ShmoopTube

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finance a la shmoop what is odd lot theory

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well odd lot theory is an investment notion that presupposes that retail [Woman investor appears giving thumbs up]

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investors are idiots the theory here is that when you see a lot of trades with

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odd Lots you should basically do the opposite of what those trades are doing

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like you know buying up a stock or selling down a stock or something like [Man throws stock away]

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that well odd Lots are basically just small

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order amounts like 22 shares here in 58 shares there in 77 shares here there and

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everywhere and the idea is that odd Lots are almost always traded by small retail

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investors who can't afford large blocks of stock and aren't wealthy so the [Stack of cash blows away]

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presumption is that they're not experienced in stock market or have the

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education or training to actually be making real trade schooled professional [Fire extinguisher blows out fire]

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institutional investors who generally know what they're doing generally manage

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large pools of money and trade in very large blocks like think big fat round [Stocks land around pool of money]

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numbers in the millions of shares so when you inspect a tape running by

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showing tons of tiny trades while odds are good that those are placed by you

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know cardiologists and schoolteachers gardeners and plumbers all believing

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that they can invest better than the market and the guys who make twenty five [People working in an office]

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million dollars a year at goldman sachs yeah good luck with that and

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statistically most retail investors who think they're smart enough to beat the

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market are in fact idiots so the ethos of zagging in the opposite

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direction of wherever retail investors are zigging well historically that's [Retail investor zig zagging]

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generally been a really good idea they might be excellent cardiologists or

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teachers or gardeners but when it comes to investing there well you know small

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potatoes [Woman holding potato plant]

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