What simple market indicators should beginners actually focus on first?
Hey everyone!
I'm a bit overwhelmed by all the different market indicators and charts people talk about. I've been reading some investing blogs and watching YouTube videos, but everyone seems to focus on different things - RSI, moving averages, P/E ratios, trading volumes... it's doing my head in!
As a beginner who's just starting to learn, which basic indicators should I actually pay attention to first? I'm not looking to day trade or anything complicated - just want to make sensible long-term investment decisions.
Thanks in advance for any advice! 🙏
1 Answer
Hey there!
I think that a good place to start is P/E ratio, relation between price per share and earning per share. I have seen a good Youtube video giving the example of buying a bakery. For instance, if you were buying the local bakery down the street, you'd want to know: "How much am I paying vs how much profit it makes each year?"
That's literally what P/E ratio tells you. If a stock has a P/E of 15, you're paying 15 years' worth of profits upfront. Just like if you bought a business that makes £10k a year for £150k.
Once you learn this you will discover some limitations of using purely P/E ratio when assessing company and can take it from there. Good luck!