What is insider trading?

Insider trading refers to the buying or selling of a publicly-traded company's stock based on material, non-public information about that company. This practice is considered unethical because it violates the principle of fair play in the stock market, where all investors should have access to the same information when making investment decisions.

When individuals with insider knowledge—such as executives, employees, or anyone who has access to confidential information—trade stocks or share that information with others for profit, they are engaging in insider trading. This can undermine public trust in the fairness and integrity of the financial markets, leading to stricter regulations and penalties against those who participate in such activities.

The other options do not accurately capture the essence of insider trading. Using public information for investment decisions is a standard practice in trading. Trading based on market trends can be a common investment strategy that does not involve non-public information. Lastly, investing in securities without professional advice does not pertain to insider information and is simply a reflection of individual investment choices rather than an ethical issue tied to insider information.