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When float is virtually identical to shares outstanding, you know you don’t have to fear insider selling – they have already sold.

On the other hand, heavy insider selling can drive a stock price down, at least temporarily. This is usually a good sign because you know that the insiders believe in the company and their interests lie with yours, for the stock price to go up. When float is much less than total number of shares outstanding, it suggests that insiders – officers and employees – own a large percentage of the stock. When analyzing a stock, traders look at the float relative to the total number of shares outstanding as well as who owns it. Officers and directors may be long-term holders or have restrictions on stock sales shares in retirement accounts only come to market when an employee leaves the company and sells his shares. XYZ Corporation can have 100 million shares issued and outstanding but only 50 million of it available for trading. They may grant some stock to officers and directors, sell some in an initial public offering and keep the rest to raise more capital in the future, fund retirement benefits, grant employee stock options or use as currency for acquisitions. Companies rarely issue all shares at once.

For example, XYZ Corporation can be authorized to issue up to 300 million shares. When a company incorporates, it authorizes the total number of shares it can issue. Comparing the two can give you valuable clues about a stock’s potential performance and help you select the best trading candidates.