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Limit Buys
You must be sure that you place a limit buy order when trying to buy an OTCBB or Pink Sheet stock. In the occasion that you fail to remember this little bit of advice, some brokerage firms require that you put a limit order for orders of buy or sell. This will guard you from the dangers of the open market order. Even as the limit buy order will guard you from fluctuations in the asking price, the market makers still have a few tricks with which to harm you. You are letting the market makers know that you would like to buy a stock, but that you are only willing to pay a definite price or less for said stock with a limit buy order. To argue against your offer, the market makers may augment the asking price without filling your order in an effort to make you move up your limit price. When the ask increases, some investors get excited and believe that they must increase their limit order to stay away from missing a run. Don't fall for this ambush.
We will often set our limit either at the bid or at a price somewhere between the bid and the ask when placing an order to buy a stock. The market makers usually won't fill such an order in a timely fashion if the order is for an OTCBB or Pink Sheet stock. The market makers will often bump up the ask instead of filling the order. We are generally content to let our order sit when this happens. We will not take the market makers' bait except if the market is moving quickly and we really want a piece of the stock. Sometimes our order will stay open for hours while other times it will not fill it all. We have found that the market makers tend to fill open orders such as these near the end of the trading day in numerous cases. Our philosophy is not to chase the ask if we can stay away from it. We really look down on the case when the market makers try this tactic. Seriously, we are here to buy and sell stocks, not play games! Regrettably, you must learn to play their games if you want to be successful, because the market makers have enormous power on the OTCBB and Pink Sheets. you can challenge the market makers to a certain degree with a slowly moving stock. Nevertheless, doing the same on a stock with heavy volume may perhaps be impossible. We have traded many high volume stocks where we have had to take the market makers' bait and move up our limit buy in order to get a position in the stock. The market was hot and the stock was moving speedily. If we did not raise our limit price, our order would have never been filled. You must come to a decision as to how high you are prepared to go when chasing the ask. Many investors will chase the ask too high, raising their limit orders multiple times in the process with a fast moving stock. Greediness is what drives this process as investors don't want to miss the run. If the price is moving north speedily, investors want to be a part of it. Sometimes they want it so desperately that they don't notice that they are being taken for a ride.
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