The Complete Guide to Insider Trading Signals

In investing, one old adage holds true: "Insiders buy for only one reason – they think the price will rise." Legendary fund manager Peter Lynch famously quipped that corporate executives and directors might sell shares for many reasons, but they buy shares only when they expect gains¹. This isn't mystical — it's backed by research. Insiders legally file SEC Form 4 whenever they buy or sell their company's stock², and savvy investors treat those filings as windows into what "smart money" might be thinking.

In this guide, we'll explain how to read these filings, what patterns to watch, and why following insider activity can give you an edge. Along the way we'll highlight real historical and recent examples (from oil-and-gas explorer Matador Resources to tech giants like Salesforce and Meta) so you see how these signals play out.

What Are Insider Trading Signals?

"Insider trading signals" simply means clues gleaned from the legal stock trades of company insiders (officers, directors, or >10% shareholders) that hint at future stock moves. By law, insiders must report every open-market buy or sell of their company stock on Form 4, typically within two business days³. That report includes who traded, how many shares, at what price, and their role.

Importantly, the existence of a Form 4 does not mean illegal activity occurred — it simply documents that an insider made a trade⁴. (Think of it as public on-chain data for stocks.)

What matters to investors is what insiders do with this information. Studies confirm that insiders have an information advantage, and their trades often foreshadow performance⁵⁶. For example, 2iQ Research notes that insiders "have an information advantage… and studies show a link between their trades and stock performance"⁷.

In practice, buyers look at Form 4 data to spot high-probability opportunities (or warnings) before the market fully reacts. Form 4 filings are freely available via the SEC's EDGAR database (and many finance sites scrape them). Each filing tells you exactly when and how much an insider bought or sold. For instance, a CEO might file that he purchased 10,000 shares at $50 on July 1, 2025. That one piece of data can be a major red or green flag.

Of course, any one trade can be ordinary or for personal reasons, so smart analysis is needed. But when multiple insiders share a similar trade, or a trade is unusually large, that can be a powerful signal.

How to Read a Form 4 Filing

Before diving into patterns, let's cover the basics of Form 4. The top sections list the insider's name, title, and relationship to the company (e.g. "Director," "Officer," "10% Owner"). A key field is the transaction code: for example, "P" means an open-market purchase, "S" an open-market sale⁸. (Other codes cover option exercises, gifts, etc.)

In practice, we pay most attention to plain open-market buys (code P) by insiders, since that represents actual confidence. The filing also shows how many shares changed hands and at what price. From this, you can compute the dollar value of the transaction and the insider's new ownership stake.

If a CEO buys 50,000 shares at $30, that's a $1.5 million signal of confidence; a smaller buy by a mid-level officer of 200 shares might not mean much. The filing's footnotes sometimes explain unusual details (e.g. a trust purchase or 10b5‑1 plan).

Just remember: a Form 4 is only a report. The SEC's requirements prevent insiders from dumping stock right after privileged info, but many insiders trade routinely for normal reasons. As one analysis points out, insiders are barred from quick flip profits, so usually they hold shares for at least six months⁹.

And often they sell for mundane reasons (taxes, buying a house, diversification). Research shows that director sales usually aren't strongly linked to stock declines except in extreme cases¹⁰. In fact, the saying goes that insiders "might sell for any number of reasons, but they buy for only one: they think the price will rise"¹¹¹².

In short, Form 4 data is pure facts on trades. Your job is to sift through and look for meaningful patterns.

Why Insider Trading Signals Matter

Why do we care about these trades at all? It's simple economics: executives see the company from the inside. Even the best analysts can't know every facet of a business. Corporate leaders work with the products, budgets, and strategy day in and day out. If they start buying their own shares with their own money, it often means something good is expected.

Academic studies bear this out: for decades, researchers have found that stocks tend to rise after insiders buy. For example, one study noted that simple strategies of buying a stock when a director buys it can beat the market by 5–10% annually¹³, though results can be "lumpy" and not consistent every year.

Another study found that combining insider buying signals (especially in cheap, undervalued stocks) with momentum indicators could have produced about 23.5% annualized returns¹⁴. Hedge funds and professional traders certainly pay attention. In fact, some specialized funds literally copy-cat director trades as part of diversified strategies¹⁵.

