psychological control. Fear and greed are the two most common emotions when participating in stocks.

Market declines and you buy more? Panic may make you want to sell immediately to avoid further losses. Market surges and you miss the opportunity? Regret and FOMO (fear of missing out) push you to buy at the peak. Both cases lead to poor outcomes.

Experienced investors’ advice is that maintaining stable psychology is more important than accurately predicting market trends. Have a plan in advance, write down your trading rules on paper, and follow them even when emotions tempt you to do the opposite.

3. Diversification is a defensive strategy

Warren Buffett, the great investor of the 20th century, always advises: “Don’t put all your eggs in one basket.” Diversifying your portfolio is not to maximize profit but to minimize risk.

Holding many stocks from different sectors—technology, energy, real estate, banking—means that the negative impact of one sector will be offset by the good performance of others. Market indices like S&P 500 or VN30 are examples of diversified portfolios.

You can also diversify by investing in various asset classes: stocks, bonds, commodities, and even cryptocurrencies. Each asset class has its own cycle and reacts differently to economic fluctuations.

4. Choose stocks based on real data

For long-term investors, selecting good stocks is a vital factor. Not all stocks are worth holding.

Signs of quality stocks:

• Low debt, liquidity ratio (current assets divided by short-term debt) over 1.5
• Revenue and profit growth consistently over 5 years (excluding global crisis years)
• Increasing profit margins, ROE, ROA annually
• Regular dividend payments to shareholders
• Reputable management with no history of fraud or hiding information

Leading companies like Vinamilk, Hòa Phát, Vicostone… do not promise huge short-term returns but are safe assets during market uptrends. They grow slowly but steadily, decline little, and retain value.

5. Risk control - Mandatory rule

Any transaction can result in a loss. Successful people are not those who never lose but those who lose less.

The basic tool for risk control is Stop Loss orders (sell stop). When you buy a stock at 100 dong, set a sell order at 90 dong right from the start. This way, your maximum loss is 10%—an acceptable level.

Golden rule: Never let a loss exceed 2% of your total capital on a single trade. If you have $10,000, the maximum loss per trade is $200. It sounds small, but if you have 50 consecutive losing trades without control, your entire account can vanish.

6. Technical analysis - Tool for entry and exit points

If long-term investing relies on fundamental financial data, short-term trading depends on technical analysis—reading price charts, indicators, and patterns.

Two most popular indicators:

RSI (Relative Strength Index) - measures trend strength. When RSI < 30, stocks are oversold and may reverse upward. When RSI > 70, stocks are overbought and may correct downward.

Stochastic - an oscillator indicator. When above 80, the market is overbought. When below 20, oversold. These points often indicate potential reversals.

However, no indicator is 100% accurate. Investors should combine multiple indicators, confirm with chart patterns (chart formations), and observe market sentiment to make decisions.

7. Catching the bottom - Opportunities and dangers

Catching the bottom of stocks (buying at the lowest price) can bring double profits but is also the riskiest play.

Signs of market bottom formation:

• Prices form new lows but momentum indicators (RSI, Stochastic) rise—showing selling pressure is weakening
• Each new low is higher than the previous—indicating selling force is waning
• Trading volume spikes—sign of large investors bottom-fishing

But beware: Never put all your assets into catching the bottom. It’s a game of chance. Use only a small portion of your capital for testing. Also, avoid bottom-fishing in speculative stocks or those abnormally cheap—these can crash very deeply when they fall.

8. Do not use borrowed money to participate in stocks

This is a common mistake among new investors: borrowing money to invest.

You should only invest with idle funds—money that, if lost, does not affect your daily life. If you borrow money to invest, you face not only market risk but also repayment pressure, which can influence your decisions psychologically.

A safer way to amplify profits is to use Margin (margin trading) if supported by your trading platform. With margin, you borrow from the exchange, not from individuals or lending companies. The risk of a margin call (margin call) is higher, but at least you are not personally in debt.

9. Adjust your portfolio according to trends

The world changes, human needs change, and the stock market also evolves.

For example: When COVID-19 broke out, economic support policies lowered interest rates. Borrowing became cheaper, so people borrowed to buy houses, causing real estate prices to soar, and real estate stocks surged. But when inflation returned, central banks tightened monetary policy, restricting real estate loans. Housing demand decreased, and related stocks reversed downward.

Experienced investors are not those who hold forever but those who know when to increase or decrease their weightings based on market conditions. Even Warren Buffett, although famous as a long-term investor, constantly adjusts his Berkshire portfolio in each reporting period.

10. Continuous learning - No formal degree teaches this

The stock market is a living university. Every day you trade, you learn something—even from your mistakes.

Experienced investors emphasize: Practice before using real money. Most trading platforms offer demo accounts with virtual funds, allowing you to trade without risking real money. Use this account to:

• Practice chart analysis skills
• Test strategies before deploying
• Accumulate experience and confidence

No book or course can replace real-world experience. Start small, learn quickly, and expand gradually.

In summary, to succeed in stock investing, you must understand yourself (goals, risk tolerance), control your psychology, diversify your portfolio, select quality stocks, manage risks, analyze technically, adjust strategies according to market trends, and most importantly, keep learning. The stock market is not a game of chance but a skill that can be developed. Patience, discipline, and mental resilience—these are the three keys to success.