Following Insider Trading

This article on following insider trading goes over a strategy you can develop, test and put to use, based on purchases and sales of stock made by large shareholders, board memebers and officers of a corporation.

As a note, this article is not refering to any illegal trading activity, such as what you may have read about in regards to insider trading in the past.

Base on the strategy we will be looking at here, the term "Insider" refers to nothing illegal at all, merely someone connected in some way to a corporation with a track record that we can research with prior purchases and/or sales.

A good way to get started is to learn about Sec Filings and how to put them to use. Check out the page I've already written in the past to brush up on Sec Filings.

Keeping a list of good websites handy for doing research on stocks is a key part of developing and following insider trading. Besides the ones I have listed on the SEC page, you'll want to find and bookmark your own favorites as well. Another good site for doing research on Insiders is Fidelity's Research section of their main site.

You can see on the page I have linked and in the image below, various details about insider trends and transactions.

Following Insider Trading

In the case of the example above, you can see that in March 2009 there was a large amount of Insider purchases made, which just so happened to be the bottom of the market. In this case, buying on the coat tails of the GE insiders would have been a very profitable decision at the time.

Remember that this is only one example. Many times insiders are wrong as well. One of the things I've found over the years is to find and track specific insiders with specific stocks and see how their long term track record is. Once you find someone who has a good percentage of purchsing near lows and selling near tops, keep them on your list of potential trade ideas to track.

On the other end of the spectrum, if you come across someone who always buys at the top and sells near the bottom, keep them on a list also, the list NOT to follow their insider trading ideas.




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