One commentator notes that major hedge funds and billionaire investors sometimes pile into the same stocks that insiders are buying – giving private investors a way to piggyback the "smart money."

By following insider signals, you're essentially getting a sneak peek at what managers of the company are thinking. Of course, it isn't foolproof. Investopedia notes that only roughly one quarter of insider purchases actually result in abnormal returns¹⁶. But insiders clearly have more information about their firm than most outsiders do.

Even if insiders aren't always right, their collective moves do nudge prices. The key is separating the meaningful signals from the noise (like routine option exercises or planned buys). We'll cover that below.

Key Insider Buying Patterns to Watch

Some insider trades are far more telling than others. Decades of research and market experience suggest these patterns often herald stock moves:

1. Cluster Buying by Multiple Insiders

If several executives or board members buy the stock around the same time, that's a very strong bullish signal. As Nasdaq explained, when "mass insider buying behavior" occurs – so-called a cluster buy – it is "the strongest signal available in insider trading"¹⁷.

Why? Because it shows broad internal conviction. For example, oil company Matador Resources saw 6 insiders (including the CEO and COO) buy shares together in November 2020. Shares later surged 387% over the next two years¹⁸.

Again in spring 2023, five Matador insiders bought jointly, and the stock jumped about 30% by year-end¹⁹. Other case studies show similar payoffs: Stockopedia notes that when more than three directors buy a stock within three months, the shares averaged about +2% per month in excess of the market over the following year²⁰.

In short, cluster buys consistently stand out in hindsight, and private investors who spotted them have been handsomely rewarded (as with Total Produce's 76% rally after a director cluster purchase²¹).

2. Large Individual Purchases by Top Executives

A big bet by the CEO, CFO or another high-ranking insider can also be a clue. Consider recent tech examples:

Salesforce (April 2025): Board member Oscar Munoz spent about $1 million buying stock right after the shares dipped. The stock promptly rebounded sharply thereafter²².
Pinterest (November 2022): CEO Bill Ready (new in his role) dropped $5 million on shares while Pinterest was -75% off its highs. Within a few months Pinterest rallied ~40%²³.
Meta Platforms (Late 2022): When Mark Zuckerberg and other Meta executives bought millions in late 2022 after a 70%-plus crash in Meta's price, the stock doubled over the next year²⁴.

These aren't "routine" or token buys – they're big skins in the game by the very people running the company. When insiders put millions on the line, especially at market lows, it often signals they see a turnaround in progress.

3. Repeat or Follow-On Buys

If an insider buys once and the stock moves up, watch if they buy again. Consistent repeat purchases suggest steadily rising confidence. For example, Guess? Inc. CEO Carlos Alberini has made several large open-market buys over time as his clothing retailer weathered the COVID downturn.

2iQ Research noted his September 2021 purchase of 83,000 shares (around $2.2M) as a bullish move – it wasn't the first time he had bought, and each time his buying preceded rallies²⁵.

Likewise, if you see a CFO buy now and then again next quarter as the stock dips, that pattern is more reliable than a one-off blip.

4. Buying After a Decline or Bad News

Insiders often buy when outsiders are panicking. A common scenario: bad earnings or negative headlines send a stock down hard, then a top executive quietly steps in to buy. This contrarian move can hint that the market overreacted.

TIKR notes that large insider buys following big drops, or buys after weak earnings, are classic breakout signals²⁶. In practice, if a stock falls 20% on poor results but you see the CEO buying $500K of shares a few days later, that's a credible signal a bottom might be near.

The pattern shows how insiders often buy near depressed levels²⁷, right when the broader market has sidelined the stock.

Insider Selling and Red Flags

What about insider selling? Usually we focus on buys, but sales can sometimes warn of trouble. In general, though, research (and folklore) say insider selling is less reliable as a signal. Directors might sell stock for perfectly normal reasons (paying taxes, buying a home, rebalancing a portfolio), so a sale alone usually isn't cause for alarm²⁸.

Only if insiders are selling massive amounts, especially after a stock ran up, should you worry.

That said, there are cautionary stories. In early 2023 the president of Silicon Valley Bank, Gregory Becker, sold $3.6 million in SVB stock. When the bank failed two weeks later, it turned out Becker had netted $2.3 million profit from that sale²⁹. That example made headlines and triggered investigations, though we must admit it's exceptional.

