Series 65: Odd Lot Theory

Odd Lot Theory

An odd lot transaction is a transaction that is less than 100 shares. The odd lot theory assumes that the only investors who will trade in odd lots are small investors that cannot afford a round lot transaction. The theory further proposes that small investors are always behind the major trends, and how they are behaving is a signal to bet the other direction. So if the odd lot investor is buying, the technical analyst will sell, and vice versa.