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What Investors Can Learn from Insider Trading

UPDATED: March 2022

What Investors Can Learn from Insider Trading – When investors are studying the market, making sense of insider trading activity can be one of the hardest challenges they face. After all, they must look at the market dynamics and then figure out whether insiders are making moves based on the rise and fall of share prices.

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What Investors Can Learn from Insider Trading

Even though corporate insiders may be engaging in insider trading, it doesn’t mean that insiders have it easy when trying to figure out what financial investments to make in the market.

To make things simpler, we will share what insider trading is, how can an investor learn from insider trading, and what is the best use of insider trading data. So, let’s begin: 

What Is Insider Trading?

The first thing you should know about is that there is illegal insider trading, and then, there is legal insider trading. As an investor, you must first understand the difference between the two to profit more from them. Illegal insider trading occurs when insiders buy and sell shares using nonpublic information. That means insiders are trying to gain an unfair advantage over other investors by using crucial financial information about their company.

Therefore, anyone who is trying to access nonpublic information to use it for their benefit when making trades in the financial market is complicit in illegal insider trading. Some examples of insider trading include the following:

  • The company CEO sells their stock after learning that the company suffered massive losses.
  • The top executives of the company also sell their stock after learning about the heavy financial losses the company suffered during the last quarter
  • Employees sell their shares after learning in the financial report meeting that the company will not post a profit this quarter.

Anyone found guilty of illegal insider trading could face heavy fines and even jail time. The Securities and Exchange Commission (SEC) regulates insider trading and keeps a close watch on anyone involved in insider trading on the financial market.

Insider Trading Isn’t Always Illegal

There are certain times when insider trading isn’t illegal, and this happens when the top executives and insiders in the company are involved in trades that aren’t based on insider information. Most of the time, insiders tend to make trades to raise personal capital. An employee of the company may sell all of their shares because they want to raise capital to purchase a new house or a boat. Also, some corporate executives are given compensation in stock by the company.

That is the reason why you may notice that a top executive of the company has suddenly bought a large number of shares in the company. That doesn’t mean the share prices will rise in the coming months but is generally the executive solidifying their compensation. There is a thin line between legal and illegal insider trading, which shouldn’t be crossed.

Investors looking to learn from insider trading should base their financial decisions on various factors instead of relying solely on insider information.

Conclusion to What Investors Can Learn from Insider Trading

Insider trading has been around for a long time, and you must look at all the factors when making investment decisions as an investor. Even though insider information is important to look at, major corporations have hundreds of insiders, and trying to figure out a pattern may prove to be a difficult proposition for investors.


About the Author & How YOU Can Profit:  This article is the copyrighted product of the team at  .

Buyback Analytics is a Top Tier Investing Platform to help investors find, analyze, and profit from investing opportunities not found through traditional investment tools. We specialize in this simple concept:  Follow the trades of Insiders – CONSISTENTLY PROFITABLE Traders, Investors, and Institutions because THEY get Inside Information that YOU don’t:

LEGAL Insider Trading / Inside Traders (CEOs, CFOs, Corporation’s Accountants & Attorneys, Politicians, etc.)
Stock Buybacks (Share Repurchases) by Public Corporations (ie. Apple, Tesla, Netflix, Meta (Facebook), Microsoft, etc.)
Market Moving Institutions (Examples: Market Makers, Investment Banks, Stock Brokerages, Hedge Funds, etc.)

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