According to the SEC, a Good Till Cancelled order refers to a buy or sell request designed to last until the order is canceled or executed. The order can be made by an investor looking to purchase or sell a security at a certain price.
This type of order has been found to offer an alternative to the placement of day orders that expire after the market closes if they are not executed whereas a good till canceled order would say open until it is either executed or canceled.
It’s important to note that a GTC order is not active during after hours trading and will only execute during normal market hours.
How To Trade Using A GTC Order
As said earlier, GTC orders can either be purchase or selling orders. To better explain their implementation here are two real world examples for both scenarios.
GTC Buy Order
Let’s assume we have investor A who has expressed the wish of purchasing stock XYZ which is currently trading at $15 but doesn’t want to pay more than $12 for it.
The investor proceeds to place a buy limit order for it at $12 with GTC instructions on it. If the stock price was to decline from $15 to $12, the GTC order will be executed.
This means that the limit order will execute at or close to the stock’s opening price. If the order doesn’t execute on that day, it will remain open until it is either filled or canceled by you or your broker.
GTC Sell Order
Using the same values above that is stock XYZ trading at $15, investor A places a sell limit order at $20 or higher. If the stock price was to increase to $20, the GTC order will be executed.
However, if the order wasn’t filled on that day it would remain open until it is either filled or canceled by you or your broker.
An important thing to keep in mind is if the stock were to gap up above your limit price, you would be filled at the better price. For example, if you had a limit price at $20 and the stock gaps up and opens at $22, then you would be filled at the higher price of $22.
If the above orders were made without implementing the GTC request when trading closed, they would expire but with the GTC instruction in place, traders won’t have to place the same order everyday if it doesn’t get filled.
Final Thoughts
As a trader or investor, it is important to understand how a GTC order works so you can implement it in your trading. Not only does it provide a way for investors to manage their portfolios but it helps to protect the investor’s portfolio from extended losses when you can’t be at your computer all the time.