There are many different types of order, or otherwise known as directives, that you as a trader can place with your broker. Good till canceled or the GTC is another form of order that can be quite useful.
Although, when it comes to issuing orders and placing them with your broker, you need to know different types of orders and what each of them can do for you.
This is imperative because each directive has certain characteristics. Thus, they ought to be used at different times and in different conditions, whichever fits the market best.
So no matter where you trade, the foreign exchange market of the various other financial markets, let’s find out more about the good till canceled order together to increase your odds of winning in the market.
What Exactly Is the Good till Canceled Order?
There are certain orders in the market that are for buying and selling. This means you send an order to the broker, whether to buy or sell, and the broker is required to complete this order, which is known as filling the order.
This order, i.e. the good till canceled order, which is also called GTC, is another type of buy or sell order that is sent by the trader to the broker.
The special feature of the GTC order is that when the trader sends this order to the broker, the order can remain open until such time that the broker has filled the order completely or canceled it.
So it is sort of like sending the order and leaving it all to the broker. However long it may take, you wait for the broker to fill it completely or cancel it, if they are not able to fill your order.
Although, because such orders are clearly very appealing to use by the traders, brokers do put a time limit in place for the GTC. Ordinarily, a GTC order can remain open for 90 days to be filled, until such time then it is canceled.
So in essence, a good till canceled order works outside of the time frame that is usually associated with other orders. But please keep in mind that different brokers consider different time frames or rather time limits for the GTC. Therefore, always make sure to check with your brokers such details before placing your order.
How Does a Good till Canceled Order Work?
How Does a Good till Canceled Order Work?
When compared to other buy or sell orders, such as the day orders, the GTC order is actually a quite useful order that can remain active the longest.
However, as it was mentioned, the duration for which the order remains open has to be specified by the broker not the trader. It is the broker that decides the duration. And that duration is almost always more than a month and usually three months’ maximum.
There are certain orders that require the broker to fill the order in its entirety, such as the all or none order. With such orders, partial fills are not allowed.
This means you either get your entire order filled, or you get none of the filled and it is canceled. Although this may have some advantages, for many traders it can be regarded as a downside.
On the other hand, certain orders also come with a time limit – meaning that they require the broker to fill the order within a certain time limit – at times even instantaneously. With such orders, if the order is not filled within the specified time limit or even instantly, then it ought to be canceled. Again, one can see some advantages, but also disadvantages at the same time.
However, with the GTC order, you have neither of these matters.
Because, first, the GTC does not specify that the order must be filled in its entirety at once.
This means partial fills are allowed with this order. And this can be regarded as an advantage, since some brokers might have a limited inventory and will not allow partial fills, your order will not receive any part of the requested asset.
Secondly, because the GTC does not specify a time limit for the order to be filled, it relieves the trader of thinking or rather worrying about the time of the order being filled.
It has, almost, as much as it takes for the order to be filled by the broker – of course until such time that the broker has specified.
Why Use Good till Canceled Order?
The best case to make for the usage of the good till canceled order or the GTC is the ease of use.
That is right, it is quite easy to use. Of course we are not merely talking about the issuing of the order to the broker. Rather the management of the account with such type of order.
When you send this order you can leave it all to the broker without worrying about the time of it. So it makes managing your account and your assets that much easier.
You can compare this type of order and this type of trading with day trading and day orders. With day orders, you need to constantly monitor the market and the prices in order to make the best choice.
But with the GTC order, you do not have to keep up with the market every second it moves forward.
Interestingly enough, you can see that there might also be a downside to such a type of trading. You send the order to the broker and they can fill it whenever they want or rather whenever they are able to.
That unspecified time in the future might not be the best time for you to have your order filled.
Depending on the market type, prices might fluctuate quite a lot. Especially with the Forex market, where the slightest variation in prices can result in a different outcome for your trade.
For this reason, certain brokers have limited the use of the GTC order by the traders, as it may result in losses for them.
Example of Good till Canceled Order
Example of Good till Canceled Order
The good till canceled order is easy enough to understand. As it offers a simple solution for traders to place their order with the broker indefinitely. An example of this would be when you want to buy at a price that is less than what is currently being traded in the market. And you do not see a decrease in prices in the short term.
In this situation, you would place a GTC order and wait for prices to get to your requested amount, which takes months, and then the broker will fill your order.
Conclusion
A good till canceled order provides an elegant solution for traders to place their buy or sell orders at their desired price for the upcoming future. A GTC order theoretically does not have a time limit, but it is usually three months. Now keep in mind while GTC offers a way for you to buy or sell at your requested price, it could also result in your order being filled at such a time that is not suitable for your assets, thus resulting in loss or less than possible profits. So choose your orders carefully and with due consideration.
