What Is Good till cancelled?
A "good till cancelled" (GTC) order is a type of order placed with a broker to buy or sell a security that remains active until it is either executed or explicitly cancelled by the investor. This distinguishes it from other trading orders that have shorter time limits, ensuring the order persists across multiple trading sessions. GTC orders are commonly used by investors who have a specific target price and are willing to wait for that price to be met, regardless of how long it takes. This type of order is a key component in many long-term trading strategies, as it removes the need to re-enter the same order repeatedly.
History and Origin
The concept of order "time-in-force" has been fundamental to securities markets for centuries, evolving alongside the mechanisms of trade execution. As markets became more automated and trading moved away from physical floors, the need for persistent orders that did not expire at the end of a trading day became apparent. The "good till cancelled" designation formalized this requirement, allowing orders to remain on an exchange's order book for an extended period. This functionality became particularly important with the rise of electronic trading systems, which could maintain and attempt to execute orders continuously without human intervention. The evolution of market structure, including discussions around order handling and market fragmentation, played a role in standardizing how such persistent orders are managed across various trading venues.4
Key Takeaways
- A good till cancelled (GTC) order remains active indefinitely until it is filled or explicitly cancelled by the investor.
- GTC orders are useful for investors seeking to execute trades at a specific price point without needing to re-enter the order daily.
- While they offer convenience, GTC orders require monitoring, as market conditions can change significantly over time.
- These orders are commonly applied to limit order and stop order types.
Interpreting the Good till cancelled Order
A good till cancelled order is not interpreted in terms of a numerical value, but rather in its duration and persistence. When an investor places a GTC order, they are essentially instructing their broker to keep trying to execute the trade at the specified price until it either happens or they revoke the instruction. This is particularly valuable in markets characterized by market volatility or when targeting a price that is significantly different from the current market price. For instance, an investor might place a GTC limit order to buy a stock far below its current trading price, anticipating a future market correction. The order will remain active, passively waiting for the desired price to be met, without the investor needing to actively monitor the market daily. This passive approach aligns with certain long-term risk management strategies.
Hypothetical Example
Consider an investor, Sarah, who wants to buy 100 shares of Company XYZ. The stock is currently trading at $50 per share. Sarah believes that $45 per share is a more favorable entry point. She doesn't want to constantly watch the market, so she places a GTC limit order to buy 100 shares of Company XYZ at $45.
- Day 1: Company XYZ trades between $49 and $51. Sarah's GTC order remains unexecuted.
- Day 10: Company XYZ's price drops to $47 due to broader market news. Sarah's GTC order is still active.
- Month 2: An unexpected earnings miss causes Company XYZ's stock to briefly dip to $44.50. Sarah's GTC order at $45 is triggered, and her shares are purchased at $45 per share.
- Result: Sarah successfully acquired the shares at her target price without having to manually re-enter the order over two months. The "good till cancelled" designation ensured the order persisted until conditions were met for its execution.
Practical Applications
Good till cancelled orders are widely used across various financial instruments and trading contexts. In stock trading, they are frequently employed for limit order entries or exits, as well as for setting stop order levels to manage potential losses. For example, a long-term investor might place a GTC stop-loss order below their purchase price to protect against significant downturns.
In options and futures markets, GTC orders are essential for implementing more complex trading strategies that require precise entry or exit points over an extended period. They are also integral to algorithmic trading systems, where computer programs can continuously monitor market data and attempt to execute GTC orders based on predefined criteria, contributing to market price discovery.3 For individual investors, GTC orders provide a convenient way to set target prices or stop-loss levels without daily intervention, especially for securities they intend to hold for the long term, aligning with passive investing philosophies that prioritize long-term wealth accumulation over frequent trading.2 A visual explanation of common stock order types, including GTC, is available from financial education resources.1
Limitations and Criticisms
While good till cancelled orders offer convenience, they also come with inherent limitations and potential drawbacks. A primary concern is that market conditions can change drastically over the life of a GTC order. An investor might set a GTC buy limit order at a certain price, but if the company's fundamentals deteriorate or the overall market enters a sustained downturn, that target price might become irrelevant or even disadvantageous. Similarly, a GTC stop-loss order, meant to protect capital, could be triggered by temporary market volatility unrelated to a fundamental decline, leading to an undesired sale.
The persistence of GTC orders requires investors to periodically review them to ensure they still align with their current investment goals and market outlook. Failure to review can result in unexpected execution at a price that is no longer optimal given new information. Furthermore, while GTC orders help in achieving specific prices, they do not guarantee liquidity or instantaneous fills, especially in illiquid markets. There's always the possibility that the order may never be filled if the market never reaches the specified price, or that it may only be partially filled.
Good till cancelled vs. Day order
The key distinction between a good till cancelled (GTC) order and a Day order lies in their time-in-force attribute.
| Feature | Good till cancelled (GTC) Order | Day Order |
|---|---|---|
| Duration | Remains active until it is either executed or explicitly cancelled by the investor. It persists across multiple trading sessions and days. | Automatically expires at the end of the trading day if it has not been fully executed. |
| Persistence | Continues to sit on the exchange's order book for an extended period, sometimes for months, depending on the broker's rules. | Active only during the current trading session. If unfilled, it is automatically removed at market close. |
| Convenience | Ideal for long-term price targets or protective stops, reducing the need for daily re-entry. | Suitable for short-term trading or for orders where immediate execution within the current day is preferred. |
| Monitoring | Requires periodic review by the investor to ensure its relevance given changing market conditions. | Less oversight required once placed, as it will expire if not filled by day's end. |
While a GTC order offers persistence, a Day order provides a clear, defined expiration, making it suitable for situations where an investor wants an immediate attempt at execution but doesn't want the order to linger if market conditions are not met within the single trading session.
FAQs
How long does a good till cancelled order last?
A good till cancelled (GTC) order remains active indefinitely until it is either filled (executed) or the investor manually cancels it. Some broker platforms may have a maximum duration (e.g., 60 or 90 days) after which GTC orders automatically expire, requiring the investor to re-enter them if still desired. Always check your broker's specific policies.
Can a GTC order be partially filled?
Yes, a GTC order, particularly a limit order, can be partially filled if there isn't enough liquidity at the specified price to complete the entire order at once. The remaining portion of the order will stay active with the "good till cancelled" designation until it is fully filled or cancelled.
What happens if I forget about my GTC order?
If you forget about a good till cancelled (GTC) order, it will remain active and could be executed at a later date, even if market conditions have changed significantly or your investment strategy has evolved. This highlights the importance of regularly reviewing all outstanding GTC orders to ensure they still align with your current financial goals and risk management approach.
Are GTC orders used for all types of orders?
GTC is a "time-in-force" instruction that can be applied to various types of orders, most commonly limit order and stop order types. It is generally not applied to market order since market orders are designed for immediate execution at the best available current price.