What Is a Good ‘Til Canceled (GTC) Order?

The GTC order type is particularly useful for investors or traders who:

1. Have a specific price target in mind for buying or selling an asset that isn't currently available in the market.

2. Do not wish to monitor the market constantly to place an order when their price target is reached.

3. Are willing to wait for market conditions to change, potentially over a long period, to get their desired entry or exit points.

However, it's essential for traders to regularly review their GTC orders, as market conditions and investment goals can change. Some brokerages might also set a limit on how long a GTC order can remain active (e.g., 90 days), and investors should be aware of such limitations to manage their orders accordingly.

While GTC orders are most commonly associated with equity markets, they can also be used in other trading markets like forex, futures, and options, depending on the rules of the particular marketplace and trading platform.

Pros and Cons of Good ‘Til Canceled Orders

The utilization of Good 'Til Canceled (GTC) orders incorporates a number of considerations that market participants need to evaluate prior to implementation. Below are the merits and demerits associated with GTC orders:

Advantages:

Efficiency: Implementing GTC orders can conserve time for market participants because repetitive daily order entry is unnecessary. Once established, the order stays in effect until execution or cancellation by the investor.

Market Opportunities: GTC orders afford the possibility of capitalizing on price fluctuations that could transpire during non-standard trading hours, inclusive of nights or weekends.

Adaptability: These orders grant flexibility to investors, allowing for alterations or withdrawals at any point before the order's completion.

Disadvantages:

Exposure to Risk: Given their persistent active status until execution or revocation, GTC orders could introduce heightened risk in comparison with intraday orders. Adverse market movements might result in missed opportunities for more favorable trade entry or exit points.

Oversight Necessity: The elevated risk attributed to GTC orders necessitates vigilant supervision to avert potential losses, contrasting the passive nature of set-and-forget orders.

Possible Additional Costs: Certain brokerage services may levy supplementary charges for the placement of GTC orders. Investors should verify the presence of such fees with their brokerage service providers.

Filling Unpredictability: The execution of a GTC order is contingent upon prevailing market dynamics and the presence of corresponding offers from buyers or sellers, making the timing of execution uncertain.

To encapsulate, GTC orders serve as an advantageous instrument for investors desiring to optimize time and seize upon prospective price movements that might occur beyond standard market operating hours. Nonetheless, these orders also subject investors to additional risk and potential costs, and there is no guarantee regarding the execution timeframe. Investors should cautiously deliberate their investment strategy and market conditions when considering GTC orders and are advised to consult their brokerage firm for comprehensive details on any associated costs.

Good ‘Til Canceled Order Examples

Purchase Limit Instruction: Should an investor consider a stock to be undervalued with an aim to acquire it at a predetermined value, they may issue a Good-Til-Canceled (GTC) purchase limit instruction through their brokerage, denoting the target acquisition cost. This GTC instruction will retain its validity until such time as it is executed, revoked, or the investor opts to adjust or annul it.

Disposal Limit Instruction: An investor in possession of a stock they perceive to have appreciative potential, but desiring to divest when it reaches an explicit value threshold, can set forth a GTC disposal limit instruction at the chosen divestment price. This order will remain in effect until the market price meets the specified threshold, or the investor proactively modifies or rescinds the instruction.

Stop-Loss Instruction: To mitigate downside risk, an investor with stock holdings might establish a GTC stop-loss instruction with their brokerage, setting a floor price at which the brokerage is directed to liquidate the stock. The GTC stop-loss instruction stands until it is either consummated, withdrawn, or adjusted by the investor.

Acquisition Stop Instruction: If an investor predicts an uptick in a stock's value and intends to purchase the asset above its current market rate, they have the option to place a GTC acquisition stop instruction with their brokerage, stating the precise acquisition price. This instruction will remain operative until the stock reaches the specified price, or until the investor decides to cancel or amend the order.

These exemplify a selection of methods by which investors may utilize GTC instructions to actualize their market strategies.

Good ‘Til Canceled Orders vs. Other Types of Orders

Good 'Til Canceled (GTC) orders constitute a variety of limit order utilized by traders to set forth specific price conditions for trades. Contrasting with market orders, which are promptly executed at the present best market price, GTC orders retain their validity until they are either executed or explicitly revoked by the trader, thereby enabling the trader to establish an exact price target for the transaction.

Limit orders, having similarities to GTC orders in terms of price specification, differ in that they are not intrinsically enduring until canceled. Limit orders may assume various forms, including Day orders, which expire at the close of the trading day if not executed; Fill or Kill (FOK) orders that mandate immediate execution in full or not at all; and Immediate or Cancel (IOC) orders which necessitate partial or full execution instantaneously with any unexecuted portion being canceled.

Traders are advised to meticulously assess Good 'Til Canceled orders alongside other available order types to ascertain the order mechanism best suited to their trading objectives and requirements.

The Bottom Line

In essence, Good-Til-Canceled (GTC) orders serve as a strategic tool for investors, enabling the placement of sustained orders within the financial markets whilst negating the necessity for continuous supervision of price fluctuations. GTC orders afford investors a degree of price security, safeguarding them against abrupt market changes. Consequently, for investors aiming to capitalize on protracted market trends, GTC orders are an exemplary instrument.