Odd Lot Theory

When investing in a common stock an odd lot is any number of shares less than 100. A person who purchases an odd lot of shares is typically viewed as a small less experienced investor.

The Odd Lot Theory is a contrarian indicator that states when the small less experienced investor is buying it indicates a market top and is a signal for the more experienced investor to sell. Conversely when the small less experienced investor is selling it indicates a market bottom and a good time for the more experienced investor to buy.

The bottom line is being a disciplined investor that does not follow the crowd can be very profitable. Do not let emotion guide an investment decision.