What Does Good ‘Til Cancelled Mean in Trading?

“Good ‘Til Cancelled” (GTC) is a specific instruction for a trade order in financial markets. It dictates how long an order remains active. This article explains the mechanics and implications of using GTC orders.

Understanding Good ‘Til Cancelled Orders

A Good ‘Til Cancelled (GTC) order is an instruction to a brokerage to buy or sell a security that remains active until it is either fully executed or explicitly cancelled by the investor. Unlike typical “day orders” which expire at the close of the trading day if unfilled, a GTC order persists across multiple trading sessions. This allows an investor to set a specific price target for a security and wait for market conditions to meet that price without needing to re-enter the order daily.

While the name suggests an indefinite duration, brokerages typically impose a maximum time limit for GTC orders. This limit often ranges from 30 to 180 days. If the order is not filled or manually cancelled within this period, it will automatically expire.

Common Applications of Good ‘Til Cancelled Orders

GTC orders are used in financial markets, particularly in stock trading, for setting specific entry and exit points. Investors often employ GTC orders when they aim to buy a stock at a price lower than its current market value or sell a stock at a price higher than its current value. This allows them to capitalize on anticipated price movements without constant market monitoring. For instance, an investor might place a GTC limit order to purchase shares if a stock’s price dips to a certain level. Similarly, a GTC stop order can be set to sell shares if the price falls below a certain threshold to limit potential losses.

This order type is particularly useful for those with a longer-term investment perspective, as it supports strategies that do not require immediate execution. It enables investors to establish precise price targets and let the market work towards those levels. The flexibility of GTC orders makes them suitable for managing investments when an investor cannot continuously watch market fluctuations.

Managing Good ‘Til Cancelled Orders

Once a GTC order is placed, it remains active in the market, often being resubmitted by the brokerage system each trading day. Investors can manually cancel a GTC order at any time before it is executed. This manual cancellation provides flexibility if an investment strategy changes or if market conditions no longer align with the initial order’s intent.

GTC orders are also subject to automatic cancellation under certain conditions. Corporate actions affecting the underlying security, such as stock splits, mergers, or dividend distributions, can cause GTC orders to be automatically cancelled. Regular review of open GTC orders is a sound practice to ensure they remain relevant to current market conditions and investment goals.

Distinguishing Good ‘Til Cancelled from Other Order Types

GTC orders are distinguished by their extended duration, which contrasts with other common order types that have shorter lifespans. The most direct comparison is with a “day order,” which is active only for the current trading day. If a day order is not executed by the market close, it automatically expires.

Other order types like “fill-or-kill” (FOK) and “immediate-or-cancel” (IOC) are designed for immediate execution. An FOK order requires the entire order to be filled immediately, or it is cancelled completely. An IOC order demands that any portion that can be filled immediately is, with the remaining unexecuted portion cancelled. Unlike these immediate execution orders, GTC orders are intended for situations where the investor is willing to wait for a specific price point.