Nothing beats using your own discretion and judgement and that is a must. Insiders are just cues or hints for you to guide which direction you need to look at. If I can identify a good stock why should I watch the insiders, is the standard refrain of investors. Remember, watching the chiefs is all about being street smart. Take the case of L&T. After the directors were selling the stock in 2011, the stock went into a 2 year downward spiral where it lost close to 55% of its peak value. By being smart and watching the insiders, you avoid entering or exiting at the wrong price. That is just one part of the story.

Insiders and people in the know can be lead indicators of a more serious problem cropping in the months ahead. In the case of Satyam, several institutions had already started rushing for the exits well before the scam broke out. Same was the case with a Kingfisher or Deccan Chronicle. The most egregious case was of the promoters of HFCL reducing their stake in the company even as the company was sinking deeper into a crisis. Research and analysis works up to a point. Knowing the real story is vital.