Psychology of Round Numbers

I suppose it's human nature, but I've always set my limit amounts at round numbers.  For example, I've always bought at $14.00 or sold at $35.75.  Recent events have told me that this is not necessarily a good idea.

Last week I set a buy price for Nokia at $8.25. Unfortunately, the price bottomed out at $8.26 and I lost out on the run-up that occurred since then.  I've also noticed on several occasions that I hit a sell/buy price, but the order did not execute.  I suspect that this is because there were so many other orders set on the same price.  My transaction didn't fire because my order was in line after others.

Yesterday I had a a vivid demonstration of this effect.  I had a buy order for Harte-Hanks set for $9.70.  I carefully watched the Bid/Ask quantities as the price drifted downward.  The batch sizes were consistently under 10 until the bid reached $9.70.  At that point, the bid quantity was about 90.  Since my order was placed yesterday, my order did not execute until the price was hit many times and many other orders executed at that price.  If my price had been set at $9.71, my order would have fired much earlier with minimal additional cost.

Of course this lesson has mixed impact.  In the case of Nokia, I missed out on a nice gain.  But in the case of Harte-Hanks, the price continued to drop later in the day, so I would have paid extra for no benefit.

So, what's the practical benefit of this knowledge?  If I'm keen to execute an order immediately, I should set my limit price at non-round numbers.  One cent higher for buy orders and one cent lower for sell orders.  The exceptions are orders that are placed well in advance since I would be at the front of the queue for that price. 

Addendum:

Intel passed the $23 threshold today and demonstrated the same behavior described on the sell side.  The number of shares for sale at $23 exactly was an order of magnitude above those offered at $22.98 and $22.99. But this is another case where the number of shares was not an impediment as the price quickly passed through this threshold to close at a higher price.