Tutorial: make sense of politician trades
The signal is not any one trade. It is a committee member trading in the industry they regulate, repeatedly.
Use disclosure data as a curiosity engine rather than a trading system.
How make sense of politician trades works, in one picture
The same argument as the text, as a chain. Each step is what makes the next one possible.
The market moves first, and recovers first
Shares fall before the data does and start climbing while the news is still uniformly awful. Waiting for the news to improve means buying after the recovery has happened.
- 1
Understand the delay and the vagueness
Politician TradesDisclosure comes weeks after the fact, and amounts are reported in wide bands rather than exact figures. You are reading a blurred photograph of the past. Any strategy that depends on speed is dead on arrival.
- 2
Look for the overlap with the committee
A representative on an energy committee buying energy stocks is more interesting than the same person buying an index fund. Not necessarily improper, but that is where the informational edge, if any, would live.
- 3
Look for the pattern, not the trade
One purchase means nothing. Repeated, well-timed activity in a single sector, by someone with unusual visibility into that sector, is a pattern worth noticing.
Plenty of these trades are made by financial advisers the politician never speaks to. Do not build a thesis on one line.
You can explain why a single well-timed trade is noise and a two-year pattern is not.
Read next
The signal is not any one trade. It is a committee member trading in the industry they regulate, repeatedly.
Institutional holdings read straight from SEC 13F filings, with the changes, which is the part that matters.