Lots of research has been done over the past couple of decades that focused on legal insider trading.  I make the distinction between executives buying and selling their own stock legally and the type of nefarious activity we read in the news and see in Hollywood.

The distinction is nuanced: insiders (senior corporate managers and large shareholders) can buy and sell their stock as long as they are not basing their decisions on non-public information that, if made public, would affect stock prices.

It turns out that insiders have been doing this for years and really profitably.  You can see a list of the best resources for following insider moves here.

Follow those with better (in)sight

While the research hasn’t necessarily shown that there is a connection between market movement and insider purchases and sells (in the aggregate), insider activity seems to work much better when looking at individual stocks.  It turns out that it works even better when we focus on stocks that are small and mid capitalization companies, have clusters of insider purchases (multiple executives buying around the same time) with larger purchases in dollar terms.

Tradestreaming is all about following the smart money: hedge funds, smart crowds, and certainly, corporate insiders.  Portfolios can be designed to take advantage of this data and profits can be made by mimicking these activities.

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