Deciding which shares to buy - or sell - can be a difficult business.

There are all sorts of factors, from results being announced to a tip in the newspaper.

But how much notice should be taken of directors trading shares in their own company?

Can that be seen as a reliable steer to which way the business is heading?

Recently BT's new chief executive, Ben Verwaayen, bought shares in the company worth �1m.

BT chairman Sir Christopher Bland also added another �1m of shares to his holding.

At face value that might indicate confidence in the company or a bright future.

In reality, it might just be that a director has been promoted to the board or is buying the shares as a contractual requirement.

Scrutiny

But Michael Tindale, whose company tracks directors' dealings, says that while trades shouldn't make you rush to your stockbroker, it means the company is probably worth closer scrutiny.

"It's a good reason to look at that company and analyse the other indicators," he says.

He cites a company where directors sold shares at �5 or �6. The price is now 80p and directors are buying again, which might indicate that the bottom has been reached.

It's a good reason to look at that company and analyse the other indicators Michael Tindale Directors Deals Ltd

There are City rules which regulate how directors can deal in their company's shares, particularly in periods leading up to announcements which could significantly affect the stock price.

In December 2000, Iceland founder Malcolm Walker sold �13m of shares in the company a month before it issued a profits warning.

Transparency

Iceland shares dropped sharply and Mr Walker eventually resigned.

The Financial Services Authority has been looking into the circumstances of the sale.

But directors' dealings should not be confused with insider trading.

Directors are required to notify the London Stock Exchange of any trades to ensure transparency.