Odd Lot Theory

AAA

DEFINITION of 'Odd Lot Theory'

A technical analysis theory/indicator based on the assumption that the small individual investor is always wrong. Therefore, if odd lot sales are up - that is small investors are selling stock - it is probably a good time to buy.

BREAKING DOWN 'Odd Lot Theory'

This approach assumes small investors have a low risk tolerance and tend not to hold a stock for the long-term.

RELATED TERMS
  1. Mixed Lot

    A type of order for a number of securities that is not a round ...
  2. Odd Lot

    An order amount for a security that is less than the normal unit ...
  3. Lot

    In general, any group of goods or services making up a transaction. ...
  4. Middle Market

    Definition of middle market
  5. Net Present Value - NPV

    The difference between the present values of cash inflows and ...
  6. Precedent Transaction Analysis

    A valuation method in which the prices paid for similar companies ...
Related Articles
  1. Investing Basics

    The Five Biggest Stock Market Myths

    Stocks that go down must come up, right? Wrong. We bust this myth and four other common market misconceptions.
  2. Investing Basics

    The Importance Of Corporate Transparency

    Clear and honest financial statements not only reflect value, they also help ensure it.
  3. Fundamental Analysis

    7 Controversial Investing Theories

    We take a closer look at the theories that attempt to explain and influence the market.
  4. Investing Basics

    Do Your Investments Have Short-Term Health?

    If a company is strong enough to survive tough times, it is more likely to provide long-term value.
  5. Investing Basics

    Getting To Know Stock Screeners

    Finding good stocks can be like finding a needle in a haystack. But these invaluable tools can help.
  6. Personal Finance

    Testing 3 Types Of Analysts

    Different clients require different research reports. Which type of analyst do you need?
  7. Active Trading

    The Advantage Of Intermarket Analysis

    Analyzing a variety of markets around the world can provide powerful insight into trading opportunities.
  8. Active Trading

    7 Forehead-Slapping Stock Blunders

    Avoid making these 7 investing mistakes to dodge unnecessary losses in your portfolio
  9. Trading Strategies

    Who Actually Trades or Invests In Penny Stocks?

    Although penny stocks are highly speculative, millions of people trade them daily. Here are 10 different types who do.
  10. Chart Advisor

    4 Stocks Still Flashing Buy Signals

    In the midst of volatility and a big market sell-off last week, these stocks are flashing buy signals.
RELATED FAQS
  1. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  2. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  3. How can a company execute a tax-free spin-off?

    The two commonly used methods for doing a tax-free spinoff are either to distribute shares of the spinoff company to existing ... Read Full Answer >>
  4. How are American Depository Receipts (ADRs) priced?

    The price of an American depositary receipt (ADR) is determined by the bank or other financial institution that issues it. ... Read Full Answer >>
  5. How can EV/EBITDA be used in conjunction with the P/E ratio?

    Because they provide different perspectives of analysis, the EV/EBITDA multiple and the P/E ratio can be used together to ... Read Full Answer >>
  6. How can a company reduce the unsystematic risk of its own security issues?

    Companies can reduce the unsystematic risk of their own security issues simply by doing the most effective job possible of ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  2. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  3. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  4. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  5. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  6. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!