Signaling Approach

AAA

DEFINITION of 'Signaling Approach'

The idea that insiders have information not available to the market. Moves made by insiders can signal information to outsiders and change the stock price.

INVESTOPEDIA EXPLAINS 'Signaling Approach'

The thinking goes that if a high level executive, such as a CEO, is selling, he or she is probably doing so for a reason that you, as the public, don't know yet, so you should get out also. The same is true for the opposite. If an insider is buying stocks in his or her company, it signals outsiders to also buy based on the idea that the insider knows more than he or she is letting on to the public.

RELATED TERMS
  1. False Signal

    In technical analysis, a false signal refers to an indication ...
  2. Insider

    A director or senior officer of a company, as well as any person ...
  3. Multiples Approach

    A valuation theory based on the idea that similar assets sell ...
  4. Dividend Signaling

    A theory that suggests company announcements of an increase in ...
  5. Insider Information

    A non-public fact regarding the plans or condition of a publicly ...
  6. Insider Trading

    The buying or selling of a security by someone who has access ...
Related Articles
  1. Options & Futures

    When Insiders Buy, Should Investors Join Them?

    Insider tracking can inform your investment strategy, but it requires research and a level head. Find out what to look for.
  2. Options & Futures

    Can Insiders Help You Make Better Trades?

    Find out why the trading activity of owners and executives can be a valuable trade-confirmation tool.
  3. Trading Strategies

    Risk Management Techniques For Shorting Call Options

    Shorting covered calls is a popular options trade strategy. Here are the methods to mitigate the risk/loss and enhance profits for selling covered calls
  4. Trading Strategies

    5 Ways To Adapt To Tough Markets

    Tough markets undermine profitability and lower self-confidence. Fight back with five simple but powerful rules of engagement.
  5. Chart Advisor

    Use This ETF To Trade The Swiss Franc

    Traders were stunned last week when the Swiss National Bank removed the currency peg that tied the value of the Swiss franc to the euro.
  6. Trading Strategies

    Day's First Trade Can Serve As Support/Resistance

    The first trade of the day in liquid markets defines a narrow price level that can act as support or resistance for the entire session.
  7. Chart Advisor

    3 Energy Related Stocks Poised For A Pop

    A sharp decline in energy prices have created an interested opportunity in several oil-and-gas related companies. Given the strong downtrends apparent on the charts, most traders would use recent ...
  8. Chart Advisor

    Do Good Buys Remain Among Beaten-Down Financials?

    The financial sector performed the worst last month (besides energy, of course). Here's a look at some financial stocks that have bucked that trend.
  9. Trading Strategies

    How effective is creating trade entries after spotting a Sanku (Three Gaps) Pattern?

    Learn about the sanku, or three gaps, pattern including formation, interpretation and additional confirmation necessary to establish effective trades.
  10. Technical Indicators

    How do I build a profitable strategy when spotting an Sanku (Three Gaps) Pattern ?

    Understand the interpretation of the sanku candlestick pattern and learn how to create a profitable trading strategy based on the pattern.

You May Also Like

Hot Definitions
  1. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  2. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  3. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  4. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  5. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  6. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
Trading Center