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A good ’til cancelled (GTC) order allows traders to buy or sell a security at a specified price, even if it takes days, weeks or months for the specified price to be reached. Unlike day orders that expire if unfilled by the end of a trading session, a GTC order typically remains active until executed or manually canceled by the trader. They may also be canceled by the brokerage if they exceed a time limit, typically 30 to 90 days. This type of order helps traders maintain a target price without continuously monitoring the market. While GTC orders offer flexibility, they are subject to market conditions, price fluctuations and brokerage-imposed time limits, typically lasting up to 90 days before automatic expiration.
A financial advisor can help you set up GTC orders to buy or sell securities at predetermined prices.
A GTC order is a directive placed with a brokerage to buy or sell a security at a set price that remains active until executed or manually canceled. Unlike market orders that expire at the end of the trading day, a GTC order extends over multiple sessions. This allows traders to automate transactions without re-entering orders daily.
GTC orders are commonly used by investors who want to buy or sell at a specific price and are willing to wait for the market to reach that level. These orders can be particularly useful in volatile markets where price swings occur unpredictably.
While GTC orders can remain effective for multiple sessions, brokerages may impose time limits. Often, unfilled GTC orders will be canceled after 30 to 90 days to prevent stale orders from lingering indefinitely.
A GTC order helps traders execute trades at predetermined prices without constantly monitoring the market.
For example, an investor believes a stock currently trading at $55 is overvalued but sees strong buying potential at $50. Instead of watching the market daily, they place a GTC buy order at $50. If the stock price drops to that level, the order automatically executes, securing the shares at the desired price.
In addition to taking advantage of a buying opportunity, a GTC can be used to trigger a sale. For example, a trader holding a stock at $80 may set a GTC sell order at $90. This allows them to lock in profits without tracking price movements constantly. If the stock reaches $90, the order triggers, selling the shares at the target price.
GTC orders can offer convenience. But, as with other financial investments, they also come with risks that traders need to bear in mind. These orders execute automatically, which can save you time, but strip out valuable human assessment that could help you account for different factors.
One of the main concerns is unexpected price fluctuations. A stock’s price may temporarily dip or spike due to market volatility, triggering a GTC order at an unintended time. For example, a brief price drop could fill a buy order just before the stock declines further.
Market gaps pose another risk. If a stock closes at $60 and reopens the next day at $50 due to overnight news, a GTC sell order placed at $58 could execute at a much lower price than anticipated. This is especially relevant in connection with earnings announcements or economic events that drive sudden price swings.
GTC orders can also be forgotten. While many brokerages cancel them after a set period, an unmonitored order may execute under changing market conditions that no longer align with the trader’s strategy. To manage these risks, some investors use stop-loss limits or periodically review and adjust their open orders.
A GTC order and a day order can serve similar purposes but differ in their duration. A day order expires if unfilled by the close of the trading session, making it ideal for traders seeking short-term price movements. It helps prevent unintended executions on future days when market conditions may change.
Comparatively, a GTC order remains active across multiple sessions, allowing traders to set target prices without re-entering orders daily. This benefits investors focused on long-term price levels rather than short-term fluctuations. However, GTC orders carry the risk of execution due to temporary price swings or market gaps, which day orders avoid by limiting exposure to a single session.
A trader expecting a quick price move may prefer a day order to control execution timing. But, if you’re waiting for a stock to reach a specific price over days or weeks, you might use a GTC order instead to automate the process without daily monitoring.
GTC orders offer traders a way to set buy or sell prices and execute trades advantageously without having to constantly monitor the market. They provide flexibility by remaining active across multiple trading sessions, though they come with risks such as market gaps and unintended executions. Compared to day orders, which expire at the end of the trading session, GTC orders cater to those with longer-term price targets. Reviewing and adjusting them periodically can help you prevent unexpected outcomes.
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Source: finance.yahoo.com