The two kinds of “insider trading”
When most people hear the term, they picture a hedge fund manager getting a tip and going to prison. That's one version — illegal insider trading. There's a second version that's the opposite: fully legal, publicly filed, and freely available to anyone.
Legal insider trading
Company executives, directors, and 10%+ owners are legally allowed to buy and sell their own company's stock. The only rule is that they have to disclose every trade to the SEC within two business days on a form called SEC Form 4. That disclosure is public information. Anyone can pull it up.
This is what tools like Kestrel Terminal track. It's legal, it's required to be transparent, and it happens thousands of times a week.
Illegal insider trading
This is trading on material non-public information. Example: a CFO tells a friend “we're about to miss earnings,” and the friend shorts the stock before the public finds out. That's a federal crime.
It's completely different from what's in Form 4 filings. When traders talk about “tracking insider trading,” they always mean the legal, disclosed kind. Nothing in this article is about the illegal kind.
Who counts as an insider
- Executive officers — CEO, CFO, COO, President, and other C-suite roles.
- Board members — Directors of the company.
- 10%+ owners — Any person or entity holding at least 10% of a class of stock.
All of them have to file Form 4 within two business days of any trade. No exceptions, no grace period.
Why anyone cares what insiders do
Insiders see the actual business. They read internal sales pipelines, sit in product reviews, hear customer feedback weeks before it becomes public. They know things about the company's trajectory that the market doesn't know yet.
When they buy their own stock with their own money — real money, publicly filed — that's a signal. Not proof, but a signal. It carries information that an analyst report doesn't.
Why buys matter more than sells
Insiders sell for hundreds of reasons that have nothing to do with the company: tax planning, diversification, buying a house, executing a pre-scheduled 10b5-1 sale plan. Most sell-side data is background noise.
Buys are different. Nobody buys their own stock accidentally, or as a tax planning move. An insider buy usually has a specific reason behind it — and when multiple insiders buy the same stock at the same time (a cluster buy), that signal gets significantly stronger.
One buy is easy to explain away. Four buys in the same week from four different executives isn't a coincidence.
What insider data won't tell you
To be fair about it — insider trading data has real limits:
- Timing. Insiders can be right that the business is strong and still wrong on when the market will notice. Macro conditions can override.
- Certainty. A buy could signal confidence, or it could be diversification that happens to go the wrong direction. You can't always tell from the filing.
- Guarantees. Insiders are wrong sometimes. Cluster buys have historically outperformed the market on average, but any individual trade can fail.
How to actually track this
The raw data lives in the SEC's EDGAR filing system. You can pull every Form 4 filing directly from there if you want to parse XML by hand.
More practically, use a tracker that ingests all filings, flags cluster buys automatically, and lets you set alerts for the patterns you care about. Kestrel Terminalis our take on it — real-time coverage, automatic cluster detection, and strategy backtesting.