8 Mistakes People Make Reading Insider Trading Data

The most common errors when reading Form 4 data, from counting grants as buys to ignoring the 10b5-1 flag, and how to avoid each one.

Insider data is free and public, which makes it easy to misuse. These are the mistakes that most often turn a decent signal into noise.

1. Counting every non-sale as a buy

The biggest one. Form 4 has many transaction codes. Only P is an open-market purchase. Awards (A), option exercises (M) and tax withholding (F) are compensation mechanics. Treating them as buying inflates "insider buying" several times over.

2. Ignoring the insider's role

A CEO or CFO knows more than an outside director who has just joined. A 10% owner that is a fund may trade for portfolio reasons. Weigh by role.

3. Ignoring size

A $5,000 purchase by an executive worth tens of millions is a token. Compare the trade with their existing holding and with what a purchase of that size means to them.

4. Treating planned sales as a decision

Sales under a 10b5-1 plan were scheduled months ago. Check the checkbox and footnotes before reading anything into them.

5. Reading a single filing, not a pattern

One purchase is interesting. Several insiders buying in two weeks is more interesting. A year of steady selling by one person is background noise.

6. Forgetting indirect holdings

Shares can be held through trusts, family entities or funds. A filing may show shares owned "indirectly". Read the footnotes to see whose stake it is, so you do not double count or misjudge.

7. Missing amendments

A Form 4/A corrects an earlier filing. If you copy data without removing duplicates, the same trade appears twice.

8. Ignoring the market context

A purchase after a 40% drop can be a bargain or a mistake. A purchase near an all-time high is a different bet. Look at the price path, not just the filing.

A checklist

• Code P or S only?
• Who is the filer?
• How big relative to their holding?
• Planned or unplanned?
• Alone, or part of a cluster?
• Any footnote that changes the picture?
• What has the stock done since?

Bourse applies the first filter for you. It keeps only P and S filings, flags clusters, and shows how each stock has moved since the disclosure, but the judgement is still yours.

Bourse provides financial data and editorial information, parts of which are generated by AI. This page is for general education only. It is not personalised investment advice or a recommendation to buy or sell any financial instrument. Make your own decisions.