eli5: How do stock traders know when to buy and sell, is it pure guessing or is there factors that affect it?

Question

eli5: How do stock traders know when to buy and sell, is it pure guessing or is there factors that affect it?

In: 1

Answer 1

Badly. Index funds consistently outperform actively managed funds.

https://www.nytimes.com/2022/12/02/business/stock-market-index-funds.html

The actual answer to the question is that they research historical trends, company financials and other information and try to use that analysis to determine which stocks will perform better than the market as a whole. But it does come down to guesswork, because they are all part of the market as a whole. That’s not to say that some people don’t do really well sometimes, but the best strategy also happens to be the easiest.