Want to make a profit in the stock market? 10 must-know tips

You are new to the stock investment journey and want to know how to improve your trading performance? The problem is that just learning theory from books has never been enough. A professional trader must continuously update market information, learn from predecessors, and build their own strategy. Based on practical experiences in stock investing, this article summarizes 10 tips that anyone participating in the stock market should understand.

Step 1: Build a solid mindset first

The stock market is constantly volatile – a position with big profits today can turn into a loss tomorrow. This requires you to have a very stable mindset to make sound decisions.

Don’t let emotions control your actions. Fear can cause you to cut losses prematurely when you should be waiting. Greed can push you into risky trades without a plan. Keep a steady mindset, analyze thoroughly the reasons behind each price fluctuation to decide whether to hold or exit.

Step 2: Define your investment style from day one

Effective stock investing starts with choosing the right style that suits you. There are basically two main approaches:

Short-term investing: You trade within the day, relying on technical analysis to identify buy and sell points. Requires continuous monitoring of price charts, deep knowledge of technical indicators, and daily market news tracking.

Long-term investing: You buy and hold, selecting stocks based on fundamental analysis. Doesn’t require constant price monitoring, just knowledge of fundamental analysis and financial reports.

Each style has different strategies. Once you determine your style, strictly adhere to that strategy to avoid wrong decisions caused by emotional reactions.

Step 3: Never put all eggs in one basket

Diversifying your portfolio is a secret advised by all experienced investors. Warren Buffett also emphasizes this principle – diversification helps minimize excessive losses when risks occur.

You can diversify by buying multiple stocks from different sectors, or even investing in various asset classes like stocks, cryptocurrencies, forex. For example, stock indices like S&P 500 or VN30 are already diversified baskets of many stocks. When a bear market hits, these portfolios tend to decline less than holding a single stock.

Step 4: Choose stocks with strict criteria

If you pursue a long-term investment style, selecting the right stocks is crucial. Good stocks often have the following characteristics:

• Low debt, with short-term asset/liability ratio (current assets/short-term liabilities) over 1.5
• Revenue and profit growth consistently over the past 5 years
• Profitability indicators such as profit margin, ROE, ROA increasing year by year
• Regular dividend payments to shareholders
• Reputable management team, no history of violations or hidden information

Leading companies in Vietnam like Vicostone, Vingroup, Vinamilk, Hòa Phát are among the strongest performers over the past 10 years. They share large market shares and widely recognized leadership.

Step 5: Control risks with supporting tools

For short-term traders, risk control is key to success. Use orders like Sell Stop (Sell Stop) or Buy Stop (Buy Stop) to protect your assets.

An effective strategy is to set stop-loss points 10-15% away from the opening price. This ensures that if you incur losses, you can still withstand them. It’s a scientific way to manage risk instead of letting emotions dominate.

Step 6: Master technical timing for buy and sell points

Professional investors use technical analysis to identify optimal buy and sell points. The two most popular indicators are:

RSI (Relative Strength Index): If RSI is below 30, the stock is being oversold – a good buy signal. If RSI is above 70, the stock is nearing a peak – a warning signal.

Stochastic Indicator: If above 80, the stock is overbought and likely to correct. If below 20, the stock is oversold and may recover.

Learn to combine these indicators with price action to make more accurate trading decisions.

Step 7: Bottom-fishing techniques to maximize profits

Catching the bottom of a stock can bring extraordinary profits. Signals indicating a bottom formation include:

• When prices continuously make new lows but momentum indicators increase – selling pressure has weakened
• When prices start making higher lows compared to previous lows – selling pressure decreases
• When trading volume surges during a decline – signs that investors are bottom-fishing

However, catching falling knives is very risky. Use only a small portion of your capital to bottom-fish and never risk all your assets. Also avoid bottom-fishing speculative stocks or those trading below par value – these tend to fall even further than expected.

Step 8: Adjust your portfolio according to market trends

Markets change, people’s needs change, and you need to adapt accordingly. Even long-term investors should periodically review portfolio performance and adjust allocations.

For example, in real estate: When COVID-19 broke out, banks lowered interest rates to stimulate consumption. Housing demand increased, and real estate stocks rose. But later, as banks tightened real estate credit, demand decreased, and real estate stocks declined. A smart investor would reduce real estate holdings when policies change.

Warren Buffett is famous for long-term investing, but if you follow Berkshire’s portfolio, you’ll see allocations change constantly. Real investment experience isn’t just about holding long but holding with appropriate proportions based on market conditions.

Step 9: Do not borrow money to play stocks

This is one of the most important secrets you should remember. Only invest with idle funds – money that, even if lost, won’t affect your life.

Currently in Vietnam, borrowing money to invest is very risky because many scam companies operate fake investment apps with extremely high interest rates up to 1000% per month.

However, you can use margin (leverage) wisely. For example, with a margin account supporting 1:20 leverage, you only need $100 to control a position of $2,000. In the worst case, you only lose your initial capital and won’t incur debt. In favorable cases, a 1% price increase yields a 20% profit.

Step 10: Continuous practice is the only way

Warren Buffett has a golden rule: never lose money when investing. To achieve this, you need to keep learning, analyze stocks, and trade practically to understand both theory and market reality.

The most effective way is to start with a demo account, practice analysis and trading skills without real risk. Through this, you accumulate experience, learn from mistakes, and then move to a real account.

Conclusion

Effective stock investing isn’t a secret; it’s a combination of knowledge, discipline, a strong mindset, and practical experience. Start small, keep learning, control risks, and maintain trading discipline. That’s the path to long-term success in the stock market.