Definition
Good ‘Til Canceled (GTC) is a type of order that an investor places to buy or sell a security at a specific price, which will remain active until the investor specifically cancels it. These orders don’t expire at the end of the trading day like most orders, and they can theoretically last forever if not canceled. GTC orders also get canceled if the brokerage firm that holds the order closes.
Phonetic
The phonetics of the keyword “Good ‘Til Canceled (GTC)” is: Good – /ɡʊd/ ‘Til – /tɪl/Canceled – /ˈkæn.səld/GTC – /ˈdʒiː tiː siː/
Key Takeaways
- Duration: Good ‘Til Canceled orders (GTC) are set to stay active until the investor cancels them. They do not expire at the end of the trading day like typical market orders, but instead remain in effect until a set of specified conditions are met or the order is manually canceled.
- Flexibility: GTC orders provide a higher level of flexibility for investors as they allow investors to set their buy and sell orders without having to continuously watch the market. They can specify the price points at which they want to buy or sell, and the order will execute once the market meets those criteria.
- Limitations: While GTC orders provide flexibility, they may also come with certain limitations or risks. For example, an investor could potentially forget about a GTC order, leading to undesired trades if market conditions change unpredictably. Additionally, GTC orders are not recognized by every exchange or trading platform, and some may impose time limits for GTC orders.
Importance
The Good ‘Til Canceled (GTC) term in business/finance is important because it provides flexibility and control to the investor over their investment strategy. A GTC order allows an investor to set an order to buy or sell securities at a specified price, and the order will remain in effect until it is either executed or the investor cancels it. This way, investors don’t have to closely monitor their stocks on a daily basis as the GTC order will only execute when the security reaches the desired price. In volatile markets, a GTC order enables an investor to ensure they do not miss potential investment opportunities, which can result in improved profitability. Thus, the investor can maintain a long-term strategic approach to investing rather than reacting to short-term market fluctuations.
Explanation
The Good ‘Til Canceled (GTC) order is an indispensable tool for investors and traders that offers them flexibility and convenience in their trading activities. The primary purpose of a GTC order is to provide investors with the assurance and peace of mind that their buying or selling conditions will be met without constantly having to watch the market. This type of directive alleviates the burden on investors of having to personally and physically make transactions when their predetermined conditions are realized. A GTC automatically executes a transaction when a security hits a specified price, and is used for both buying and selling of securities. For example, a GTC sell order will be fulfilled when a security reaches a certain high price point, allowing the investor to maximize profit. Alternatively, a GTC buy order could be set up to kick in once a security drops to a certain low price point, which enables the investor to purchase at a desirable rate. Importantly, a GTC order remains active until the investor decides to cancel it, conditions are met, or the brokerage stipulates its expiration, helping to mitigate potential losses and enhance profitability.
Examples
Example 1: Stock Market TransactionsSusan is an investor who wants to buy shares of a high-profile tech company, but she’s not willing to pay more than $200 per share. Instead of continually tracking prices, she places a Good ‘Til Canceled (GTC) order with her broker at her desired purchase price. This order remains in effect until either the price drops to $200, allowing the purchase to take place, or Susan decides to cancel the order.Example 2: Forex TradingJohn is a Forex trader who speculates the value of USD/EUR is going to rise to 1.2500. However, the current rate is 1.2200. Since John does not have the time to constantly watch the exchange rate, he places a GTC order at 1.2500. This order will remain active until the exchange rate hits his target level or John chooses to cancel it.Example 3: Commodity TradingA silver commodities trader, Lisa, wants to sell her silver futures contract when the price reaches $25.50 per ounce. The current price is $24.50 and she doesn’t want to watch the market all day. Thus, she issues a GTC order to her brokerage to sell at $25.50. The order will remain active until the price reaches or exceeds $25.50 or she withdraws it.
Frequently Asked Questions(FAQ)
What is a Good ‘Til Canceled (GTC) order?
A Good ‘Til Canceled (GTC) order is a buy or sell order that remains active until either the order is executed or the trader decides to cancel it. It does not expire at the end of the trading day like a day order would.
When would a trader utilize a GTC order?
Traders often use GTC orders when they have a specific target price for a security and are willing to wait an unspecified amount of time for the security to reach that price.
What happens if the market never reaches the set price on a GTC order?
If the market doesn’t reach the price specified in a GTC order, the order remains in effect. The order will continue open until it’s either executed or the trader cancels it.
Are there any risks associated with placing a GTC order?
Yes, one of the primary risks with a GTC order is forgetting the order is in place. This can lead to unintentional trades if market conditions change. Therefore, it’s critical to closely monitor all open orders.
What’s the difference between GTC and Day Order?
A Day Order expires at the end of the trading day if not executed, while a GTC order remains active until it’s either filled or canceled by the trader.
Is there a limit on how long a GTC order can remain open?
This depends on the policies of individual brokerages. Some firms might automatically cancel GTC orders after a specific period, such as 30 to 90 days.
Can GTC orders be modified?
Yes, GTC orders can typically be modified or canceled at any time while the order remains open. However, the specifics may vary by brokerage.
Related Finance Terms
- Limit Order
- Day Order
- Immediate or Cancel (IOC) Order
- Stop-Loss Order
- Fill or Kill (FOK) Order
Sources for More Information
