A Good-Till-Canceled (GTC) order is a type of brokerage order that instructs the broker to buy or sell a security at a specified price and remains active until either the trade is executed or the order is manually canceled by the trader. Unlike day orders, which expire if unexecuted within the trading day, GTC orders carry over to subsequent trading sessions.
Types of Good-Till-Canceled Orders
Buy GTC Order
A Buy GTC order specifies the price at which a trader is willing to purchase a security. This order will not be filled until the security’s price reaches or falls below the specified purchase price.
Sell GTC Order
Conversely, a Sell GTC order specifies a price level at which a trader is prepared to sell a security. This order remains open until the security price reaches or exceeds the stipulated sale price.
Examples of Good-Till-Canceled Orders
- Buy Example: A trader places a GTC order to buy 100 shares of Company XYZ stock at $50 per share. The order remains open until the stock price hits $50 or the trader cancels the order.
- Sell Example: An investor places a GTC order to sell 200 shares of Company ABC at $120 per share. The order will stay valid and open until the stock price reaches $120 or the investor decides to cancel it.
Historical Context
GTC orders were introduced as a convenience for traders who do not wish to monitor the market continuously. By placing a GTC order, traders can automate their buy/sell intentions without the need to renew orders daily.
Comparison with Other Order Types
Good-Till-Canceled vs. Day Order
- Good-Till-Canceled Order: Remains active until executed or manually canceled.
- Day Order: Expires at the end of the trading day if not executed.
Good-Till-Canceled vs. Fill or Kill Order (FOK)
- Good-Till-Canceled Order: Open until fulfilled or canceled.
- Fill or Kill Order: Must be filled entirely immediately or it is canceled.
Applicability in Trading Strategies
GTC orders are particularly useful for:
- Long-term investors: Who do not need immediate execution of their trades.
- Price-sensitive traders: Who want transactions to occur only at specific price levels.
- Market monitoring: Traders who cannot actively monitor market fluctuations can set their price floors and ceilings.
Related Terms
- Day Order: An order that expires if not executed by the end of the trading day.
- Fill or Kill Order (FOK): Requires immediate execution in its entirety or the order is canceled.
- Limit Order: An order to buy or sell a security at a specific price or better.
FAQs
What happens if a GTC order is not executed?
Can a GTC order be modified?
How long does a GTC order last?
Summary
Good-Till-Canceled (GTC) orders are valuable tools for traders looking to automate their trading practices without continually monitoring market prices. By setting specific buy or sell conditions that remain active until fulfilled or canceled, GTC orders provide flexibility and control over trading activities. This type of order distinctly contrasts with day orders and fill or kill orders, catering to different trading strategies and preferences. Understanding GTC orders can help traders make more informed and strategic investment decisions.
References
- “Investopedia: Good-Till-Canceled (GTC) Order”, Investopedia, 2023.
- “The Intelligent Investor”, Benjamin Graham, 1949.
- “Order Types in Trading”, Market Educational Resources, 2022.
