Good 'Til Canceled (GTC) Orders: Definition, Function, and How to Use Them

What Is Good 'Til Canceled (GTC)?

Good 'til canceled (GTC) orders allow investors to set buy or sell actions that remain pending until they either execute at specified price points or the investor cancels them. Unlike day orders, GTC orders do not automatically expire at the end of a trading day but instead provide flexibility for managing trades over extended periods. This overview covers the functionality, benefits, and risks of GTC orders, along with practical examples to help you leverage them in your investment strategy.

Key Features of Good 'Til Canceled (GTC) Orders

GTC orders differ from day orders, which expire at the end of the trading day if unfilled. Despite their name, GTC orders don't stay active forever. Most brokers set GTC orders to expire 30 to 90 days after investors place them to avoid a long-forgotten order suddenly being filled.

Through GTC orders, investors who may not constantly watch stock prices can place buy or sell orders at specific price points and keep them for several weeks. The trade executes if the market price reaches the GTC order's price before it expires. The trade executes if the market price reaches the GTC order's price before it expires.

Most GTC orders execute at their limit price, but there are exceptions. If the share price jumps past the limit price between trading days, the order completes at a more favorable price—higher for sell orders and lower for buy orders.

Understanding the Risks of GTC Orders

Several exchanges, including the NYSE and Nasdaq no longer accept GTC orders, including stop orders. They have decided that such orders are a risk to investors who may see their orders executed at an inopportune time due to temporary volatility in the market. That said, most brokerage firms still offer GTC and stop orders among their services, but they execute them internally.

GTC orders are risky during extreme volatility, which can push prices past the limit before bouncing back. This may trigger a sell-stop order as stock prices slip. If prices rebound, the investor may have sold low and now must buy at a higher price to regain the position.

Example of a GTC Order

Investors usually place GTC orders because they either want to buy at a price lower than the current trading level or sell at a price higher than the current trading level. If shares of a certain stock currently trade at $100 apiece, an investor may place a GTC buy order at $95. If the market moves to that level before the investor cancels the GTC order or it expires, the trade will execute.

The Bottom Line

Good 'til canceled (GTC) orders provide investors with the flexibility to buy or sell securities at specified prices without the need for constant market monitoring. While they remain active until executed or canceled, most brokers set expiration limits to prevent forgotten orders from being fulfilled unexpectedly. GTC orders carry risks, particularly in volatile markets, where orders might execute at unfavorable times. Investors should consider these factors and evaluate the potential benefits and drawbacks before placing a GTC order.