A couple months ago I posted my backtesting results on an old book "Short Term Trading Strategies That Work", and was happy that this community found it somewhat useful. So I figured I'd share another one 😄
This time I looked at **insider buy signals**.
I've seen the idea of following insider buys come up quite a few times across various trading subreddits, but I hadn't seen a comprehensive backtest. I was curious enough to run one myself.
My methodology:
* I collected all SEC Form 4 filings from Jan 2025 - June 2026
* Tested 2 commonly mentioned strategies:
* **Significant insider buy**: defined as someone who bought >$1m or increased their position by >10%
* **Cluster buy**: defined as >=3 insiders all bought within 5 days window
* Entries are taken at the open of the first trading day after the filing(s) become public — the earliest point us retail traders could realistically act
* I then looked at 1/3/5-day holding period returns.
Overall, neither strategy was nearly as strong as Reddit discussions often suggest. Win rates hovered around 50%, with only a modest positive edge on average.
The more interesting results came from digging deeper:
* **Market cap didn't matter.** Contrary to many Reddit strategies, filtering for small caps made practically no difference.
* **Some sectors consistently outperformed.** Using a one-sided binomial test, I found several sectors (I used GICS sub-industry) with statistically significant win rates. One example was **Trading Companies & Distributors** (these are like equipment and machinery suppliers), with a 78.3% 5-day win rate across 23 signals.
[All sectors with statistically significant positive win rate](https://preview.redd.it/cau5golj1w7h1.jpg?width=1720&format=pjpg&auto=webp&s=3d799c4387d55ded5ab269a1fdf91e6bd4e10c93)
* **A handful of tickers stood out.** For example, **$IMRX** had 10 qualifying insider-buy signals during the backtest period, with a 90% 5-day win rate and an average return of +12.38%! Obviously that's a small sample, but it's an interesting watchlist candidate.
[Some examples of tickers with high win rate and high 5D return](https://preview.redd.it/xihxbkqf1w7h1.jpg?width=1460&format=pjpg&auto=webp&s=a3a871fd4dca03449ceed02d5b64b2861c231b96)
I wrote up the full methodology, results including all the outperforming tickers and sectors in a blog post. I'll put the link in a comment below.