Good Till Cancelled vs. Day Order
When trading there are two different order types. One is a day order and one is good till cancelled.
What’s the difference between these two order types, and which one should you use when? That’s what we’re going to talk about right now. Day order vs. good till cancelled.
When you place an order there are 5 things your broker needs to know.
- What you want to trade. What stock, option, futures or EFT?
- If you want to buy or sell. You need to define if you want to trade.
- How many shares, options or ETFs you want to trade
- At what price you want to buy or sell.
- How long should the order be valid? For the day or GTC (good till cancelled)?
The difference between day order vs. good till cancelled
When you place a day order it means that this order is valid for the trading day.
Meaning, if you place it the night before when the markets are closed, it means that it’s valid for the next trading session.
And the trading session is from 9:30am Eastern to 4:00pm.
Now, one of the following two things will happen with the day order.
Either it gets filled throughout the day, since you are specifying a certain price and what you want to get filled it might or might not happen.
When it happens, this order will be filled and then you have a position.
If it’s not being filled, so if prices never went to the level that you specified, the order is automatically being cancelled at the end of the day.
When should you use a day order?
For me personally, I use a day order when I want to enter a position.
It doesn’t matter whether you want to buy a stock, because you are betting on a rising market, or you want to sell a stock because you are betting on a falling market.
When you enter a position you tell your broker for today do the following: If we get filled, yay, and if not, cancel the order.
The other option you have is specifying that the order is good till cancelled
Also known as GTC. What does this mean?
Here again specifying all five things.
- What you want to trade
- Whether you want to buy or sell
- How many shares or options you want to trade
- At what price?
- And then you say, “This order stays in the market until either I am getting filled at the specified price that I put in, or until I cancel the order.”
The main difference is that this order remains in the market until it gets filled or you decide to cancel it.
When should you use a GTC order?
Well, a GTC order is perfect for your exit.
I like to use GTC orders for my profit target and my stop loss.
Because if I would only use a day order it means that at the end of the day, my stop loss and profit target would disappear and I have to re-enter it the next day.
This is why I specify my stop loss and profit target as GTC, because I’m usually in a trade anywhere between 5 and 20 days and I do not want to re-enter the order every single day.
So I want to make sure that either the order gets filled or I manually hit the cancel button to get rid of the order.
In summary, you have two different types of orders.
- A day order, which is only valid for one trading day and these order types are best used for your entries.
- Good till cancelled or GTC, and that order type remains in the market until it gets filled or you’re cancelling it, best used for exit orders. And exit orders for me are stop loss and profit target.
I hope this helps. Leave a comment below and let me know.
To learn exactly how I trade, including how I pick stocks, when I enter and when I exit, visit www.mytradingroutine.com now for a free 35-minute video.