For most insiders, Form 4 sales indicate perfectly legal normal behavior. As Stockopedia notes, the link between a director selling and future returns is "fairly weak" except in stocks with very high valuations³⁰.

In summary: watch insider sells with skepticism. Focus primarily on the conspicuous buys as positive signals.

How to Track and Use Insider Signals

Getting insider-trade data isn't hard, but making sense of it requires some filters:

1. Know the Form 4 Basics

Search EDGAR or use stock screener websites (most have an insider-transactions tab). When you spot a Form 4, check:

Who traded (their title and stake)
What transaction code ("P" for purchase, "S" for sale)
How many shares, and when

Anything funded by the insider's own cash (open-market buy) is most interesting.

2. Check Context and Roles

When you see a purchase, ask: Did it happen right after a stock drop or bad earnings? The timing matters³¹. Also note who bought: a CEO/CFO or multiple directors carries more weight than a junior officer or employee³²³³.

TIKR advises investors to look at the buyer's role and size of trade: "Large buys from the CEO, CFO, or multiple directors carry more weight than low-level trades"³⁴. In other words, focus on the leaders on the balance sheet side.

3. Look for Clusters Across Days

Insider filings can trickle in over a couple of days. If one insider buys on Monday and two more on Tuesday, daily newsletters might list them separately. To catch "hidden" cluster buys, monitor the same stock over several days.

As one newsletter warns, if you only scan per day, you might miss that "the CEO bought on Monday, but 3 directors bought on Tuesday… you may pass by those 'hidden' cluster buys without even realizing it"³⁵. It pays to group trades by stock over a week, not just at daily glance.

4. Use Tools & Screeners

There are many platforms that aggregate insider data. For instance, InsiderSignal and services like Finviz, OpenInsider or Morningstar let you filter by recent buys/sells or by insiders only. Paid services like 2iQ or TIKR provide alerts for big trades.

Yahoo Finance and many brokerage sites also list the latest Form 4s on each stock's page. Whatever the tool, set alerts or filters for:

Large purchases
Cluster buys
Trades by C-suite officers

5. Act Quickly

Insider signals tend to be front-loaded. Studies show that about half the gains from an insider-buy signal occur within 60 days, and about 25% happen in the first 10 days³⁶. In other words, the market often bounces fast when insiders move.

For example, if you see a CFO buy today, consider acting sooner rather than later. (This is one area where individual investors can outmaneuver big funds: we can jump in small and fast.)

That said, confirm there's no overlapping news or corporate event that explains the move.

6. Beware of Caveats

Not all insider buys are equal. Some are part of pre-set 10b5-1 trading plans (which insiders establish while not in possession of fresh news), meaning those buys might not reflect new insights.

Also check if the purchase was from the company itself (e.g. via a share grant or exercise) versus open market – the latter tends to carry more information. And remember that strategy often means insiders are adding positions, not all-in, so use these signals alongside your own research and risk management.

Examples of Insider Trading Signals

Matador Resources (MTDR)

In late 2020 Matador's own managers were quietly loading up. Six insiders (including the CEO) bought shares within days of each other. The stock was around $1.50 in Nov 2020, and after that cluster buy it later topped $7, a 387% gain by end of 2022³⁷.

It happened again: in March 2023 five Matador insiders bought around the same time, and the stock rallied ~31% by year-end³⁸. Those cluster buys were a clear internal vote of confidence.

Salesforce (CRM), April 2025

Board member Oscar Munoz bought ~$1 million worth of shares in mid-April, after the stock had just dipped about 6%. He wasn't the only insider buying (he had bought $500K in 2024 as well), but his April purchase came right near a short-term low.

Salesforce promptly rebounded (this was, in hindsight, a textbook insider-buy signal)³⁹. Munoz is known for well-timed buys, so watching his Form 4 filings has been profitable for some.

Pinterest (PINS), November 2022

After the social media stocks swooned, Pinterest's CEO Bill Ready made headlines by putting $5 million of his own cash into PINS shares on the open market⁴⁰. The stock had plunged ~75% from prior highs.

Within months, Pinterest rallied about 40% (and eventually over 100% at its next peak). Ready's first big buy as CEO signaled he saw long-term value where others were scared off⁴¹.

