What Is GTC in Trading? A Complete Guide

Newcomers to stock trading often have much to learn about investment options. Some people spend weeks studying trends to decide who the best up-and-coming companies are.

In fact, sometimes people spend so much time deciding who to invest in that they forget about investment strategies. As a result, it often takes a long time before investors learn about things like GTC orders.

What is GTC in trading, you ask? GTC orders stand for "Good 'Til Cancelled" transactions.

These orders present an excellent alternative to traditional stock orders. If you're unfamiliar with the GTC stock meaning, keep reading! We'll give you all the information you need in the guide below.

What is GTC in Trading? Exploring the Basics

So, what does GTC mean in stocks? Before discussing this, we'll first explore the traditional stock order.

Traditionally, the most common stock order is the day order. In this trade, your order expires at the end of the day if the transaction remains unfilled.This short lifespan helps traders protect their safety. This way, they don't spend money unnecessarily.

Day orders can also protect the trader's personal information. The longer a transaction takes to process, the more opportunity identity thieves have to steal your data.

So, why would GTC orders need to exist? This trade option helps people buy stocks at a particular price point. You can also use GTC to sell stocks once they reach a specified price.

When you place a GTC order, the order remains open until the stock in question reaches that price. This option helps investors who don't constantly monitor the stock prices make the transaction they want.

Don't get the wrong idea, though. Despite the order's name, GTC orders rarely remain open indefinitely. Generally, these orders will cancel out if they haven't become filled within 30-90 days.

Fortunately, most GTC orders fill at their appointed price without canceling. However, their expiration limit prevents you from getting blindsided by an unexpected expense further down the road.

What is GTC Order in Practice?

If this sounds complicated, don't worry. An example can demonstrate how simple it really is.

As mentioned before, investors usually place GTC orders because they want to buy or sell at convenient prices. They have to wait for the market to reach the desired price level before they can make this order, though.

So, let's say you've invested in the dental care company Colgate-Palmolive. When writing this article, this company's stock costs $85.05 per share.

After some consideration, you've decided you want to sell your Colgate-Palmolive stock. But, you want to wait until the stock reaches $90.00 so you can make a profit.

A GTC order lets you do this immediately without monitoring the stocks each day. If the market moves to that $90.00 space, you can complete the order.

The same holds for buying a stock with GTC orders. Let's say you want to purchase a stock for $15, but it currently sells at $18. Instead of waiting on the price to fall, you can place a GTC order for $15.

If the stock reaches that price within the appointed time, the order will fill. This way, you can buy stocks at the time most convenient for you.

But, if the market takes longer than you like, you can cancel instead. Alternatively, you can let the order remain until the time limit runs out.

Risks of GTC Orders

As you can see, there are advantages to using GTC orders. However, there are also some disadvantages.

Some exchanges decided to stop accepting GTC orders, including stop orders. They have a few reasons for doing so.

First, these orders can be a risk for investors whose orders execute at poor times in the market. Temporary volatilities in the stock can result in unlucky returns for investors.

The other primary risk of a GTC order is when they occur on volatile market days. Sometimes, this results in pushing the price past the limit of the order before the value snaps back.

What does this mean for the investor? In short, it means the investor may have just sold low instead of selling high. Now, if that investor wants to regain their position, they'll have to buy at a higher price than they sold for.

Availability of GTC Orders

We mentioned before that some exchanges decided to stop accepting GTC orders. So, you may wonder, how available are GTC orders? Can you use these in most stock exchanges?

Some prominent stock exchanges, including the New York Stock Exchange and NASDAQ, no longer accept these orders. Other exchanges have also opted to stop allowing these.

However, GTC orders remain a widely used order type in most exchanges. If you already have an exchange you enjoy, check their rules to see if GTC orders are an option for you.

You may be somebody who hasn't begun building your investment portfolio. If these orders appeal to you, don't worry! Simply search the web for reputable exchanges that allow you to place GTC orders.

Learning Stock Trading Techniques and Strategies

If you were wondering, "what is GTC in trading?" we hope you found your answer! When used well, GTC trading can provide several opportunities for investors to take advantage of stock prices.

However, GTC orders are not the only secret weapon in an investor's arsenal. Several other tips and techniques can help you build the ideal portfolio for your goals.

How can you discover these tips? The answer is simple. All you have to do is sign up for our Spiking Insider Trading Masterclass. Spiking is a community of investors dedicated to helping each other grow.  Spiking Insider Trading Masterclass can help you attain your financial goals and build a robust portfolio. Join now and learn all about the Spiking AI which will help you grow your generational wealth!

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*Disclaimer: The article should not be taken as, and is not intended to provide investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. Spiking strongly recommends that you perform your own independent research before making financial decisions.