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Good Til Cancelled (GTC) Explained

Good til Canceled (GTC) Defined

Good ‘til cancelled (GTC) order is an investment order to buy or sell a security or stock at a specified set price that remains in effect or active until it is executed, or the investor cancels the order. For example, an investor can specify to sell a stock at $10 per share, then the GTC will stand until the condition is met and share price has reached to $10, unless the investor intervenes and cancels the instruction. If the stock reached $10 per share, under the GTC order, the shares will be sold. With a GTC instruction, the order doesn’t expire at the end of the trading day like day orders but held for usually not more than 90 days after which the instructions are revisited, and further instructions are requested from the investor.

A Little more on GTC orders

Through GTC orders, investors do not need to constantly monitor the stock price and can just buy and sell at specific price points and keep them for several weeks. For example, a GTC can be set to buy a stock at a specific price point different from current market price by looking at the stock’s price-to-earnings ratio, price-to-book ratio and so on without constant monitoring of the stock. Usually, GTC orders are placed because investors want to buy at a lower price than the current trading level or sell a price higher than current trading level. Sometimes, GTC order are also placed if market price of a share starts to fluctuate and there is uncertainty over its future. Sell orders can be placed at a slightly lower price to prevent further losses.

Even when using GTC orders, investor must closely monitor conditions in the market since the standing order might be executed even when there is an event that sends the stock in unexpectedly one direction or the other. Several exchanges, including the NYSE and NASDAQ do not accept GTC orders because it is considered a risk to the investors where the instructions might be carried out at an inopportune time. These usually arise due to temporary volatility in the market and might cause loss to the investor. The main risk of GTC order comes when a day of extreme volatility pushes the price past the GTC order before quickly snapping back. When the price rebounds, the investor just sold low and faces the prospects of buying high to regain the position. However, many brokerage firms still offer GTC among their services and execute the instructions internally.

References for Good Until Cancelled Orders


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