Definitions for "Odd Lot Theory"
Keywords:  contrary, wrong, theory, guilty, lot
A historical theory that the odd lot investor, traditionally a small personal investor trading in less than 100 shares at a time, is usually guilty of bad timing and profits can be made by acting contrary to odd lot trading patterns. Those who believe this theory interpret heavy odd lot buying in a rising market as an indication of technical weakness and the signal of a market reversal. Heavy odd lot buying in a declining market is seen as an indication of technical strength as is thus a signal to buy. Analysis of odd lot trading patterns over the years has failed to support this theory with any real consistency. Odd lot investors tend to buy market leaders and have tended to do well in the upward market of the past 50 years.
The Odd Lot Theory is a strategy for investment, which assumes that the small investor is always wrong. A high number of odd lot transactions can be seen as an indication to take action contrary to the odd lot directed trend. Therefore when small investors are selling stock - it is probably a good time to buy.
An investment strategy which assumes that the small investor is always wrong. Using odd lot buying and selling patterns as indicators of small investor activity, this theory maintains that one should buy as odd lot selling increases and vice versa.
Keywords:  oex, budget, entities, index, federal
OEX index Off budget Federal entities