What is Good 'Til Canceled ?

1839 reads · Last updated: December 5, 2024

A Good 'Til Canceled (GTC) order is a type of trading instruction that remains active until the trader cancels it or it is automatically canceled by the trading system. Unlike a Day Order, which expires at the end of the trading day if not executed, a GTC order can remain active for several days, weeks, or even months until the specified conditions are met or the order is canceled.Key characteristics of a Good 'Til Canceled order include:Persistent Validity: Once set, the order remains valid until the trader cancels it or it is automatically canceled due to market rules.Flexibility: GTC orders allow traders to keep an order active for an extended period, suitable for those who do not want to monitor the market frequently.Automatic Cancellation: Some exchanges or brokers may set a maximum validity period for GTC orders (e.g., 90 days), after which the order is automatically canceled.Execution Conditions: GTC orders are executed when the market price meets the specified conditions, such as a target buy or sell price.Example of Good 'Til Canceled order application:Suppose an investor wants to buy a stock at $50 per share, but the current market price is $55. The investor can place a GTC order with a buy price of $50. The order will remain active until the stock price drops to $50 and is executed, or the investor cancels the order.Advantages of Good 'Til Canceled orders:Reduced Monitoring: Investors do not need to monitor the market constantly, as the order will automatically execute when conditions are met.Long-Term Strategy: Suitable for long-term investors who can set buy or sell orders based on target prices.Disadvantages of Good 'Til Canceled orders:Forget to Cancel: Due to the extended validity period, investors might forget to cancel orders that are no longer needed.Market Changes: Market conditions may change, potentially making the execution price less favorable.Good 'Til Canceled orders provide a convenient way for investors to maintain active trading instructions over a long period without the need for constant market monitoring, aligning well with long-term investment strategies.

Definition

Origin

The concept of Good 'Til Canceled orders originated in stock and futures markets to provide investors with greater flexibility and convenience. With the development of electronic trading platforms, GTC orders have become more widespread, allowing investors to set long-term strategies without needing to monitor the market frequently.

Categories and Features

The main features of Good 'Til Canceled orders include:
1. Continuous Validity: Once set, the order remains valid until the trader cancels it or it is automatically canceled due to certain market rules.
2. Flexibility: GTC orders allow traders to keep their orders active for a longer period, suitable for those who do not wish to monitor the market frequently.
3. Automatic Cancellation: Some exchanges or brokers may set a maximum validity period for GTC orders (e.g., 90 days), after which the order will be automatically canceled.
4. Execution Conditions: GTC orders are executed when the market price reaches the specified conditions, such as a specified buy or sell price.

Case Studies

Case 1: Suppose an investor wants to buy a stock at $50 per share, but the current market price is $55. The investor can set a GTC order at a buy price of $50, and the order will remain valid until the stock price drops to $50 and is executed, or the investor cancels the order.
Case 2: Another investor wants to sell a stock when it reaches $100 per share. Even if the current price is $90, the investor can set a GTC order to ensure it is automatically executed when the price reaches the target.

Common Issues

1. Forgetting to Cancel: Due to the long validity period, investors might forget to cancel orders that are no longer needed.
2. Market Changes: Market conditions may change, potentially making the execution price of the order less advantageous.

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