There are a number of key terms of and abbreviations in the world of trading stocks.
If you’re new to this world, you might be confused or just simply overwhelmed by all the different abbreviations.
Our aim at stockmaven.com is to give you all the information you need to be successful when it comes to trading stocks.
In this article, we’ll be discussing what GTC means in stock trading. We’ll also discuss some closely related questions surrounding this abbreviation.
So, let’s get into it and find out what GTC means in stocks!
What Does GTC Mean In Stocks?
Put very simply, GTC stands for Good-Til-Cancelled.
In the context of stocks, a GTC order is an order to buy/sell a stock that will last until the order is either completed or cancelled.
There is usually a time limit on how long an investor can leave a GTC order open, this is determined by the brokerage firm. This can also vary from firm to firm.
A common misconception is that Good-Till-Cancelled orders can remain active indefinitely.
The maximum time a GTC order can be left open is usually 90 days.
What might some benefits of a GTC order be?
Well, if you’re the type of investor who does not want to watch stock prices constantly, with a GTC order you can buy or sell orders at a specific price point and maintain this for several weeks.
The great thing about GTC orders is that if market prices hit the price of a GTC order before it comes to term, the trade will execute.
Whilst nearly all GTC orders execute at a specified price point, or the limit price, there are some exceptions to this.
For example, if between trading days the price per share gaps up or down, and skips over the limit price of the GTC order, the order will complete at the price more favorable to the investor.
Is Day Or GTC Better?
As you might have guessed, GTC orders are used as an alternative to day orders.
Day orders will expire at the end of the trading day, even if they are unfilled. This means that day orders are great for a particular day’s trading session.
GTC orders will remain active unless the deadline for the order has passed (up to 90 days), they are cancelled by the customer, or have been executed by a broker.
Are There Any Risks With GTC Orders?
As with all buying/selling of stocks, there are certain risks associated with GTC orders.
There are a number of exchanges, NYSE and NASDAQ for example, that no longer accept GTC orders as well as stop orders.
The thinking behind this is that these exchanges view GTC orders are too high a risk for investors, particularly if these investors see GTC orders executed at inopportune times.
These inopportune times are usually dictated by temporary market volatility.
Despite this, numerous brokerage firms do still offer GTC/stop orders in their services, but these are usually executed internally.
If on a particularly volatile market day, the price of the GTC order might exceed the limit price of the order, then snap back quickly.
This extreme volatility might trigger a sell-stop order if the price of stock slips.
If the investor sold low after the price rebounded quickly, they may face the prospect of needing to buy high to regain their position.
An Example Of A GTC Order
Let’s now take a look at a hypothetical example of a GTC order.
An investor might be motivated to place a GTC order if they want to do one of the following:
- Buy stock at a price lower than the current value
- Sell stock at a higher price than the current trading price
Let’s say, for example, that the current price of a certain stock trades at $100 a piece.
An investor might place a GTC purchase order at $95.
Now, if the market shifts to that level before the investor cancels the order, or the order expires, the trade will execute.
Frequently Asked Questions
Can GTC Orders Be Cancelled?
The short answer is yes, a GTC order can be cancelled. Any order that uses a GTC time frame will continue to operate until the order is filled or cancelled by the customer who placed the order.
Do GTC Orders Execute After Hours?
This is an important point, and it’s worth noting that GTC orders are not active in after – hours trading. They will only execute during standard market hours.
How Long Is A GTC Order Good For?
Brokers tend to set GTC orders to expire anywhere between 30 and 90 days after they are placed by investors.
This prevents a long forgotten order suddenly being filled.
Conclusion
GTC (Good-Till-Cancelled) orders work regardless of time frame, unless they are explicitly cancelled.
GTC orders are great for traders who might want to cut down their day-to-day management of a portfolio.
There are certain risks associated with using GTC orders, including the order being executed at inopportune moments caused by brief rallying of prices or volatility.
The fallback caused by either of the above could leave an investor at a loss.
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