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Rookie Stock Investors

You’re a Rookie Stock Investor if you’re a beginner or fairly new to the investing world. Most usually start out with a “buy and hold” approach. Maybe you’re transitioning from a full-service brokerage or employer-sponsored retirement plan to a do-it-yourself online broker like TradeKing. If you’re a rookie, your experience with investing in individual stocks may be limited, not making more than a few trades per month in a cash account. Many beginners have more experience investing in money market funds or mutual funds. Just because you’re a rookie doesn’t mean you don’t have high expectations for your trading, and you’re probably eager to expand your general market knowledge and investment experience to achieve your goals. That said, many beginners aren’t fully aware of the time and dedication involved with investing or trading. It’s easy for rookies to fall prey to failed investments made with a “gut feeling” or consisting of “tips” instead of actual research. (But if you’re reading TradeKing’s Education Center, chances are you won’t be one of them – bully for you!)

A Rookie Stock Investor will normally understand the concept of buy low and sell high. However, rookies are especially vulnerable to letting emotion take over once a trade or investment has begun. This may lead to you holding onto securities with losses even as the reasons for the original investment have deteriorated. You may’ve found yourself hoping, maybe even wrongly expecting, a losing stock would recover so you can “get back to even”. If higher prices return, you may pull the sell trigger too soon, selling your stocks at break-even or with only small profits. It’s tough for many beginners to see the forest for the trees, recognizing if the outlook for a particular security is favorable even if the short-term trend is rocky. Rookies often have had successful trades during strong bull markets, but during tougher times when volatility is up and bears rule the game, you may feel at a loss.

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As a Rookie Stock Investor, here are the basics you should master:

  • How to obtain and read basic quotes using a ticker symbol (bid, ask, size, last, change, high, low, open, close and volume)
  • Keep tabs on the major market indices (S&P 500, DJIA, Nasdaq composite, Nasdaq 100, Russell 2000, etc.)
  • The basics of investing in stocks and fundamental analysis
  • Where to find reputable and reliable sources for research (TradeKing, magazines, newspapers)
  • Order entry terminology (action of buy or sell, quantity, price, type of order, duration)
  • Position terminology (long, short)
  • How T+3 settlement affects stock transactions
  • How dividends work
  • What corporate actions are and how they may impact stock holdings
  • How to regard your gains or losses as real, even if they are still unrealized

Rookie Stock Investors can improve their skills by:

  • Using TradeKing’s independent stock research from Standard & Poor's
  • Finding investment opportunities with TradeKing’s Stock Screener
  • Reviewing stock strategies geared to the rookie skill level
  • Reviewing Determining Market Outlook
  • Watching news headlines daily for any potential investments or impact on your current holdings
  • Knowing when earnings are to be released for all potential and actual stock holdings
  • Anticipating and planning for all possible outcomes for your trades, not just the positive scenarios
  • Staying cautious if you’re buying stock within one week of the underlying company’s earnings or other big announcement (or holding off on the investment temporarily)
  • Using limit orders for nearly all trades
  • Understanding how commissions and fees impact your bottom line
  • Engaging members of the Trader Network to help you work through investing ideas
  • Engaging members of the Trader Network to explain their investing analysis
  • Journaling your trades with Trade Notes to record your investing thought process
  • Attending or watching TradeKing’s free educational webinars, geared to the rookie skill level

Rookie Stock Investors should steer clear of the following:

  • Do not take advice from phone solicitations, direct-mail or email newsletters touting unknown companies
  • Resist the urge to buy penny stocks or other low-priced stocks on a “hot tip”
  • Do not trade strategies labeled for more advanced traders
  • Do not use market orders, with few exceptions
  • Do not short stock – this can expose you to unlimited losses

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