Guide to Playing Stocks - 10 Unmissable Tips for Investors

Many beginners in stock investing tend to focus on learning theory, but in reality, the market is much more complex. To trade stocks effectively, you need to combine foundational knowledge with experience from seasoned investors. This article summarizes 10 essential tips that anyone aiming for success in stock trading must master.

1. Define your investment approach from the start

Before beginning trading, clearly identify which style you belong to:

Short-term investing: Use day trading strategies based on technical analysis to determine entry and exit points. This method requires continuous price monitoring, high risk tolerance, and leverage to increase profits.

Long-term investing: Select quality stocks and hold them for an extended period based on fundamental analysis. This approach demands less frequent monitoring, lower risk, and offers stable returns.

Each method has its own strategy. If you choose short-term, you need to learn chart analysis techniques and follow daily market news. If you prefer long-term, you should be proficient in reading financial reports and understanding company performance indicators.

Comparison table of the two investment methods:

Once you’ve decided on your approach, strictly adhere to your planned strategy to avoid impulsive buy/sell decisions driven by emotions.

2. Maintain stable psychology in all situations

Many investors fail not due to lack of knowledge but because they cannot control their emotions. The stock market is highly volatile; a position with significant gains can turn into a loss in just a few days.

When the market drops sharply, you may feel fear and want to sell everything immediately. But this is precisely when you need to stay calm. Instead of making impulsive decisions, analyze the reasons behind market fluctuations and decide logically whether to hold or cut losses. Hasty decisions made out of panic often lead to regret later.

Experienced investors understand that emotional stability is key to long-term profitability. Learn to regulate your emotions and always think logically when facing market volatility.

3. Diversify your portfolio as the best defensive strategy

This is a tip recommended by all experienced investors. Even Warren Buffett—the investment legend—always emphasizes this strategy. Diversification helps minimize severe losses when risks materialize.

You can diversify by:

• Buying different stocks instead of concentrating on a single security
• Choosing stocks from various industries
• Combining different asset classes such as stocks, cryptocurrencies, and forex

A typical example is stock indices like S&P 500 or VN30. These indices are diversified baskets of many stocks. During bear markets, these indices tend to decline less than holding a single stock. Warren Buffett advises long-term investors that investing in indices is a simple yet effective way to increase returns compared to savings or bonds.

4. Choose quality stocks for long-term holding

If you follow a long-term investment approach, selecting the right stocks is crucial. To pick good stocks, you should:

• Read detailed financial reports of the company
• Understand the company’s growth strategy
• Assess the market potential for its future products

Characteristics of a quality stock:

• Low debt, with liquidity ratios (Current Assets/Short-term Debt) above 1.5
• Revenue and profit growth consistently over the past 5 years (excluding periods of general crises like pandemics)
• Profitability ratios such as profit margin, ROE, ROA increasing annually
• Regular dividend payments to shareholders
• Reputable leadership with no history of deception or concealment

Historically, the top 10 Vietnamese companies with the strongest stock price growth over 10 years include Vicostone, Vingroup, Vinamilk, Hòa Phát, Bình Minh Plastic—all large enterprises with high market share and continuously recognized leadership.

High-quality stocks may not always deliver high returns during hot markets, but they serve as excellent defensive assets when the market turns downward. Therefore, adding a few quality stocks to your long-term portfolio is a strategy often recommended by experienced investors for beginners.

5. Adjust your portfolio according to market trends

Even if you are a long-term investor (by year), you still need to periodically review your portfolio performance and adjust weights to align with market trends.

For example, during the COVID-19 pandemic: When the outbreak started, central banks loosened monetary policy, lowering interest rates to stimulate consumption. Borrowing became easier and cheaper, leading to a surge in real estate demand. This pushed real estate stocks sharply higher.

However, to curb overheating property prices, in early 2022, central banks tightened real estate lending. This policy change reduced housing demand, lowered profit expectations for real estate companies, and their stock prices declined.

An experienced investor knows how to flexibly adjust portfolio weights to adapt to policies and growth trends. Even Warren Buffett—famous for long-term holding—regularly rebalances his Berkshire portfolio based on quarterly reports. Effective stock trading isn’t just about holding long; it’s about holding with appropriate weights according to market conditions.

6. Always control risks

Risk management is a key factor for success, especially for short-term traders. Tools for risk control include:

Sell Stop Order (Sell Stop): Automatically sells your stock when the price hits a preset level. When the stock falls to that level, the order executes automatically.

Buy Stop Order (Buy Stop): Buys stock when the price reaches a specified level.

A common effective tactic is setting stop-loss or stop-buy points about 10-15% away from your entry price. This helps manage risk and ensures that potential losses stay within your tolerance.

7. Precisely identify entry and exit points

Experienced investors use technical analysis (charts, patterns, indicators) to determine optimal trading times. The two most popular indicators are:

RSI (Relative Strength Index): Measures price volatility. When RSI < 30, stocks are oversold (potential buy). When RSI > 70, stocks are near overbought (consider selling).

Stochastic Indicator: Measures trend strength and signals reversals. If > 80, stock is overbought and may peak and reverse downward. If < 20, stock is oversold and likely to rebound.

If you are not yet proficient with these tools, you can learn more from top analysts’ trading signals. Mastering these tools to accurately identify entry and exit points is a crucial step in the stock trading guide.

8. Tips for catching the bottom

Catching the bottom—buying at the lowest price—maximizes profit. To identify the bottom, watch for signals such as:

• Price forms a new bottom but momentum indicators (RSI, Stochastic) rise. This suggests selling pressure is weakening and the price is near bottom.

• Price starts forming higher lows compared to previous bottoms. An indication that selling pressure has eased.

• Large trading volume appears during price declines. Showing investors are trying to catch the bottom.

If successful, you can generate extraordinary profits. However, catching falling knives is extremely risky—you might get caught in a trap. Therefore, only invest a small amount to test. Never risk your entire assets on this game. Also, avoid catching bottoms in speculative stocks or stocks trading below par value, as they can fall sharply if conditions worsen.

9. Do not borrow money to invest

This is a key advice Warren Buffett always emphasizes: never lose money in investing. Therefore, avoid borrowing to invest in stocks.

Only invest with idle cash or savings—funds that, if lost, won’t affect your life. Currently in Vietnam, borrowing to invest is very risky because many untrustworthy companies lure investors with apps offering interest rates up to 1000% per month.

However, you can use tools like margin trading wisely. Margin amplifies profits while limiting losses. For example, with 1:20 leverage, you can buy stocks worth $2,000. In the worst case, you only lose your initial capital and don’t incur debt. But if stocks rise by 1%, you earn 20% profit.

10. Continuous practice is the key to success

Constant learning, analyzing stocks, and practicing trading are the only ways to master both theory and market reality. You need to accumulate experience through real trades.

The best way to start is by practicing with simulation tools. Begin with a demo account to hone your analysis and trading skills without real risk. From simulated mistakes, you will learn valuable lessons that apply when trading with real money.

Conclusion

A successful stock trading guide requires patience, discipline, and emotional stability. The 10 tips above are just the foundation—there’s a long road ahead for you to explore. Keep learning, adapt to market fluctuations, and always remember that success in stock investing is not achieved overnight but through effort and accumulated experience over time.