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I buy low-priced and penny stocks a lot. I run into this situation constantly (even on higher-priced stocks.) I bid, say, $.10 (with no qualifiers) on 1000 shares on a stock currently selling for $.15. It will creep lower toward my bid (sometimes over a 6-month time-frame) and suddenly one day it sells—to someone else—for $.07, 3-cents below my bid. The next day it will pop back up to $.12 or $.15 and I get filled on no shares at my bid price. Is this not a "bidding process?" If I'm bidding higher, why don't I get filled first? Why does someone else get to buy the stock I want cheaper than my bid price?

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    Your question itself may be valid, but I'll just point out the ever-present caveat that penny stocks are extremely volatile, and I'd advise you not to invest in anything if you don't understand the mechanics of how it works. – Grade 'Eh' Bacon Oct 12 '17 at 16:53
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    What exchange is this on? It's possible that the lower bid had an all-or-nothing bid that matched the market order perfectly, but I have never heard of an exchange skipping the highest bid just to match an all-or-nothing order. – D Stanley Oct 12 '17 at 20:09
  • Happens all the time to me. Scottrade gives me different mumbo jumbo about Market Makers every time I ask them to explain. Never makes sense to me. As far as wisdom goes… too late. But if I can double-up, or better, reducing my cost by 50%, or more for $50…I'll take the chance, sometimes. – Kenfro Oct 13 '17 at 23:48
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    @Kenfro If you are getting responses from your broker and don't understand it (calling it "mumbo jumbo") it would be highly advisable for you to stop trading until you do understand what is happening. The less you understand about where your money is going, the more this becomes 'gambling' instead of 'investing'. – Grade 'Eh' Bacon Oct 16 '17 at 15:15
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It definitely depends on the exchange you are trading on. I'm not familiar with Scottrade, but a standard practice is to fulfill limit orders in the order they are placed.

Most of the time, you wouldn't see stocks trade significantly under your bid price, but since penny stocks are very volatile, it's more likely their price could drop quickly past your bid and then return above it while only fulfilling a portion of the orders placed.

Example
1. Penny stock priced at $0.12
2. Others place limit orders to buy at $0.10
3. You place limit order to buy at $0.10
4. Stock price drops to $0.07 and some orders are filled (anything $0.07 or higher) based on a first-come first-served basis
5. Due to the increase in purchases of the penny stock, the price rises above $0.10 before your order is filled

***EDIT*** - Adding additional clarification from comment section.

A second example
If the price drops from $0.12 to $0.07, then orders for all prices from $0.07 and above will start to be filled from the oldest order first. That might mean that the oldest order was a limit buy order for 100 shares at $0.09, and since that is above the current ask price, it will be filled first. The next order might be for 800 shares at $0.07. It's possible for a subset of these to be filled (let's say 400) before the share's price increases from the increased demand. Then, if the price goes above $0.10, your bid will not be filled during that time.

  • Also "Stock price drops to $0.07" would mean that some order is filled at 0.07, which is the heart of the problem. A 0.10 buy order should be filled before a 0.07 buy order regardless of when they come it, so your first sentence should read "standard practice is to fulfill limit orders at the same price in the order they are placed" – D Stanley Oct 16 '17 at 22:16
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    @DStanley I don't think that's necessarily true. In fact, I'm certain that's not true on at least some exchanges. I've often seen the oldest-placed order filled first, regardless of whether there were higher priced bids out there. – Michael Bianchi Oct 16 '17 at 22:22
  • @MichaelBianchi So if person A submits a $100 limit sell order, then person B submits a $1 limit sell order, and I place a market buy order, I'm forced to buy at $100 because person A was there first? – D Stanley Oct 16 '17 at 23:17
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    @DStanley Let me clarify a little. If the price drops from $0.12 to $0.07, then orders for all prices from $0.07 and above will start to be filled from the oldest order first. That might mean that the oldest order was a limit buy order for 100 shares at $0.09, and since that is above the current ask price, it will be filled first. The next order might be for 800 shares at $0.07. It's possible for a subset of these to be filled (let's say 400) before the shares price increases from the increased demand. Then, if the price goes above $0.10, your bid will not be filled during that time. – Michael Bianchi Oct 17 '17 at 2:51
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    Great answer - and it highlights well how the volatility and low liquidity of penny stocks can add a great deal of risk to an investor [in a well-traded stock, the price wouldn't be as likely to jump back up quickly after dipping]. – Grade 'Eh' Bacon Oct 18 '17 at 12:58

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