Odd Lot Theory

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. Odd Lot

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

    A group of 100 shares of a stock, or any group of shares that ...
  3. Odd Lotter

    An individual investor who buys securities, usually stocks, in ...
  4. Retail Investor

    Individual investors who buy and sell securities for their personal ...
  5. Mixed Lot

    A type of order for a number of securities that is not a round ...
  6. Even Lot

    A normal unit of trading for securities or bonds. An even lot ...
Related Articles
  1. Trading

    The Odd Lot Theory: Betting That Small Investors Are Wrong

    The odd lot theory is a largely discredited proposition that small investors are usually wrong and that doing the exact opposite will yield above-average returns.
  2. Trading

    7 Controversial Investing Theories

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

    NYIF Instructor Series: Odd Lot Orders

    In this short instructional video Jack Farmer explains what an odd lot order is and what the potential downsides are.
  4. Investing

    Betting Basics: Fractional, Decimal & American Odds

    Betting odds are expressed in three popular formats: Fractional (British), Decimal (European) and American (Moneyline). So, if you are planning to enter the betting or the gambling world, it ...
  5. Investing

    Understand The Math Behind Betting Odds & Gambling

    A betting opportunity should be considered valuable if the probability assessed for an outcome is higher than the implied probability estimated by the bookmaker. Furthermore, the odds on display ...
  6. Managing Wealth

    Small Cap Investing: How to Think About Illiquidity

    Do your homework, have a long term view, exercise patience, you'll find that investing in small market capitalization stocks is no riskier than investing in large stocks
  7. Markets

    What's a Small Cap Stock?

    The “cap” in small cap stocks refers to a company’s capitalization as determined by the total market value of its publicly traded shares. Small cap stocks are generally defined as the stock of ...
  8. Markets

    An Introduction To Small Cap Stocks

    When it comes to a company's size, bigger isn't always better for investors. Find out more here.
  9. Investing

    What Are The Odds Of Scoring A Winning Trade?

    Just because you're on a winning streak doesn't mean you're a skilled trader. Find out why.
  10. Markets

    Why You Need to Watch Small Caps (IWM)

    Small cap performance impacts broad market tone and direction while revealing important details about market psychology.
RELATED FAQS
  1. How much more will it cost me to buy an odd lot of shares?

    A round lot is a predetermined number of shares of stock - usually 100 shares, while an odd lot refers to any number of shares ... Read Answer >>
  2. How does a beginner investor seek and evaluate markets and companies worth investing ...

    I'm a beginning investor. I'm struggling in learning how to research markets and companies to invest in. What are key indicators ... Read Answer >>
  3. What is the best way to invest in small cap companies?

    Learn about the best ways to invest in small cap companies. Find out when small cap companies yield the highest return and ... Read Answer >>
  4. What's the smallest number of shares I can buy?

    Unlike mutual funds, which can be purchased in fractional units, shares of stock cannot be divided. So, the smallest number ... Read Answer >>
  5. How can I use risk return tradeoff to determine my risk tolerance and investment ...

    Learn how an investor can use the risk-return tradeoff to determine what assets to include in a portfolio, and understand ... Read Answer >>
  6. Why should I be looking at small cap stocks as a potential investment?

    Discover the role of small-capitalization stocks in an equity portfolio, and learn why investors take on additional risk ... Read Answer >>
Hot Definitions
  1. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  2. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  3. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  4. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  5. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  6. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
Trading Center