Categories are created to group products in a bunch and assign certain filters to it. Below is a video of how to create categories, sub-category and how to reorder the category:
Here are the steps you can follow.
1. Click on Products section of your admin.
2. Click on Categories.
3. Click on Add new Category, it is present in the top right most corner.
4. Enter Category name, image and relevant description in the respective fields.
5. Enter filters like Size, Color etc.
6. Slug will be automatically taken from the category name.
7. Save the changes.
8. Congratulations your category is ready. Now start assigning products to this category.