What Is Good 'Til Canceled (GTC)?
Let me explain what a Good 'Til Canceled (GTC) order is. As an investor, you can use GTC orders to set buy or sell actions that stay in place until they execute at your specified price points or until you decide to cancel them. Unlike standard day orders that automatically expire at the end of the trading day, GTC orders give you the flexibility to manage your trades over longer periods. In this post, I'll cover how they work, their benefits, the risks involved, and some examples to show you how to use them in your strategy.
Key Features of Good 'Til Canceled (GTC) Orders
You need to know that GTC orders aren't like day orders, which vanish if they're not filled by the end of the day. Despite the name, GTC orders don't last forever—most brokers will expire them after 30 to 90 days to avoid the issue of a long-forgotten order suddenly executing. This means if you're someone who doesn't watch stock prices every minute, you can place a buy or sell order at a specific price and leave it active for weeks. The trade will go through if the market hits your price before the order expires.
Typically, GTC orders execute right at your limit price, but there are cases where you might get a better deal. For instance, if the share price gaps past your limit between trading days, the order could fill at a price that's better for you—higher if you're selling or lower if you're buying.
Understanding the Risks of GTC Orders
Be aware that not all exchanges accept GTC orders anymore. Places like the NYSE and Nasdaq have stopped taking them, including stop orders, because they see them as risky—your order might execute during a temporary market dip or spike. However, many brokerages still provide GTC options and handle them internally.
The main risk comes in highly volatile markets. Prices can swing wildly past your limit and then bounce back, triggering something like a sell-stop order when prices drop. If the market rebounds quickly, you could end up selling low and then having to buy back in at a higher price to rebuild your position. You have to weigh this when deciding if a GTC order fits your plan.
Example of a GTC Order
Here's a straightforward example to illustrate. Investors often use GTC orders to buy at a price below the current market or sell above it. Say a stock is trading at $100 per share right now. You could place a GTC buy order at $95. If the market drops to that level before you cancel the order or it expires, the trade executes automatically.
The Bottom Line
In summary, Good 'Til Canceled orders let you buy or sell securities at set prices without needing to monitor the market constantly. They stay active until filled, canceled, or expired by your broker to prevent surprises. But remember the risks, especially in volatile conditions where executions might not favor you. Consider these points carefully before you place a GTC order in your trading.
Key Takeaways
- A Good 'Til Canceled (GTC) order stays active until executed or canceled, but most brokers set an expiration of 30 to 90 days.
- GTC orders allow investors to set buy or sell limits without daily monitoring, though they come with risks of executing during temporary market volatility.
- Unlike day orders, GTC orders remain open past the trading day, potentially filling if the market hits the specified price point within the order's life span.
- GTC orders are not accepted by all exchanges due to potential risks, but many brokerages continue to offer them internally.
- An example of a GTC order is placing a buy order below the current market price, hoping the market falls to that level.
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