Good-Till-Canceled (GTC) is a type of trading order that remains active until it is executed or explicitly canceled by the trader. Unlike day orders, which expire if not filled by the end of the trading day, GTC orders do not have a set expiration date and will stay in the market until the specified conditions are met.
Key Features of Good-Till-Canceled Orders
Definition and Mechanism
A GTC order is designed to provide traders with the flexibility to maintain their position in the market without the need for daily renewal. This type of order ensures that the trade will be executed at any point in the future when the specified price criteria are met.
Types of Good-Till-Canceled Orders
There are several types of GTC orders, each serving different trading strategies and objectives:
- Limit Orders: An order to buy or sell a security at a specific price or better.
- Stop Orders: An order to buy or sell a security once the price reaches a specified level, often used to limit losses.
- Stop-Limit Orders: Combines elements of both stop and limit orders, activating a limit order when a specified stop price is reached.
Special Considerations
While GTC orders offer convenience, traders must be vigilant as these orders can remain open for an extended period, potentially exposing the investor to market risks and fluctuations. It’s also important to review and manage these orders regularly.
Examples of GTC Orders
- Buying a Stock: Placing a GTC buy limit order to purchase shares of a company at $50. The order will stay active until the stock price drops to $50 or below.
- Selling a Stock: Using a GTC sell limit order to sell shares at $75. The order will remain in the system until the price reaches or exceeds $75.
Historical Context and Applicability
GTC orders have been a staple in trading for decades, providing long-term traders and investors with the ability to manage their positions without daily intervention. They are particularly useful in volatile markets where prices can fluctuate significantly over short periods.
Comparisons with Other Order Types
GTC vs. Day Orders
- GTC Orders: Remain active indefinitely until executed or canceled.
- Day Orders: Expire at the end of the trading day if not executed.
GTC vs. Immediate-or-Cancel (IOC) Orders
- GTC Orders: Remain active until filled or canceled.
- IOC Orders: Require immediate execution of all or part of the order; unsatisfied parts are canceled.
Related Terms
- Limit Order: An order to buy or sell at a specific price or better.
- Stop Order: An order triggered when a security reaches a particular price.
- Market Order: An order to buy or sell a security immediately at the best available current price.
FAQs
How long do GTC orders last?
Are there any risks involved with GTC orders?
What happens if a GTC order is partially filled?
References
- Investopedia: Good ‘Til Cancelled Order (GTC)
- Securities and Exchange Commission (SEC): Glossary
Summary
Good-Till-Canceled (GTC) orders are a versatile and flexible tool for traders and investors, allowing them to maintain positions in the market without the need for daily order renewals. While they provide significant advantages, traders must be mindful of the potential risks and regularly monitor these orders to align with their trading strategies and market conditions.
