You want to maximize your investments. Whenever possible, this means buying when the stock is low and then selling after a dramatic increase. You’re always looking for ways to predict when the value is about to jump. Clearly, watching for an increase in value and then buying could mean that you miss the spike you’re looking for.
As you do this, make sure that you do not engage in insider trading. Though it may seem attractive from a financial perspective, it is illegal.
Essentially, stock trading is supposed to be done using only public information. Anyone who invests should have the same information available to them in one form or another.
Insider trading happens when you have nonpublic information — insider information — and you use it to gain an unfair advantage. It is illegal to buy or sell based on this information.
For instance, perhaps you have a contact working in a certain tech company. The company is very small and the stock prices are cheap, even though the company shows promise. Then you hear from your contact that the company is discussing a partnership with a giant tech corporation. This is going to massively inflate the stock value. They have not told the public yet, but it looks like it is going to happen.
If you trade based on that private information, you could be accused of insider trading. This is simply one example of how it works, though it can take many forms.
Those who are facing serious allegations must know all of the legal defense options they have moving forward. The ramifications are serious and could even result in jail time.