What Is a Good-til-Canceled Order?

A good-til-canceled (GTC) order is a type of buy or sell trade that instructs the broker to keep the order open until executed or canceled by the investor. An investor can choose to cancel GTC orders at any time. Otherwise, they will expire after a certain period of time has passed, typically 60 or 180 days, depending on the brokerage firm.

GTC orders contrast with other types of trade orders that set limits on timing of execution. A GTC order is unlike a day order, which is canceled automatically at the end of regular trading hours if it is not filled. But like a GTC order, a day order remains open until it is filled. There is, of course, no guarantee that the order will be filled.

Immediate-or-cancel (IOC) and fill-or-kill (FOK) orders are the opposites of a GTC order. Both of these order types require that at least part of the order be executed immediately or not at all. An FOK order is canceled if the entire order is not filled immediately; an IOC order will be partially filled before being canceled if the entire order cannot be filled.

GTC orders are usually used by price-sensitive investors who have longer time horizons. One of the major behavioral advantages an individual investor can exhibit is patience, both in timing a trade and waiting for growth. Day traders are unlikely to use GTC orders because they want immediate trade executions based on intra-day market patterns. Their strategies cannot afford the risk that patience allows.

Good-til-Canceled Order Pros and Cons

GTC orders pair well with limit and stop orders, which set restrictions on prices for the execution of a buy or a sell trade. A limit order sets a minimum price at which a stock will be sold and a maximum price at which a stock will be bought. A stop order acts more like a trigger; an order is executed if a stock moves past the specified stop price. Stop orders can be used to activate limit orders or market orders.

If you are interested in a stock as a long-term investment but cannot follow its price movements day to day, you can use a GTC order with a limit order to buy the stock at your preferred price without entering the same order requirements every day.

For example, say a stock is currently trading at an ask quote of $48.64, which you think is an overvaluation by the market of the stock’s worth. You are willing, based on your analysis, to buy the stock at a price of $48.00. You can set a limit price at $48.00, and by making this a GTC order, you can forget about the order until it executes at the price you want if the price gets there.

On the sell side, you can set a GTC order with a stop order to sell your position when a stock’s price begins to fall. This will allow you to preserve your gains without needing to closely follow the market’s movements. However, the stop order becomes a market order when it hits the stop-sell price and may be filled at a much lower price if the market is moving quickly.

Keep in mind that GTC orders only apply to regular trading hours on exchanges. Your order will not be executed if a stock hits your stop price in after-hours or extended-hours trading. It is important to note that sudden price changes after hours may trigger a GTC order you otherwise were not expecting when the market opens.

There is a disadvantage to GTC orders during periods of extreme volatility. Major exchanges, such as the NYSE and the Nasdaq, don’t allow investors to set GTC orders because of a situation in which investors may be harmed by sudden price swings that activate GTC orders before prices reverse to previous positions. Suddenly, you have sold at a temporary low caused by volatility when the price ultimately settles higher. Usually, brokerages offer GTC orders by executing them internally.

Conclusion

A good-til-canceled order works well for investors who have patience or do not want to watch the market’s moves every day. This order type in conjunction with stop and limit orders allows you to precisely restrict your entrance and exit prices and apply the orders over a longer period of time than a day trade, without needing to reenter orders daily. The length of time a GTC order can remain open is dependent on the brokerage firm.