A Good-Till-Cancelled (GTC) order is a type of order used in financial markets to buy or sell a security at a specified price, which remains active until the order is executed or manually cancelled by the trader. Unlike day orders, which expire at the end of the trading day if not filled, GTC orders provide greater flexibility and are ideal for traders who want to avoid placing orders repeatedly.

This article explains how GTC orders work, their advantages, disadvantages, and practical uses in trading.

Understanding Good-Till-Cancelled Orders

A GTC order allows traders to maintain their desired position in the market for an extended period. This type of order is particularly useful when traders want to execute trades at specific price levels that may not be immediately available. Once the security reaches the desired price, the GTC order is executed.

For example, if you want to buy a stock at £100 but it is currently trading at £120, you can place a GTC buy order at £100. The order will remain active until the stock price drops to £100 and the trade is executed, or you cancel the order.

Key Features of GTC Orders

1. Persistence: The order remains active until executed or cancelled, even beyond a single trading session.
2. Customisable Price Levels: Traders can set a specific price at which they want the order to be executed.
3. Flexibility: GTC orders can be placed for any security, including stocks, forex, commodities, and options.
4. Time Limit Options: Some brokers may set a maximum time limit (e.g., 90 days) for GTC orders, after which they expire automatically.

How Good-Till-Cancelled Orders Work

Here’s a step-by-step breakdown of how GTC orders function:

1. Placing the Order: A trader specifies the type of order (buy or sell), the security, and the desired price.
2. Order Activation: The GTC order is submitted to the broker and becomes active in the market.
3. Market Monitoring: The order remains in effect, monitoring the market for the specified price level.
4. Execution or Cancellation: Once the price is reached, the order is executed. Alternatively, the trader can manually cancel the order at any time.

Practical Example of a GTC Order

Suppose you want to sell shares of a company at £50, but the current price is £40. You place a GTC sell order at £50. The order stays active and is executed only if the stock price rises to £50. If the price never reaches this level, the order will remain active until you cancel it or it expires (if a time limit is set by your broker).

Advantages of Good-Till-Cancelled Orders

GTC orders offer several benefits:

• Convenience: Eliminates the need to monitor markets constantly or place orders daily.
• Customisation: Allows traders to target specific price levels for their trades.
• Flexibility: Works across various markets and asset classes.
• Long-Term Strategy: Ideal for traders with long-term price targets.

Disadvantages of Good-Till-Cancelled Orders

Despite their advantages, GTC orders have some drawbacks:

• Execution Uncertainty: The order might never be executed if the price target is not reached.
• Market Changes: Prolonged orders may become irrelevant due to changing market conditions.
• Forgotten Orders: Traders may forget about active GTC orders, leading to unintended trades.
• Broker Limitations: Some brokers impose time limits or fees for maintaining GTC orders.

When to Use GTC Orders

GTC orders are most effective in the following scenarios:

• Targeted Trading: When you have a specific price target for buying or selling a security.
• Low Volatility Markets: Useful in markets where price movements are gradual.
• Long-Term Planning: For investors who want to achieve strategic price levels without monitoring the market constantly.
• Avoiding Emotional Decisions: Helps traders stick to their plans and avoid impulsive decisions during market volatility.

FAQs

What is a Good-Till-Cancelled (GTC) order?
It is a type of order that remains active until executed or cancelled, allowing traders to buy or sell a security at a specified price.

How is a GTC order different from a day order?
Day orders expire at the end of the trading day if not executed, while GTC orders remain active indefinitely or until manually cancelled.

Can GTC orders be cancelled at any time?
Yes, traders can cancel GTC orders manually at any time before they are executed.

Do GTC orders expire?
Some brokers may impose expiration dates (e.g., 30 or 90 days), while others allow the order to remain active indefinitely.

Are GTC orders suitable for all traders?
They are ideal for traders with specific price targets who do not want to monitor the market constantly but may not be suitable for active day traders.

What happens if the price target of a GTC order is never reached?
The order remains active until the target is met or the trader cancels it. Some brokers may automatically cancel the order after a certain period.

Can GTC orders be used in forex trading?
Yes, GTC orders are widely used in forex trading to enter or exit positions at desired exchange rates.

What are the risks of using GTC orders?
Risks include execution uncertainty, changing market conditions, and the possibility of forgotten orders leading to unintended trades.

How do brokers handle GTC orders?
Brokers place GTC orders in the market and monitor them until they are executed or cancelled. Some may charge fees or set expiration limits.

Is a GTC order better than a limit order?
A GTC order is a type of limit order but with extended duration. It is more suitable for long-term strategies, while a standard limit order is often used for short-term trades.

Good-Till-Cancelled orders are a powerful tool for traders and investors with specific price targets and long-term strategies. By understanding their functionality, advantages, and limitations, you can incorporate GTC orders effectively into your trading plan.