What is a Good Till Canceled (GTC) Order?
A Good Till Canceled (GTC) order is an open order used by traders to buy or sell financial instruments at a predetermined price. As the name suggests, this type of order remains valid until it is either filled or canceled by the trader. GTC orders provide a level of flexibility and control, allowing traders to set specific entry or exit points without needing to monitor the market constantly.
Why Use a GTC Order?
GTC orders are particularly beneficial for traders who cannot dedicate themselves to trading full-time. These traders can place an order with their broker, confident that it will be executed if the specified price is met. This eliminates the need to watch the markets 24/7, making it a convenient option for part-time traders or those with other commitments. Additionally, GTC orders can be used for both entering and exiting trades, offering versatility in trading strategies.
How Long Do GTC Orders Last?
While GTC orders are designed to stay open until canceled, most trading platforms impose a time limit on how long they can remain active. This time limit, known as time-in-force, typically ranges between 30 to 90 days. If the order criteria are not met within this period, the order will expire automatically. Traders should be aware of this timeframe to ensure their trading strategy aligns with the platform’s rules.
What is the Difference Between GTC Orders and Day Orders?
It is essential to understand the distinction between a GTC order and a day order. A day order expires at the end of the trading day if it is not filled, requiring the trader to place a new order the following day. In contrast, a GTC order remains active until it is either canceled by the trader or the maximum time period expires. This makes GTC orders more suitable for long-term strategies, whereas day orders are better for short-term, intraday trading.
Examples of Using GTC Orders
Let’s consider a few scenarios to illustrate the practical use of GTC orders:
Example 1: Entering a Trade
Imagine you want to buy shares of a company currently trading at $50. However, you believe the stock price might drop to $45 in the next few weeks. You can place a GTC order to buy the shares at $45. If the stock price reaches this level within the GTC order’s validity period, your order will be executed automatically.
Example 2: Exiting a Trade
Suppose you own shares of a stock currently priced at $60, but you want to sell if the price reaches $65. You can place a GTC order to sell your shares at $65. If the stock price hits this target within the order’s time frame, your shares will be sold without any further action on your part.
Key Takeaways
In summary, Good Till Canceled (GTC) orders offer a convenient and flexible way to manage trades without the need for constant market monitoring. They are particularly useful for part-time traders and can be used for both entering and exiting trades. However, it’s crucial to understand the time-in-force limits imposed by trading platforms, typically ranging from 30 to 90 days. By leveraging GTC orders, traders can set specific price points and let the market work for them, providing greater control and peace of mind.
