What is Insider Trading?

Insider trading refers to the buying or selling of stock by someone who has information that is not available to the general public. For example, suppose you or someone you know works at a company, and you know that the company is about to be faced with a lawsuit that will damage the company’s reputation and cause stocks prices to fall. This information has not yet been made to the general public. If you sell your stock in the company before the news is announced, thereby avoiding and loss, you would be engaging in insider trading. By the way, this is illegal.