Stock Trading in 2025: 6 Principles Investors Must Know Before Getting Started

Understand What “Stock Trading” Truly Means

Stock trading involves buying and selling stocks over short periods to profit from price fluctuations. This approach differs from long-term investing, where investors hold stocks for extended durations. Teaching trading correctly should start with accepting that the risks involved in trading are significantly higher than traditional investing.

Some people believe that trading can generate profits in all market conditions, whether the market is rising or falling. This idea is not wrong if one can accurately predict the market direction. However, the problem is that short-term price movements are difficult to predict. Professional traders primarily use technical analysis by studying price charts, trading volume, and various indicators to identify optimal trading opportunities.

Risk Management: The Foundation of a Live Trading Career

No matter how skilled you are at trading, without strict risk management, your future in the stock market could end prematurely.

Position Sizing is the most fundamental principle. Do not put all your money into a single stock. Divide your capital into small portions, ensuring that each trade risks no more than 2-3% of your total funds. This approach helps you survive even after multiple mistakes.

Using Stop Loss involves setting a predetermined exit point when the price drops to an acceptable level. It is crucial to set Stop Loss before entering a trade, not after the price has fallen, and to follow it disciplinedly. Never hope that the price will reverse.

First Step: Open a Brokerage Account and Set a Budget

Before doing anything, you need to open an account with a securities company or (broker). Currently, there are many options both domestically and internationally. Consider the following: service fees, reliability, ease of use, and customer support.

Opening an account is generally straightforward and can be done online with minimal documentation.

Set a clear budget. This is a step often overlooked by beginners. You must limit yourself to how much money you will use and ensure it is money you can afford to lose, coming from assets outside of emergency funds. The professional guideline is not to risk more than 10% of your total assets on a single stock. Start with a small amount first.

Learn Trading Orders and Practice with a Demo Account

There are several types of orders you need to understand. Market Order is an order to buy or sell immediately at the current price. The advantage is speed, but the downside is that the price may move before the order is completed.

Limit Order is an order to buy or sell at a specified price only. The advantage is control over the price, but the downside is that the order may not be executed.

Here’s the key: Before trading with real money, practice with a (Demo Account) offered by many brokers. During practice, analyze stocks and monitor results. Doing this for 3-6 months will help you understand market behavior and build confidence. It also allows testing various strategies and studying trading psychology, which is a crucial aspect often overlooked by beginners.

Measure Results Against the Market and Maintain a Long-Term Perspective

The goal of stock trading is to achieve returns better than investing in market indices like the SET Index or S&P 500. If you earn 5% annually from trading but the index rises 10%, you are not yet successful. This comparison helps you evaluate whether your trading is effective. If your results are worse than the index, consider changing your strategy.

Maintain a long-term outlook. Although trading is short-term, overnight riches are unrealistic. Success in trading requires patience, continuous learning, and emotional control. Successful traders often view trading as just one part of a diversified portfolio. Long-term investments in other assets should accompany trading activities.

Avoid Common Trading Mistakes

Don’t blindly trust advice from social media. Many recommend stocks, but some have hidden agendas or lack real knowledge. Relying solely on others’ advice without your own analysis is risky. The best approach is to learn how to analyze stocks yourself, use credible sources of information, and deeply understand the stocks you trade.

Keep a trading journal. This is vital for analyzing performance and managing taxes. In Thailand, profits from stock trading are taxable, and the calculation can be complex.

Create a balance between short-term trading and long-term investing. While trading can be exciting, it should not be your only strategy. A diversified portfolio reduces risk.

Summary of Stock Trading Principles

Stock trading is a skill that can be learned, but it requires patience, ongoing education, and strict risk management. Start with learning the basics, practice with a demo account, and gradually increase your capital as confidence grows.

Remember, successful trading does not come from luck but from knowledge, experience, and discipline in risk management. If you follow these principles to teach trading properly, stock trading can become an effective tool for generating additional income. But always keep in mind that past performance does not guarantee future results.