Investor Glossary-odd lot theoryInvestor Glossary-odd lot theoryInvestor Glossary-odd lot theoryInvestor Glossary-odd lot theoryInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Odd Lot Theory

The HTML to link to this page
 

Odd lot theory is a theory within the discipline of technical analysis. Unlike large institutional investors, small investors tend to trade in smaller, "odd lots." Odd lot theory derives its name from these odd lot investors who buy less than 100 shares.

Odd lot theory states that small independent investors are generally wrong about the timing of equity trades, and thereby serve as a contrary indicator of future stock price movements. Odd lot theory predicts that when the volume of odd lot purchases spike, the market is due for a downturn. On the other hand, odd lot theory states that under bear market conditions, following a mass sell-off of odd lots, the market is about to recover.

While historically popular, odd lot theory has failed to be borne out by analysis of market data and has fallen out of use by most investors. Another reason for the decline of odd lot theory is the propensity for small investors to invest in mutual funds rather than shares of stock.



Rate this Odd Lot Theory definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: implied volatility, EBITDA, APR, liquidity ratio, labor relations, VIX, current ratio, 1031 exchange, balance sheet, ex-dividend, FTSE, risk management, Zero Cost Collar, retained earnings, dividends payable, stock market close, phantom income, diluted share, debt service coverage, required rate of return, 1035 exchange, command economy, inflation, 144a, real GDP, annual return, limit order, deferred tax, stock split, 401a, wholly-owned subsidiary, margin rate, class C shares, option premium, in escrow, open position, deferred revenue, Key Rate Duration, minority interest, per diem, ex-dividend date, covered put, reverse mortgage, cancelled check, average price per share, FICO score, quality assurance, LIBOR, irrevocable trust


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2015 Investor Glossary - All rights reserved - Terms of Use