There are a lot of signals investors look for to determine whether to buy a stock. However, I believe one stands out above all others…

Insider buying – the legal kind.

In The War Room, members have achieved a 92% win rate on insider trades that I have covered.

But what makes an insider trade successful?

Here are five things I look for:

1. Do insiders buy in clusters? Meaning, do more than two or three insiders buy at the same time?
2. Are the insiders who buy on the front lines? In other words, I look for C-level officers who are involved in day-to-day operations.
3. Are they spending more than their base compensation? You have to have conviction to put that much money on the line.
4. Do they buy after a bad announcement that sends the shares lower? They know what’s coming down the pike in future quarters, and if they think the stock is being unfairly punished (meaning the stock price is cheap), they step in.
5. Are the fundamentals of the company intact? There’s no point following insiders into a bad trade. Even they aren’t perfect and sometimes are just blinded by loyalty rather than focused on the facts.

If you follow these rules, you’ll be in the green more often than not.

One of Our Fastest “Follow the Money” Winners

A great example of how we followed insider buying to sizable profits – in a very short time frame – was our trade on General Electric.

In October of 2019, I posted this in The War Room:

General Electric (GE) is a mess. A total mess. Shorts think it’s going to zero and longs think the worst is behind it. One thing is certain: The shares can get volatile as they approach earnings – and right after as well. It doesn’t make sense to bet on it with a lot of money, but they have been optimistic with their last two earnings calls under their new CEO, Larry Culp, and insiders have been buying the shares. So we are going to take another VERY CHEAP, highly speculative chance on GE.

We then entered a speculative earnings play – what we call a “Win-Both-Ways Trade” – to take advantage if the stock moved up OR down. Here’s what I said…

BUY TO OPEN the GE November 8 $9.50 calls (GE Nov 8, $9.50C) for $0.16 or less. The current bid/offer is $0.15 by $0.16. DO NOT PAY more than $0.16 on this liquid option. Also BUY TO OPEN the GE November 8 $8.50 puts (GE Nov 8 $8.50P) for $0.22 or less. The current bid/offer is $0.21 by $0.22. Do not pay more than $0.22. DO NOT PAY more than $0.38 total for both sides combined.

This is a speculative earnings play, and remember to enter it with a half position in the event we get a chance to add to it in the coming days.

Just two weeks later, it was clear that following the insider money was the right side of that bet. GE surged from $70.50 to more than $80 in 14 days, and the calls we bought rocketed 453.33%! We closed out the puts and calls on October 30, 2019, for a 123.68% total gain on the trade in just two weeks!

Here’s my register-ringing post from that day:

“SELL TO CLOSE the balance of your GE calls and lock in triple-digit gains!”

As you can see, we followed the checklist – and the insider money – and took advantage of the opportunity! And on this play, we hedged our bets. Most of the time, I’ll go with a straight call play and aim only for the upside.

But I use a wide range of trading tactics to hedge when appropriate. And by using a Win-Both-Ways Trade, we still made out like bandits by following the insider money to profits.

Action Plan: Don’t miss the next real-time insider trade! Every day in my Insider Matrix, I track insider buying scanners for signals like the ones I saw on GE. Follow the insider money with me in real time and see how I have locked in a 92% win rate. Join my Insider Matrix!

Fun Fact Friday: If you are sweating the short-term downward pressure from the Ukraine-Russia conflict, below is a chart of the S&P 500 stocks with the highest percentage of sales coming from those two regions. If you are long on any of them, you could consider reducing your position or hedging it. Not sure how to hedge? We hit three hedge winners in The War Room this week alone. Unlock the secrets to hedging by clicking here.