Did you know that people who run businesses are allowed to trade stocks and other types of assets? That's right: Elon Musk can buy and sell shares of Tesla . He might decide to buy Tesla before announcing great earnings , or releasing a new model of his car. Conversely, he might decide to sell Tesla if he is planning on tweeting "Tesla is a bit overvalued imo" (real tweet!) and sending the stock tanking by over 10% in a single day. The catch is, he has to record these purchases and sales, so that traders can follow along!
This not only works for single stocks, but for the entire market. And I proved it with a backtest here, where I looked through historical data that showed how insiders positioned for over each day. You can see that typically, there is a reaction towards their trading activity, in the same direction that they traded. Now that you know insiders happened to sell a lot of stocks on May 17th, you might not be shocked to see that stock prices fell quite a bit.
This indicator is very useful for shorter term directional bias, but you should also know that many insiders could trade with a longer time frame. For example, during the covid crash, unthinkable levels of insider buying were going on. These ones were the longer term insiders, who just wanted to get cheap shares for the next year. It's a mix of both, but it seems to me that the majority of them trade only with the next few days to weeks in mind.
You can find this indicator here: openinsider.com/charts
Thanks for playing.
This not only works for single stocks, but for the entire market. And I proved it with a backtest here, where I looked through historical data that showed how insiders positioned for over each day. You can see that typically, there is a reaction towards their trading activity, in the same direction that they traded. Now that you know insiders happened to sell a lot of stocks on May 17th, you might not be shocked to see that stock prices fell quite a bit.
This indicator is very useful for shorter term directional bias, but you should also know that many insiders could trade with a longer time frame. For example, during the covid crash, unthinkable levels of insider buying were going on. These ones were the longer term insiders, who just wanted to get cheap shares for the next year. It's a mix of both, but it seems to me that the majority of them trade only with the next few days to weeks in mind.
You can find this indicator here: openinsider.com/charts
Thanks for playing.
Comment:
In this backtest of 21 samples, we can see that the indicator correctly predicted the next day's direction a total of 16 times, and only failed 4 times. This means that it has a success rate of around 75%, a substantial edge.
Comment:
Here I added check boxes to "successful" signals, and an X above each "failed" signal.
Comment:
*backtest of 20 samples