Definition
Good ‘Til Cancelled, often abbreviated as GTC, is a type of order an investor can place with a broker to buy or sell a security. It remains in effect until the investor specifically cancels it, or the trade is executed. Without a specific cancellation, a GTC order can persist indefinitely.
Key Takeaways
- ‘Good ‘Til Cancelled’ (GTC) is a type of order used in securities trading that remains active until it is either executed or explicitly cancelled by the investor.
- This order type is commonly used with limit orders, and allows investors to place trades without having to constantly monitor the market.
- A GTC order does not guarantee a transaction, rather it guarantees that the order will remain open until a transaction is made or the order is manually cancelled.
Importance
The finance term, Good ‘Til Cancelled (GTC), is significant as it refers to a type of order that an investor can place to buy or sell a security at a specified price, which remains active until the investor decides to cancel it.
This benefits investors as they don’t need to renew their instructions every day, saving time and resources.
It provides them with a better handle on their long-term investment strategy due to the flexibility and control it offers.
Furthermore, a GTC order can protect them from rapid market fluctuations as it is designed to be executed only when the security’s price hits a certain point, ensuring that investors secure their desired entry or exit price.
However, because markets can change drastically, it also requires regular monitoring and maintenance to ensure it align with current market conditions.
Explanation
Good ‘Til Cancelled (GTC) is a type of buy or sell order that stays active on the exchange until the instruction is manually cancelled by the investor or when the transaction has been processed. This term is particularly pivotal in investment and stock trading, providing investors with a measure of control over their trades while diminishing the need to constantly monitor the market.
It essentially indicates that an order would remain open until the investor decides to cancel it, thereby allowing them an opportunity to execute a trade at a precise price point. The primary purpose of a GTC order is to allow an investor the ability to wait until a specific price point is reached without having to continuously monitor the status of their order.
This can potentially lead to more strategic trades and better returns on investments as investors can input orders that will simply stay put until their conditions are met. In the fast-paced investment environment, having a GTC order can provide a level of convenience and assurance for the investor.
It’s important to note that not all brokerages offer GTC orders and, in some cases, these orders may expire after a certain period even if they have not been filled or manually cancelled.
Examples of Good ‘Til Cancelled
Stock Trading: An investor wants to buy shares of Company X when the price falls to $20 per share. However, the current price is $
Instead of continuously watching the market, the investor places a Good ‘Til Cancelled (GTC) order at $
If the price falls to $20 or below, the order will be executed. If not, the order remains open until the investor cancels it.
Real Estate Market: A real estate investor places an offer on a property, using a GTC clause. This offer stays valid until the investor decides to withdraw it, giving them the flexibility to wait out for a favorable response, irrespective of how long it might take.
Foreign Exchange Trading: A forex trader predicts that a certain currency pair will reach a specific rate, but it hasn’t yet. To be able to make profit from such a situation, they place a GTC order at the predicted rate. Once that rate is reached in the forex market, the trade executes, and if it doesn’t reach, the GTC order stays in place until the trader cancels it.
FAQs on Good ‘Til Cancelled (GTC)
What does Good ‘Til Cancelled mean?
A Good ‘Til Cancelled (GTC) order is a type of order that remains active in the market until the investor decides to cancel it. This order does not expire at the end of the day like other types of orders, allowing investors to keep a position open for an indefinite period of time.
How long does a GTC order last?
A GTC order lasts until the investor decides to cancel it. If not cancelled, it remains in the market indefinitely. However, some brokerage firms may set a limit, typically 30 to 90 days, after which the order will automatically be cancelled if not fulfilled.
How to place a GTC order?
To place a GTC order, you first need to log into your brokerage account, then enter the security you wish to trade. After selecting the order type as “Good ‘Til Cancelled”, you will need to enter your trade parameters, such as the number of shares and your preferred purchase or sale price. Once all information is entered, click on “Place Order” to finalize the transaction.
Can a GTC order be cancelled?
Yes, a GTC order can be cancelled at any time by the investor. In fact, the term ‘Good ‘Til Cancelled’ implies that the order will remain effective until it is specifically cancelled by the investor.
What are the advantages of using a GTC order?
GTC orders allow investors to set their trade parameters once and not worry about them each day. This order type can save time and reduce the stress of daily trading. GTC is especially useful when an investor believes that a security’s price will reach a particular level in the future, but isn’t sure when.
Related Entrepreneurship Terms
- Limit Order
- Day Order
- Stop-Loss Order
- Duration
- Order Cancellation
Sources for More Information
- Investopedia: An extensive online resource for understanding finance terms and concepts, including Good ‘Til Cancelled.
- Fidelity: A well-known brokerage firm that provides resources and explanations for various financial terms and practices.
- Nasdaq: The official site for the Nasdaq stock market, offering a wealth of information on trading terms and stock market concepts.
- Charles Schwab: A reputable investment firm that provides valuable insights and explanations of various finance terms, including Good ‘Til Cancelled orders.
