Buying and selling stocks isn’t always as straightforward as pressing a button on your brokerage account. When you place an order to buy or sell stocks, you have options for how long that order remains active in the market. Among the most popular selections for any traders are the Good Till Cancelled (GTC) and Day Order options.
When you’re trading real money the difference between these two terms can be a meaningful change in portfolio value so let’s dive in to understand them better.
What is a Day Order?
A Day Order is an order to buy or sell a stock that remains active only for the trading day on which it was placed. If the order isn’t executed by the time the market closes, it expires and is no longer valid.
- Example: Let’s imagine that you want to place a Day Order to buy 100 shares of a company at $50 per share at 10:03 AM. If the price never hits $50 during that trading day, your order will be automatically cancelled at the end of the day, and you’ll need to place a new order if you still want to buy the stock.
What is Good Till Cancelled (GTC)?
A Good Till Cancelled (GTC) order will remain active until you either fulfill the order, manually cancel it, or until it reaches a broker-defined expiration period, which can range from 30 to 90 days depending on the brokerage.
- Example: You set a GTC order to sell 100 shares of a stock at $150 per share. If the price doesn’t reach $150 on the day you set the order, it will remain in place for weeks or even months, depending on your broker’s policies, until the conditions are met or you decide to cancel it.
How These Orders Work
Now that you know what the terms are, how do you actually use them to your advantage?
Day Orders are active from market open to close (e.g., 9:30 AM to 4:00 PM ET for the New York Stock Exchange).
However you’ll need to keep in mind that if conditions aren’t met by the end of the trading day, the order expires.
So they tend to be a good option for for short-term traders or when you’re looking to capitalize on same-day price movements.
Good Till Cancelled (GTC) orders are on the other hand stays in effect across multiple trading days until they are either executed or cancelled.
They tend to be best for longer-term trading strategies where you want to set a specific price point without constantly monitoring the market.
With that said, if you want to modify a GTC order or cancel one, you can do so anytime until they are executed.
How Should You Use Day and GTC Orders?
So when should you look to use a Day Order? The short answer is if you tend to be a day trader or want to make quick trades based on daily price changes.
The nice aspect of a Day Order is that you get to avoid overnight risks because Day Orders prevent exposure to after-hours market fluctuations, which can be risky.
It’s also quite simple to manage active trades and is ideal when you’re watching the market closely and prefer a daily evaluation of your positions.
A GTC Order lets you set price targets over time so it’s ideal if you want to buy or sell a stock at a specific price and don’t care if it takes a while.
The nice thing about GTC orders is that less monitoring is needed so it’s a good fit for investors who can’t check the markets daily but have set long-term price goals.
Patient investors can also wait for the right conditions over a few weeks or many months.
What Are The Pros of Day Orders & GTC Orders?
Day Orders will typically have the benefit of reduced market exposure because risk is limited to whatever market volatility takes place during market hours on the day the order is placed.
It also lets you be flexible because you can adjust your trading strategies daily, depending on market conditions.
Meanwhile, GTC Orders permit a high degree of convenience because they allow you to virtually set and forget the trade and lower the need to monitor the market constantly.
As a result, they align well with long-term strategies and are good for investors focused on specific price goals without being affected by short-term volatility.
What Can Go Wrong with Day Orders & GTC Orders?
Day Orders do come at the potential cost of missed opportunities, particularly when a stock hits your target price after market hours in which case your order won’t execute.
They also tend to require frequent monitoring so you need to be active and attentive, which may not suit every investor.
In contrast, GTC Orders are exposed to market fluctuations and so prolonged exposure to market volatility poses the threat of being a double-edged sword.
It’s also possible that the risk of order staleness rises, meaning that prices may change significantly over time and so your original order less relevant.
What Is The Best Practice To Submit a Day or GTC Order?
When submitting a Day Order, it’s generally good practice to submit a limit order that specifies the maximum or minimum price you are willing to pay or receive and to prevent paying more or selling for less than desired.
With GTC Orders it’s best to review and adjust your order to ensure that it still aligns with your investment goals, and this is especially true during earnings seasons or major economic events.
What Pitfalls Should You Look to Sidestep?
Some brokers set an automatic expiration after a set number of days so don’t be lulled into a false sense of security and ignore expiration policies for these GTC orders.
It’s always a good idea to check pre-market or after-hours activity to get a pulse on potential price movements that could impact your order. The risk of blindly placing an order without staying aware of market activity is that you could get a poor fill on your trade or get whipsawed easily if markets are turbulent.
With GTC orders, make sure to set target prices that are realistic and based on the stock’s trading history and market conditions. Some traders set unrealistic price points and find themselves unnecessarily disappointed later on.
Advanced Applications
For those looking to automate their trading, it’s possible to combine GTC orders with automatic alerts or conditional orders that lend themselves more to sophisticated trading strategies.
So too is it possible to use GTC orders as part of a portfolio rebalancing strategy to manage risk and sell positions when certain price thresholds are reached.
Current Trends vs Historical Perspective
Information flows are fast these days and markets tend to reflect that speed so retail investors tend to favor GTC orders for long-term strategies while active traders prefer Day Orders to make quick gains.
Historically, Day Orders were traditionally more common but GTC orders gained popularity with the rise of online brokerage platforms.
Final Words
If you’re looking to place a Day Order or GTC Order, platforms like Charles Schwab, TD Ameritrade, and Fidelity offer different features for managing these order types.
Finally, professionals often recommend GTC orders for key entry and exit points, especially in less liquid stocks while active traders prefer Day Orders to keep their strategies adaptable and minimize overnight risks.
#1 Stock For The Next 7 Days
When Financhill publishes its #1 stock, listen up. After all, the #1 stock is the cream of the crop, even when markets crash.
Financhill just revealed its top stock for investors right now... so there's no better time to claim your slice of the pie.
See The #1 Stock Now >>The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.