This a super basic description to be helpful. Our game is quite complex so there's a lot to learn and evaluate on this topic!
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AP - Armor Piercing
HE - High Explosive
If you can get your AP shells to pen armor into a ship and detonate inside, then they are very helpful. There is some advanced understanding that comes along with this as your shells might over-pen (pass through the armor of the ship and out the other side), or shatter if the armor is too thick, or bounce if the armor is too angled.
As a general rule:
If a ship is showing a lot of broadside and is the same type as you (Cruiser -> Cruiser or Battleship -> Battleship) then AP is a good choice.
If a ship is well-angled or pointing at you, High Explosive is the safer, more consistant choice.
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Definitely a good idea to check out the wiki article linked above. You can also find YouTube videos describing this!
AP Shells and Armor!
HE Shells!