Such an advantage obviously influences insiders’ risk reward calculations
and their decision of whether to buy.
Therefore, when insiders buy their company’s shares in the open
market, they have to make the same risk reward calculations individual
investors and stock traders do. They must figure in the trading costs
of paying commissions and buying at their stock’s ask price. A
decision that buying shares on the open market is worth the risk even
with these costs is a much stronger signal to us.
Our online monitoring tools and consulting services covers the needs of
all types of investors. With offices in Hong Kong, China, and Canada,
our team of consultants are available to help you implement investment
strategies based on insider trends you deem to be crucial in stock
selection. A number of researchers have studied the
relationship between insider trading activities and the stock market
performance. In this note, we present our research results as shown in
the following charts. We calculate the weekly unique insider buyers
and plot it against the Dow Jones Industry Average.
Trading history and pattern for insider buying. This rule is
probably the most important one and requires the most work to keep.
There are a number of things that we want to discover. Did the insider
have a successful trading history? Are insiders enthusiastic about
their own company's stocks? Small cap stocks are cheaper to buy then
the big caps. Many big cap stocks are expensive and move very slowly.
Yes small caps stock are riskier but if you have the capitol to invest
and you buy the right small cap your gains will out way the risk
Try and stay in a area of small companies that have great profit
potential. You can use a stock screener to help narrow your search.
Most stock brokers will have a small cap stock screener that you can
use. You can set the share price you want to start out with You can
set the profits and sales revenue criteria and so on. A stock screen
will be a huge help finding the right small cap stock to buy.
Set yourself some kind of plan , knowing when the owners are
buying their own stock or stock on what type of companies. The first
place is to look at a combines earnings. Many of the stock brokers
will have a ranking on the earnings power a small company will have.
Have this type of service know when to buy like the insiders of the
company will make you money. Traders can also use a service that
watches when the insiders of the company are buying stock.
Improve your profits when trading stocks by knowing what the
insiders of the company are buying. You need to increase your profit
from winning stock trades or reduce your losses from the losing stock
trades.
The first thing you need to do is use trailing stops on all your stock
trades. Before you enter a stock trade you need to determine how much
you are willing to risk if the trade goes against you. Usually in the
five to ten percent range is a good stop loss but you need to make
that decision and stick with it. You need to move the stop to
breakeven as your trade is making a profit. |
