Meaning of insider trading and how it is conducted.
Insider trading also known as insider dealing is trading of shares by any insider like manager or executive based on information which is not yet made public. It is usually prohibited by the law and it can be legal or illegal depending upon the piece of information which is used is made public or not. Some investors may involve in practicing legal insider trading as they believe insiders have better insight about companies performance and goals. Member of management buying shares of their company often conveys positive message in market, but illegal insider trading should never be practiced. Traders can take help from financial advisory services providers to know about useful trading strategies and precise levels to trade with.
Following are some ways by which insider trading is conducted:
1) Members of company
Employees who are working is any public traded company have access to information which are not easily available to public. They make use of this information and buy/sell shares based on it. By doing so they expect they will earn good once the information is made public.
2) Different professionals
Bankers, lawyers, brokers may have access to confidential information of their clients. They make misuse this privilege and buy/sell shares based on the information they have learned.
3) Government officials
Government officials can get access to different confidential information while execution of their duty. They may perform insider trading using this information.
4) Hackers and thieves
Clever people find number of ways to get access to company's confidential information. Once they get access they may make use of such information and trade on the basis of it.
An innocent investor or trader may perform insider trading accidentally. Following are some precautions which you can take to save yourself from doing so :
1) Rely on usage of reliable and authentic source of information while trading in market. If any person is providing you any kind of information then make sure that information is available at other sources as well.
2) Inform suitable authorized person if you come across any piece of information related to your portfolio which is not yet made public.
3) While working in a company if you are having access to its confidential information then do not use it for wrong purpose.
It can be concluded by saying that insider trading is considered to be illegal in most of the cases. So before you make use of any information while trading always make sure that information is easily available to public also. If found guilty, fine may be imposed on you or it can even lead to imprisonment. While trading in market traders can use mcx tips and other experts suggestions to earn expected returns and accomplish their trading goals. Discipline is one quality that every trade must posses for becoming a successful trader. Indisciplined trading practices are not going to help good from market on long term basis.