Eli5 - How does stock trading work???

This isn’t really an answer, but advice for how to get started. My 5th point is closer to an answer maybe.

1) anything you want to save for the future, put into a Roth IRA and then into an index ETF. This saves you taxes and diversifies, but you won’t be able to get it back without a penalty until you’re retirement age (with some exceptions like buying a house).

2) Anything you are willing to lose can go into individual stocks to learn.

3) start with fake stocks on yahoo/google by creating account and telling it you own stocks even if you don’t.

4) once your comfortable with how that works, pick an industry that you know something about, and pick a few companies to compare.

5) P/E is a good starting place. Others might suggest other indicators. Compare your few selected stocks using P/E ratio and seeing which ones have lower profit and then use your knowledge of the industry to ask why and if you think it will change. If you think it will go up, buy just a few shares and WAIT like 6+ months watching it every day.

6) you won’t learn anything with penny stocks.

7) 90% of what you read online is garbage, a lot is literally just AI writing paragraphs or articles that say “ABC stock moves up because XYZ happened” and are completely unrelated things and lazy writing. You have to dig to see why your stock moves. That’s where you really learn.

/r/explainlikeimfive Thread