In the stock market, Good Til Cancelled is a kind of order that allows traders to purchase or sell securities at a particular price. It remains in effect until the trader cancels it or executes the order.
Traders commonly use Good Til Cancelled orders when they want to sell or buy a stock at a specific price but are unsure when the market will reach that price.
It allows them to place an order at their desired price and wait for the market to move in their favour. However, the order will remain open indefinitely unless the market reaches the specified price.
Unlike day orders, which expire at the end of the trading day, GTC orders persist for extended periods. This makes them ideal for traders who prefer long-term strategies without frequent monitoring. It can be used with various types of orders, such as limit orders and stop orders.
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How Good Til Cancelled Orders Work
In order to place a GTC order, a trader must specify the type of order (limit or stop order, for example) as well as the price level or conditions at which the order should be executed.
Once the order is placed, it remains active in the market until either the specified conditions are met and the order is filled, or the trader cancels the order manually.
Some brokers impose time limits for GTC orders, often between 30 and 90 days, to avoid accidental trades from forgotten orders.
Risks of GTC Orders
- Market volatility: Sudden price movements may trigger GTC orders at unfavourable times.
Market conditions can change significantly over time, making a GTC order less relevant or potentially disadvantageous. As a trader, you should regularly review their open GTC orders to ensure they remain in line with their current trading strategy. - Neglect: Since GTC Orders remain active until they are manually cancelled, there is a risk that traders may forget about their open orders, potentially leading to unexpected executions and losses.
Best Practices for Good Til Cancelled Orders
Set Expiry Dates: To avoid surprises, include expiration dates for GTC orders.
Monitor Regularly: Review active orders to ensure they align with current goals.
Understand Market Trends: Keep an eye on market behavior to optimize your strategy.
Frequently Asked Questions
Do Good Til Cancelled orders expire?
Many brokers set automatic expiration periods, usually between 30 and 90 days.
Can I modify a Good Til Cancelledorder?
Yes, you can change or cancel a GTC order before execution.
Who should use GTC orders?
GTC orders suit traders with long-term goals who do not monitor the market daily.
Final Thoughts
Good ‘Til Cancelled (GTC) orders offer flexibility and convenience for traders who focus on long-term strategies. While they reduce the need for daily market monitoring, they require regular checks to avoid potential risks. By following best practices, traders can make the most of GTC orders while minimizing the downsides.
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