10 Stock Trading Principles That Successful Investors Always Follow

If you are just starting your stock investment journey and want to improve your business results, learning from experienced investors is essential. However, mastering theory alone is not enough—you need to continuously update market information, follow trends, and learn from the lessons of those who came before. Here are 10 principles to help you enhance your performance when participating in stock trading.

1. Choose an investment method suitable for yourself

Before starting, you need to clearly determine whether you are a long-term or short-term investor:

Short-term investing: Use day trading techniques, analyze charts to find entry and exit points. This method requires constant attention, deep technical analysis knowledge, and a high risk tolerance.

Long-term investing: Buy and hold stocks based on fundamental analysis of the company’s financial health. This approach requires knowledge of reading financial statements and business development strategies.

Each method has its own strategies. Once you identify your direction, focus and strictly adhere to that strategy to avoid poor decisions driven by psychology.

2. Diversify risk through portfolio diversification

This is one of the valuable lessons Warren Buffett constantly reminds us of. Instead of putting all your money into one stock, you should own various assets from different industries.

Diversification can include:

• Buying stocks from different sectors
• Holding multiple market indices such as S&P 500, VN30
• Combining stocks, cryptocurrencies, forex, and other assets

When a bear market hits, a diversified portfolio will decline less than holding just one stock. During a bull market, investing in indices may not yield as high returns as individual stocks, but the profit rate still far exceeds savings or bonds.

3. How to select quality stocks

To choose good stocks for long-term holding, you need:

Read financial reports: Check debt levels, liquidity ratios such as short-term assets/short-term liabilities should be over 1.5.

Observe growth: Revenue and profit should grow steadily over 5 years, excluding global crises.

Check profitability ratios: Profit margins, ROE, ROA should increase annually.

Check dividends: The company should pay dividends regularly.

Evaluate management: Company leadership should have a good reputation and no history of dishonesty or hiding information.

Leading companies like Vicostone, Vingroup, Vinamilk, Hòa Phát all have management teams recognized for many years. These quality stocks may not generate high returns during hot market periods, but they serve as excellent defensive plays when the market turns downward.

4. Adjust strategies according to market fluctuations

Markets always change based on economic needs. A wise investor needs to adjust portfolio weights according to policy changes and trends.

Real-world example: When COVID-19 broke out, central banks loosened monetary policy and lowered interest rates. Borrowing became cheaper, leading to a surge in housing demand and strong real estate stock prices. However, in early 2022, as real estate lending tightened, demand decreased, and stock prices in this sector also fell.

Experienced investors like Warren Buffett not only hold but also continuously adjust the proportion of stocks in their portfolios. Successful investing is not about holding “at all times” but knowing how to hold with appropriate weightings for the current market situation.

5. Risk management is a key factor

No matter what investment approach you take, controlling risk is always a top priority.

Protection tools:

• Stop Loss orders: Sell stocks when the price drops to a predetermined level, automatically limiting losses.

• Stop Buy orders: Buy stocks when the price reaches a specific level to avoid missing upward opportunities.

Effective strategy: Place stop points about 10-15% away from your entry price. This helps manage losses within your risk tolerance and prevents large damages.

6. Determine buy/sell timing using technical analysis

Experienced investors use technical indicators to find optimal entry and exit points:

Relative Strength Index (RSI):

• RSI < 30: Stock is being sold off, a buying opportunity
• RSI > 70: Stock is nearing a peak, caution needed

Stochastic Indicator:

• Above 80: Overbought, high chance of reversal downward
• Below 20: Oversold, likely to rebound soon

If you’re not proficient with these tools, start with trading platforms that offer integrated analysis tools with clear signals.

7. Skill in bottom-fishing stocks

Accurately catching the bottom can yield extraordinary returns. Signs that stocks are bottoming out:

• Prices create new lows but momentum indicators (RSI, Stochastic) rise—showing selling pressure is weakening.

• Prices start forming higher lows compared to previous lows, indicating decreasing selling pressure.

• Large trading volume appears during declines—showing investors are returning to buy the dip.

Warning: Bottom-fishing is high-risk. Use only a small portion of your capital for testing, and avoid risking all assets. Avoid bottom-fishing in speculative or underpriced stocks, as these can fall much further.

8. Do not borrow money to invest

A golden rule is to only invest with surplus funds—money that, if lost, will not affect your long-term financial situation.

Borrowing money to invest, especially from unofficial sources, is very dangerous. However, if you want to amplify returns safely, some trading platforms offer margin trading with reasonable leverage (for example: 1:20). With this approach, even in the worst case, you only lose your initial capital and do not incur debt.

9. Continuous practice is the key to success

Warren Buffett emphasizes that success comes from never losing money unnecessarily. To do this, you must:

• Continuously learn and analyze stocks
• Practice trading regularly
• Accumulate experience from real trades

A good way to start is by using demo accounts, allowing you to practice strategies and develop analysis skills without risking real money.

10. Maintain psychological stability in all circumstances

Stable psychology is a decisive factor for any investor.

Markets can be highly volatile—a position with big gains can turn into losses in just a few days. In such times, you should:

• Analyze the reasons behind the volatility
• Make rational decisions to cut losses or hold positions, avoiding emotional reactions
• Avoid hasty decisions driven by fear, as you will regret later

Conclusion

Learning to trade stocks requires patience, discipline, and mental stability. By following these 10 principles, you will have a solid foundation to build a successful investment portfolio over the long term. The journey is not easy, but with perseverance and continuous learning, you will surely achieve your financial goals.