What Is a GTC Order in Trading and How Does It Work?
Learn about Good-Til-Canceled (GTC) orders in trading. Understand how these enduring market instructions provide control and compare to other order durations.
Understanding various trading orders is important for managing investments effectively. Each order type includes specific instructions that dictate how and when a trade is executed. Order duration, which determines how long an order remains active in the market, is a key characteristic. This allows traders to align their orders with strategic objectives and preferred market engagement.
Understanding GTC Orders
GTC stands for “Good-Til-Canceled,” an order that remains active in the market until it is either filled or manually withdrawn by the trader. This order duration is designed to persist beyond a single trading day, allowing traders to set a specific price target without needing to re-enter the order repeatedly. Most brokerage firms implement their own maximum timeframes, commonly ranging from 60 to 180 days, before automatic cancellation.
Traders frequently pair GTC with limit orders, where they specify a maximum price to pay when buying or a minimum price to receive when selling. This combination allows for patience, as the order waits for the market to reach the desired price point. GTC is also often applied to stop orders, which trigger a market or limit order once a certain price threshold is crossed. This makes GTC orders suitable for strategies that do not require constant market monitoring.
How GTC Orders Function
When a trader places a GTC order, it is transmitted to their brokerage and routed to the appropriate exchange’s order book. The order then waits for a matching buy or sell order to become available at the specified price or better. GTC orders are designed to persist through multiple trading sessions, remaining active each subsequent day until a fill occurs or cancellation is initiated.
While “Good-Til-Canceled” implies indefinite duration, most brokerage firms implement internal policies that automatically cancel GTC orders after a predefined period. This period commonly ranges from 30 to 180 days. This automatic cancellation prevents stale orders from accumulating indefinitely on the order book and ensures traders periodically review their trading intentions.
Corporate actions affecting a security can also lead to the automatic cancellation of GTC orders. For instance, a stock split, reverse stock split, merger, or significant dividend distribution might cause an open GTC order to be canceled to prevent unintended execution or incorrect pricing. Such events fundamentally alter the security’s structure, requiring traders to re-evaluate their positions and potentially re-enter orders.
Comparing GTC with Other Order Durations
GTC orders stand in contrast to other common order durations, most notably the “Day Order.” A Day Order is active only for the duration of the current trading day. If a Day Order is not filled by the market close, it automatically expires, requiring the trader to re-enter it the following day if they wish to maintain their trading intent.
Other less common order durations include “Fill-or-Kill” (FOK) and “Immediate-or-Cancel” (IOC). An FOK order requires immediate and complete execution; if the entire order cannot be filled at once, no part of it is executed. An IOC order demands immediate execution for any available portion, with the unfulfilled remainder being canceled. These types of orders are generally used for very specific, time-sensitive trading scenarios.
Traders often choose a GTC order over a Day Order when they are not actively monitoring the market throughout the day or are targeting a price that may take an extended period to reach. For example, an investor seeking to acquire shares of a company at a significant dip in price might use a GTC limit order to wait for that specific market condition. This allows for a strategic, patient approach to entering or exiting positions.