Altogether, there are 7 types of orders in the stock market, presenting hundreds of opportunities to place a bet. The possibilities are endless, making newcomer investors and traders a tad confused. Regardless of how intimidating it may seem, once a trader is comfortable with every option that their brokerage offers, with the right strategy in place, the sky is the limit in terms of profits.
Good-till-canceled (GTC/GTX) orders are just one to choose from. When a GTC order is placed, either for buying or selling, it has to be fulfilled at a specific price by buying or selling that instrument. The order stays in place until it is executed or canceled but typically expires after up to 90 days if that instrument doesn’t reach the specified price. This expiration is necessary to avoid long-forgotten orders that might be left there accidentally. GTC orders are available in the two biggest markets, European and American.
GTC order is a frequent alternative to Day orders. However, Day orders always expire at the end of each trading day if not executed at the set price. GTC order is the opposite of an Immediate or cancel order(IOC). GTC orders are used to buy or sell at different prices than their current levels without having to actively look at prices.
Monitoring prices used to be the most labor-intensive part of actively trading or looking for the best entry-point to an investment. Investors and traders can transition into passively managing their portfolios with GTC orders.
As convenient they look, GTC orders pose some risks. In times of high volatility, brief price hikes might trigger GTC executions, with consequent and sudden fallbacks in price, leading to unexpected losses. To secure gains and prevent huge losses, anytime a GTC order is placed, there should also be a Stop Loss Order and a Limit order set up as well. These can be modified later.
GTC In The Stock Market With Brokerages
Most brokerages suggest GTC orders be canceled before 9:25 AM, Eastern time if the order was intended for a NASDAQ stock. Otherwise, the unnecessary order might still get executed. Setting them up, forgetting about them until they get executed or canceled, and setting up again, is convenient for both investors and swing traders.
On some occasions, the prices of instruments skip the set execution price of GTC orders. In that case, the order fulfills at a better price for investors, securing their profits. This is true for both buy and sell orders, but they will only executive in regular market hours, never pre-market or after-hours.
Most risk-aversing investors use GTC orders exclusively when the markets are closed, avoiding unfortunate and sudden spikes in price due to high volatility. After these spikes, quick snapbacks are frequent, leaving them in losing positions. A GTC order is superior to use as stop loss or take profit order instead of simple Day Orders, as they would disappear after each day.
Buying options with GTC orders is also a bad idea, as option prices change immensely and suddenly after the first hours of market opening. Chances are, the fulfilled GTC order at a set price won’t correctly represent the current value of the options. Keep in mind, a hit and miss is ultimately better than a bad entry, resulting in a losing position.
Good till canceled orders are helpful to stay mechanical when trading and stick to a predetermined strategy. Pre-set limits help avoid closing and opening positions out of emotions.