What is Insider Trading?
In US markets, "insider trading" specifically refers to legal transactions by company officers, directors, and 10%+ owners that must be disclosed via Form 4 within two business days. (The illegal version — trading on material non-public information — is also called insider trading; context distinguishes them.) Indian disclosure: Promoters and designated persons file under SEBI PIT regulations. Insider buying is generally a stronger signal than selling (which has many reasons besides expected stock decline).
Why it matters for investors
Insiders have information advantage about their company's prospects. Studies show insider buying generates modest excess returns; concentrated buying by multiple insiders or large dollar amounts is most informative. Insider selling is noisier — could be diversification, taxes, divorce, or expected decline. The "Cluster Buy" pattern (multiple insiders buying within days) is closely tracked.