tailgating
Tailgating is when a broker or ordinary investor copies a big trade they got wind of before it becomes public, hoping to profit from the same move.
In plain English
Chidinma worked as a settlement officer at a small brokerage in Lagos, and one Tuesday she overheard her boss on the phone placing a huge buy order for a client on a mid tier bank stock.
Before the market even absorbed the news, Chidinma calmly bought some units for herself on her own trading app, certain the stock would climb once her boss's order pushed the price up.
That is tailgating. It is riding on someone else's trade because you know something is coming, and not since you did your own homework on the company.
It happens with fund managers too. If a big fund is known to be loading up on a stock, smaller investors sometimes pile in right behind them, hoping to catch the same wave without doing any digging of their own.
The trouble is that tailgating is often built on information that should stay private, and even when it is not illegal, it is lazy investing dressed up as cleverness.
A Nigerian in Manchester sending money home to invest in shares should ask their broker one plain question, are you buying this for me because you researched it, or because someone else is buying it too.
A broker notices a client about to place a ₦50,000,000 order on a stock and quickly buys ₦300,000 worth for himself first, expecting the price to rise once the big order lands.
Questions people ask
Is tailgating illegal?
It depends on how the information was obtained. If it involves confidential client orders or inside information, it can breach broker rules or securities law. If it is simply copying a public trend, it is not illegal, just risky.
How is tailgating different from following an investing expert's advice?
A good expert explains the reasoning behind a trade so you can judge it yourself. Tailgating skips the reasoning entirely, you just copy the action and hope the outcome repeats for you too.
Why do people still tailgate if it is risky?
Because it feels like a shortcut to profit without the work of research, and watching someone else make money quickly is tempting, even when you do not understand why they made that move.
Last reviewed