If the majority of traders in a stock were insiders then any information that could cause a price shock would be reflected as soon as the insiders knew (ie the stock would not move when the price shock news was later publicly released the stock. A stock with this much insider trading would be from a trading perspective equivalent to a stock with no insider trading as any price shock could not be predictable from prior prices. No, but none of these matter in regards to insider trading causing price predictive information to become embedded in the price data series. This doesn't matter. If some insiders act after others then the difference will just be a lag in the price signal rather than a spike. I would expect so. This is rather irrelevant to trading though. The insiders I am talking about are not those that have the knowledge, but those that trade on that knowledge. If an insider choose to not trade then apart from not being a crook, they will have no affect of the market. I do assume that all insiders that chose to trade on this knowledge have the goal of making a profit. If insiders choose to trade at a level below the possibility that the information provides then the end result will be that the price predictive signal will be present, but smaller. This doesn't matter, the effect of slow buying verses fast buying would be to just slow the price movement direction. The end level will be the same all things being equal. Yes insiders could do this, but this is also a price signal This is exactly my point. Most price movement is noise, the question is identifying those stocks where past price movement is predictive of future price movement. My prediction, based on the random trading hypothesis, is that the price predictive signal present in the past price data will be the largest in those stocks that have the greatest amount of insider trading. Since it is possible to retrospectively identify those stocks with high levels of insider trading, and assuming that stocks that have previously had high levels of insider trading will have high levels of insider trading in the future (a fairly reasonable assumption), then this prediction should allow you to know where to concentrate your trading - ie use a follow the crooks strategy.
I do think a lot, but that is my nature I am very likely to be wrong (almost certain), but I am most interested in knowing why I am wrong. Every hypothesis I can disprove brings me one step closer to the correct hypothesis. I can't believe that people here are not worried that the trading rules they are using are likely to be false (the don't think, just trade mentality). If you are creating trading rules by mining from past data then there is a very high probability (close to a certainty) that the rule(s) you are using have no predictive power. There is a reason the vast majority of traders lose money - the rules they are using are false. Even making money is no proof that the rules you use are correct, as it is possible that you are one of the traders that happened to fall by chance on the far right side of the earnings distribution curve. I might write up a longer post on this topic when I get the chance.
I am amazed at the level of anti-intellectualism displayed here - have a look at the really successful traders - are they intelligent, or they idiots with a good "feel" for the market. If it is the former then maybe thinking is not such a bad thing.
The base player is providing the signal. If the drummer starts following the lead guitar then things won't sound too good.
You are on the right track, dude! Take the opposite side of your intended trades and you can't go wrong! Please call your intended trades in real time for us, so we can all join in this 100% win rate Seriously, you should print screen your chart at the time of entry, then compare to a chart later on. Determine why your timing was off. It's likely a simple thing like this: I short stocks that pull back a after a run up, leaving behind a lower high. That's normally a fine short signal. BUT I used to often miss the fact that a higher low was there as well, meaning a strong chance the previous resistance level would be tested. So I'd get stopped out above the lower high, price would test the next R level, fail to break through, then crash nicely. My direction was right and my timing was off and I threw money away. A sample chart is attached.
I am shocked no one else has mentioned this. If you are 100% wrong every time....next time you want to buy....sell instead and vise verse.