Insider Trading

Insider trading has a negative connotation in investment circles, but it can also be a sign of a strong stock and company. Martha Stewart has been in the news for her dealings with a particular trade and receiving a tip on when to sell. Since she had inside information about the company and stock price fluctuations, Ms. Stewart faces jail time and other penalties. However, not all insider activity is illegal--and when monitored correctly it can actually help an investor.

About the SEC

The Security and Exchange Commission (SEC) has established numerous rules and procedures in order to protect investors from insider trading crimes. Recent court cases have shown that investors have used inside tips and advance warnings to dump stocks before the price falls. This is not only misleading to the general public but it is also against SEC laws.

Following Insider Trading

Review the buying and selling patterns of company insiders before purchasing stock. This information is available to the public and can help determine the stability of a company. If all the executives at a company are selling off shares then it might not be a wise idea to buy that stock. Ask yourself, if the employees don't have faith in the company, should I as an investor? However, with the help of Value Discovery investors are acting on insider activity and collecting an enormous profit.

Value Discovery can provide investors with information on insider trading along with buy and sell recommendations. Since this information is a matter of public record, there are no SEC concerns and investors can be sure that they are abiding by existing laws. While anyone can view trading activity, being able to translate trading patterns can result in a significant return. Tracking all insider transactions can be very time-consuming. Value Discovery can provide email alerts to notify investors of unusual buying or selling activity.