| Everyone knows that insider trading is illegal, but do | | | | stock in the next day or two. Examples of such |
| you think that keeps it from happening? Of course | | | | "newsworthy events" include earnings |
| not. Just because you're not allowed to trade on | | | | announcements, announcements of research results, |
| insider information doesn't mean you can't trade on | | | | announcements from various kinds of industry-related |
| the telltale signatures that insider trading activity | | | | conferences or any kind of imminent news item |
| leaves. This can be quite profitable if you can detect | | | | about the stock or the industry. This is another sure |
| it in a reliable way. | | | | way of detecting that perhaps insider trading is going |
| Some tools are very useful in detecting insider | | | | on. |
| trading. For one, most of the better discount brokers | | | | Once you've detected this possible insider trading, the |
| aggregate the news for you. Be sure to use this | | | | next question is what to do about it. How and when |
| valuable feature. Having scanning software that filters | | | | do you enter the trade? Here is where some |
| for price moves on volume is also vital. | | | | experience comes in at detecting what insider trade |
| You can suspect insider trading is going on when you | | | | price moves look like. You can develop this |
| see a strong price move in the stock picks you're | | | | experience by studying price charts that show |
| monitoring on increasing volume with no news about | | | | evidence of insider trading. With some good scanning |
| those stocks. This is the key to detecting insider | | | | software you can detect these kinds of price |
| trading. If the price goes up suddenly on good | | | | movements. |
| volume with no news, you really need to ask | | | | Finding a good entry point is half the battle, but |
| yourself "Why?" One possible explanation is insider | | | | finding the right exit point is actually even more |
| trading. | | | | important. You have control over when you enter |
| To detect these strong price moves you should have | | | | the trade and which stock you pick, but once in it, |
| scanning software that filters for price moves on | | | | you need to find the exit for that particular stock. |
| volume. These scans should be run a number of | | | | Often, insider trading will plateau, and also perhaps |
| times daily, focusing especially on early in the day. It's | | | | you'll suddenly find that there is a newsworthy event |
| also important to know that there is no significant | | | | that could explain the insider trading. This is how you |
| "important news" to explain the price moves. Deciding | | | | find the exit point. So, exiting insider trading trades is |
| what constitutes "important news" requires some | | | | a great example of buying the rumor, which in this |
| experience. Of course, insider trading volume spikes | | | | case is unexplained strong price movement on high |
| can also happen toward the end of the day as well. | | | | volume and "selling on the news." This is to say, |
| These happen in anticipation of important | | | | when the news comes out, the party's over, and it's |
| announcements after the market has closed. | | | | time to go find another trade. |
| When you see a price spike on volume, another thing | | | | So, as you can see from these tips, riding on the |
| you can check for is whether there is expected to | | | | coattails of insider trading can be quite profitable with |
| be some significant "newsworthy event" about that | | | | the right preparation. |