In the fast-paced world of trading, timing is everything. But what if you could automate your entries and exits, ensuring you capture the perfect opportunity without needing to be glued to your screen? That’s where Good Till Triggered (GTT) orders come in, offering a powerful tool for busy investors and traders alike.
What is a GTT Order?
Simply put, a GTT order instructs your broker to perform a trade when a specific price condition is met. You set a trigger price, and the order remains active until that price is reached. Once triggered, the order automatically becomes a market or limit order, depending on your chosen type, and executes at the prevailing market price or your specified limit price.
Benefits of Using GTT Orders:
· Automate your trading: No more frantically watching charts and placing orders in the heat of the moment. GTT orders handle your execution, freeing time and reducing emotional trading decisions.
· Improved discipline: By pre-defining your entry and exit points, GTT orders help you stick to your trading plan and avoid impulsive trades based on market noise.
· Capture fleeting opportunities: Don’t miss out on that perfect price point while you’re away from the screen. GTT orders ensure you capture opportunities that align with your strategy.
· Reduce stress: Eliminate the constant monitoring and order placement, leading to a calmer and more focused trading experience.
Types of GTT Orders:
· Buy GTT: Instructs your broker to buy a security when the price reaches or falls below your trigger price.
· Sell GTT: Instruct your broker to sell a security when the price reaches or rises above your trigger price.
· OCO GTT (Order Cancels Other): Combines two GTT orders, one buy, and one sell, with the condition that if one is filled, the other is automatically canceled. This helps manage risk by setting both entry and exit points.
How GTT Orders Work:
1. Set your conditions: Define the trigger price, order type (market or limit), and quantity.
2. Wait for the trigger: The order remains inactive until the market price touches the trigger price.
3. Order conversion: Once triggered, the GTT converts into a regular order, ready for execution.
4. Execution: The order executes at the specified price (market order) or the best available price (limit order).
Who Should Use GTT Orders?
GTT orders are beneficial for various traders, including:
· Busy professionals: Automate trades and manage time effectively.
· Long-term investors: Set buy or sell orders at specific price points.
· Risk-averse traders: Implement stop-loss and take-profit orders for risk management.
· Swing traders: Automate entry and exit points based on technical analysis.
Beyond the Basics:
While GTT orders offer a powerful tool, it’s crucial to understand their limitations and use them strategically. Here are some additional tips:
· Set realistic trigger prices: Don’t chase unrealistic price targets, which can direct to missed opportunities and frustration.
· Use GTT orders with other risk management tools: Stop-loss orders can further protect your capital, while take-profit orders help lock in gains.
· Back-test your strategy: Simulate your GTT orders using historical data to assess their effectiveness before risking real capital.
· Stay informed: Keep up-to-date with changes in your broker’s GTT order policies or functionality.
By mastering GTT orders, you can unlock a new level of efficiency and discipline in your trading. Remember, knowledge is power, so take the time to understand how GTT orders work and how they can play a part in your overall trading strategy.
Mastering the Art of GTT Orders:
GTT orders can be a valuable tool for both novice and experienced traders. By understanding their mechanics, benefits, limitations, and potential risks, you can leverage them to automate your trading strategies, improve efficiency, and potentially enhance your trading performance. Responsible trading requires knowledge, discipline, and risk management, and GTT orders should be part of a comprehensive trading plan.
Conclusion:
GTT orders are powerful tools to enhance your trading experience by automating entries and exits, reducing emotional trading, and improving risk management. By understanding the various features and benefits, you can leverage GTT orders to achieve your trading goals efficiently and effectively. Responsible trading practices are crucial, so always conduct detailed research and understand the risks involved before placing any trade.
Bonus Tips:
· For more advanced users, explore combining GTT orders with technical analysis indicators to create more sophisticated entry and exit triggers.
· Consider using GTT orders for recurring investments, such as regular contributions to an index fund.
Disclaimer: This blog is for information purposes only and should not be considered financial advice. Please talk to the qualified financial advisor before making any investment decisions.
Frequently Asked Questions (FAQs) about GTT Orders:
What happens if the trigger price is never reached?
The GTT order remains active for a specific period (usually one year) until the trigger price is hit or expires. You can always cancel the order manually if needed.
Do GTT orders guarantee price execution?
No, GTT orders are still subject to market conditions. If the trigger price is breached quickly and there is insufficient liquidity at your desired limit price, the order might not be filled.
Can I use GTT orders for intraday trading?
No, GTT orders are typically unsuitable for intraday trading due to their one-year validity period. Look for specific intraday order types offered by your platform.
Are there any fees associated with GTT orders?
Most brokerage platforms don’t charge additional fees for using GTT orders. However, it’s always best to check with your specific platform for their fee structure.
What are some risks of using GTT orders?
Market volatility can cause unintended executions if trigger prices are too close to current market prices. Ensure you understand the risks and use GTT orders with proper risk management strategies.
How long are GTT orders valid?
The validity period varies depending on the broker, but it’s typically 365 days from the order placement.
What happens if the trigger price is not reached within the validity period?
The order expires and needs to be replaced.
Can I cancel a GTT order before it’s triggered?
Yes, you can cancel a GTT order before it’s triggered.
What are the risks of using GTT orders?
GTT orders can still be subject to slippage if the market price moves quickly after the trigger is hit. They may only be suitable for some trading strategies, especially those requiring frequent adjustments.
Are GTT orders available for all securities and order types?
Availability may vary depending on your broker and the specific security you’re trading.
What happens if the trigger price is skipped?
The order remains active until the trigger price is reached.
Can I cancel a GTT order?
Yes, you can cancel a GTT order before it’s triggered.
Are there any fees associated with GTT orders?
Some brokerages may charge a small fee for using GTT orders.
Can I use GTT orders for options trading?
Yes, some brokerages allow GTT orders for options trading with specific limitations.