Want to start trading stocks? Here are the 10 things you absolutely must know

New to the world of stock investing? Are you struggling to find ways to improve your winning rate in trading? The reality is that learning theory alone is never enough. Success in this field requires you to continuously monitor market information, learn from experienced investors, and most importantly, have a clear strategy. Here are 10 essential things that anyone starting to play stocks must understand.

Step 1: Define Your Own Playing Style

Before investing, you need to decide which type of investor you are:

Type 1 - Short-term Trader:

• Use technical analysis to find entry/exit opportunities within the day
• Continuously monitor market news
• Accept high risks to seek quick profits
• Need deep knowledge of technical indicators, reading price charts

Type 2 - Long-term Investor:

• Use fundamental analysis to select good companies and hold
• Don’t need daily monitoring
• Lower risk tolerance
• Need to understand financial health, development strategies of companies

Each style has its own strategy. Once you choose a method that fits your personality and conditions, stick to it with discipline. This helps you avoid wrong decisions driven by emotions.

Step 2: Don’t “Put All Eggs in One Basket”

Diversification is a secret Warren Buffett always applies. When you buy multiple stocks from different sectors or invest in various asset classes, you minimize losses when a crisis occurs.

Real-life example: Major indices like S&P 500 or VN30 are constructed with many stocks from different sectors. When the market declines, these indices fall less than holding a single stock.

During the overall market growth, index investing may not generate explosive returns like picking a “lucky star” stock. But in the long run, this method provides much more stable profits than savings or bonds.

Step 3: How to Choose Quality Stocks

If you are a long-term investor, selecting good stocks is a crucial decision. Carefully analyze financial reports, development plans, and the potential of products/services in the future.

Signs of a good stock company:

• Low debt ratio, liquidity ratio (current assets/current liabilities) ≥ 1.5
• Revenue and profit steadily increasing over the past 5 years (excluding the general economic downturns)
• Profitability indicators like profit margin, ROE, ROA increasing annually
• The company pays regular dividends
• Leadership with credibility, no history of fraud or hiding information

Strong leadership is a decisive factor for success. Looking at names like Vicostone, Vinamilk, Hòa Phát – all are large companies with high market share, recognized leadership over many years. These stocks may not explode during hot market times, but they are good assets for protection when the market turns down.

Step 4: Adjust Your Portfolio According to Market Cycles

The world changes, people’s needs change, so your investment portfolio must also change. Even long-term investors need to periodically review and adjust the weightings of their positions.

Example: When COVID-19 broke out, central banks loosened monetary policy, lowering interest rates. Borrowing became easier and cheaper, leading to a surge in real estate demand and real estate stock prices. But in early 2022, policies changed, banks restricted real estate loans. Demand dropped, and real estate stocks declined. If you didn’t adjust your portfolio timely, profits would be affected.

Warren Buffett is famous for long-term holding, but if you follow Berkshire’s portfolio, you’ll see stock weights change continuously each reporting period. Victory isn’t about holding anything long-term blindly, but about holding the right stocks with appropriate weightings at each stage.

Step 5: Risk Management Is Life

Especially for short-term traders, controlling risk is key. Use stop-loss orders:

• Sell Stop Order (: Set in advance; when stock price falls to your specified level, the order automatically sells
• Buy Stop Order ): Set in advance; when stock price rises to your specified level, the order automatically buys

Effective strategy: Place stop-loss points at 10-15% below your entry price. This helps control losses and prevents heavy losses.

Step 6: Techniques to Determine Optimal Buy/Sell Points

Experienced investors use technical analysis to find the best entry/exit points. The two most widely used indicators are:

Relative Strength Index (RSI):

• RSI < 30: Stock is heavily sold off, possibly a buy signal
• RSI > 70: Stock is approaching a peak, consider selling

Stochastic Oscillator (Stochastic):

• Above 80: Overbought, price may reverse downward
• Below 20: Oversold, price may reverse upward

If you’re not proficient with these tools, start with basic signals. Over time, you will develop your own analysis skills.

Step 7: Catching the Bottom – High-Interest Trick

Catching the bottom can generate huge profits but is extremely risky. If you want to try, look for these signals:

• Price makes new lower lows, but momentum indicators (RSI, Stochastic) increase – signs of weakening selling pressure
• Price starts making higher lows compared to previous lows – indicating decreasing selling pressure
• Trading volume spikes during declines – investors are bottom-fishing

Warning: Use only a small portion of your capital for bottom-fishing. Never risk all your assets on this high-loss probability game. Also, avoid bottom-fishing in speculative stocks or those trading below par value – these can fall very deep.

Step 8: Do Not Borrow Money to Invest

This is a common mistake. You should only invest with your own money, funds that losing won’t affect your long-term stability.

Today’s market has many “black swan” companies with crazy high-interest investment apps (up to 1000% per month). These are traps you should avoid.

Better to use idle cash, savings. If you want to amplify profits, you can use margin (leverage) from legitimate exchanges. For example, with 1:20 leverage, you can control stocks worth $2,000 with just (your initial capital). Worst case, you lose your initial deposit but won’t owe anyone.

Step 9: Continuous Practice Is Key

Warren Buffett once said: never lose money when investing. To achieve this, you must keep learning – analyze stocks, practice trading, connect theory with market reality.

The most effective way is to start with demo trading. Practice with a demo account to accumulate knowledge and experience without risking real money. Through each trial trade, you will better understand how the market works, how to manage emotions, and how to apply theory practically.

Step 10: Stable Mindset Determines Win or Lose

Markets are volatile; a big profit position can turn into a loss in 1-2 days. A stable mindset helps you:

• Analyze calmly the causes of volatility
• Make rational decisions to hold or cut losses
• Avoid impulsive actions you might regret later

Don’t let fear or greed dominate your decisions. Stay calm, analyze deeply, then act.

Conclusion

To succeed in starting stock trading, you need patience, discipline, and a strong mindset. There are no shortcuts. Apply these basic principles, practice continuously, and step by step, you will develop into a talented investor on the long road ahead.