Meta Platforms (META), Late 2022

When Meta's stock plummeted under $100 (after advertising headwinds), insiders stepped in. Multiple insiders – including CEO Mark Zuckerberg – collectively bought tens of millions of dollars worth of stock on the open market.

Those were the first big insider buys in years. In 2023, Meta stock more than doubled, vindicating insiders' early confidence. This is a prime example: at a very low valuation, insiders bought heavily, and the stock's big rebound followed⁴².

Wish (WISH), 2021

On the flip side, 2iQ Research pointed out that insider selling foreshadowed disaster here. After the shopping app's founder and CEO resigned in late 2021, five of the company's insiders sold large blocks of shares (Form 4 showed 142,887 shares sold).

In the following year, Wish's stock collapsed from around $30 to $3, an 83% drop⁴³. That series of insider sales, in hindsight, was a precursor to the decline.

Asana (ASAN), April 2025

Stock market trackers noticed that Asana CEO Dustin Moskovitz bought millions of dollars of ASAN shares in April 2025, right as the stock hovered near recent lows. It was a large open-market purchase on the public tape.

As of this writing the stock is still down, but the fact that more insiders are still buying suggests they continue to see undervaluation⁴⁴.

These examples illustrate how insider moves can signal future trends. Of course, not every insider transaction produces a winner – but when patterns emerge (clusters, C-suite buys, buys on dips), they're often worth a closer look.

Key Takeaways for Investors

When you pull it all together, here are some practical guidelines:

1. Trust Buys Far More Than Sells

Insiders put money at risk to buy; when many insiders buy together it's especially meaningful⁴⁵⁴⁶. By contrast, routine sell orders are often personal or tax-related.

2. Watch for Clustered Buying

One insider buying can be innocuous. But when 3, 4 or more insiders all buy in a short span, that is a powerful signal⁴⁷⁴⁸. For example, if the CEO, CFO and two board members all buy in the same week, odds favor the stock.

3. Prioritize Senior Insiders

Director and officer buys (CEO/CFO in particular) carry more weight than buys by lower-level employees⁴⁹⁵⁰. Also note blockholders (>10% owners) – they often have seats on the board and similar info access.

4. Context is Everything

Consider why insiders might be trading. Big purchases after a bad quarter or market selloff often suggest contrarian opportunity⁵¹⁵². But if insiders are buying while the stock is already near all-time highs, that is less obviously helpful.

Always check news, earnings releases, and overall market conditions.

5. Size and Frequency Matter

A small buy (a few hundred shares) usually means little. Look for significant dollar amounts. If an insider adds to a position over multiple quarters, that shows conviction.

One research note: larger trades in small-cap or undervalued stocks tend to be the most predictive⁵³, in part because they're less likely to be noticed (and because small stocks move more on informed trades).

6. Act Quickly

According to one analysis, about half of the gains from an insider-buy signal happen in the first 2 months, and ~25% in the first 10 days⁵⁴. Insider information tends to leak out fast.

If you identify a credible insider buy, it's usually best to act on it soon (within weeks, not years).

In short, think of insider trades as signposts. They're not magic bullet single indicators, but when used with other analysis they can point you to stocks worth investigating. Always combine signals with fundamentals and valuation.

But when the insiders themselves are betting heavily on the upside, it's often a cue worth heeding.

Key signals to watch for: insiders buying (not selling)⁵⁵, clustered purchases by multiple directors⁵⁶⁵⁷, top executives buying large amounts, and purchases made after big sell-offs or negative news⁵⁸⁵⁹.

Using these clues, many investors have successfully "ride[d] the smart money" – and now you can too.

Disclaimer: This information is for educational purposes only and should not be considered investment advice. Past performance does not guarantee future results. Always consult with a qualified financial advisor before making investment decisions.

Sources

Buy Stock With Insiders: How to Track Insider Buying - Investopedia
Insider trading reports: How to read an SEC Form 4 filing - Journalist's Resource
What Is SEC Form 4 and How Do You Read Form 4 Filings? - 2iQ Research
Stock Market Secrets: Learning from Director Dealings - Stockopedia
The #1 Insider Signal Every Trader Should Know - Nasdaq
How to Use Insider Buying to Predict Stock Breakouts - TIKR