What is a Good ‘Til Cancelled (GTC) order?

If you’re new to trading, you may have come across various types of orders and wondered about their specifics. One such order type is the Good ‘Til Cancelled (GTC) order. A GTC order is a type of trading order that remains active until it is either filled or explicitly cancelled by the trader. Unlike other orders that expire at the end of the trading day, GTC orders do not have a set expiration date, providing traders with greater flexibility and control over their trading strategies.

How does a GTC order work?

When you place a GTC order, you are essentially instructing your broker to keep the order open indefinitely until the specified conditions are met. For instance, if you place a GTC order to buy shares of a particular stock at a certain price, the order will remain active until the stock reaches that price and the order is executed, or until you decide to cancel the order manually.

This can be particularly useful in situations where you have a target price in mind but are not in a rush to execute the trade. It saves you the hassle of having to constantly monitor the market and place new orders each day. However, it’s important to note that some brokers may impose a maximum duration for how long a GTC order can remain active, typically ranging from 30 to 90 days.

Why use a GTC order?

There are several reasons why a trader might opt for a GTC order over other types of orders:

• Convenience: GTC orders allow you to set your desired trade conditions and then go about your daily activities without having to worry about constantly monitoring the market.
• Strategic Planning: If you have a specific price target or condition in mind, a GTC order ensures that your order remains active until those conditions are met, without the need for daily intervention.
• Flexibility: GTC orders provide the flexibility to take advantage of market movements that may occur over a longer period, which can be particularly useful for long-term investors.

What are the potential drawbacks of GTC orders?

While GTC orders offer several advantages, they are not without their potential drawbacks. Here are a few considerations to keep in mind:

• Market Changes: The market conditions can change significantly over time. An order that seemed reasonable when placed might no longer be optimal after a few weeks or months.
• Forgotten Orders: It’s easy to forget about a GTC order, especially if it’s been open for an extended period. This could lead to unexpected trades being executed if the conditions are eventually met.
• Broker Limits: Some brokers impose time limits on GTC orders, which means you might need to renew the order periodically if it hasn’t been filled.

How to place a GTC order?

Placing a GTC order is a straightforward process, but it may vary slightly depending on your brokerage platform. Here’s a general step-by-step guide:

1. Log in to your brokerage account.
2. Navigate to the trading section and select the type of asset you want to trade (e.g., stocks, options).
3. Enter the details of your trade, including the ticker symbol, quantity, and price.
4. Select the order type as “Good ‘Til Cancelled” or “GTC.”
5. Review and confirm the order details before submitting.

Once submitted, your GTC order will remain active until it is either filled or cancelled by you. It’s a good practice to periodically review your open orders to ensure they still align with your trading strategy and market conditions.

Examples of using GTC orders

Let’s look at a couple of examples to illustrate how GTC orders can be used in trading:

Example 1: Long-Term Investment
Suppose you are interested in buying shares of XYZ Corporation, but you believe the current price is too high. You decide that you would like to purchase the stock if it drops to $50 per share. You can place a GTC order to buy XYZ shares at $50. This order will remain active and will be executed if and when the stock price reaches $50, without you having to monitor the market daily.

Example 2: Selling at a Target Price
Imagine you own shares of ABC Inc., which are currently trading at $100. You want to sell your shares if the price reaches $120. You can place a GTC order to sell your shares at $120. This ensures that your order will be executed if the stock price reaches your target, even if it takes several weeks or months.

Conclusion: Is a GTC order right for you?

Good ‘Til Cancelled orders can be a valuable tool in your trading arsenal, offering convenience, flexibility, and the ability to execute trades based on specific conditions over an extended period. However, it’s important to weigh the advantages against the potential drawbacks, such as changing market conditions and the possibility of forgotten orders.

As a beginner trader, it’s essential to understand the different types of orders available and how they can be used to achieve your trading goals. By incorporating GTC orders into your strategy, you can take a more hands-off approach to trading while still ensuring that your trades are executed according to your desired conditions.

Always remember to review your open orders periodically and adjust them as needed to align with your evolving trading strategy and market dynamics. Happy trading!