ÍIn the dynamic world of stock trading, timing is everything. Investors and traders are constantly on the lookout for efficient ways to execute their trades and capitalize on market opportunities. One such tool that has gained popularity is the GTT (Good Till Triggered) order. In this article, we will explore what GTT orders are, how they work, and why they can be beneficial for traders. We will also provide some examples to help you better understand this powerful trading tool.
What is a GTT Order?
- Definition and Purpose: A GTT order is a conditional order that remains active until a specific trigger condition is met.
- Flexibility and Control: GTT orders provide traders with the flexibility to set predefined conditions to execute trades automatically, even when they are away from the trading platform.
How Does a GTT Order Work?
- Setting Trigger Conditions: Traders can define various trigger conditions, such as price levels, indicators, or specific events, which, when met, will activate the GTT order.
- Order Activation: Once the trigger condition is satisfied, the GTT order is activated and sent to the market for execution.
- Order Validity: A GTT order remains valid for one year, but it will expire if the stock does not reach the desired level within that time period.
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Advantages of Using GTT Orders:
- Flexibility and Convenience: GTT orders allow traders to automate their trading strategies, freeing up time and reducing the need for constant monitoring.
- Emotion-Free Execution: By removing emotions from the decision-making process, GTT orders help traders avoid impulsive trading decisions driven by short-term market fluctuations.
- Precision and Speed: GTT orders enable traders to execute trades swiftly and precisely once the trigger condition is met, minimizing the risk of missing out on potential opportunities.
Effective Strategies for GTT Order Usage:
- Stop-Loss and Take-Profit Orders: Traders can use GTT orders to automatically trigger stop-loss orders to limit potential losses or take-profit orders to secure profits.
- Breakout and Support/Resistance Strategies: GTT orders can be set to trigger when a stock or asset breaks out of a specific price range or reaches a significant support/resistance level.
- News-Based Trading: Traders can use GTT orders to react swiftly to news events by setting trigger conditions based on specific news announcements or market indicators.
Market Volatility: During highly volatile periods, trigger conditions may be met more frequently, potentially leading to an increased number of executed orders.
Order Execution Risk: GTT orders are subject to market liquidity and may not be executed at the desired price during fast-moving markets or gaps.
To illustrate the application of GTT orders, here are a few examples with hypothetical stock names:
Example 1 – Buy Order:
- Stock: ABC Company
- Trigger Price: $50
- Limit Price: $52
- Condition: Buy 100 shares of ABC Company if the stock price reaches $50 or lower, and execute the trade at a limit price of $52 or lower.
Example 2 – Sell Order:
- Stock: XYZ Corporation
- Trigger Price: $80
- Market Price: Market
- Condition: Sell 200 shares of XYZ Corporation if the stock price reaches $80 or higher. Execute the trade at the best available market price.
More Examples of GTT Orders :
- Example 1: Let’s say you want to buy shares of XYZ company when the price drops to INR 100 per share. You can place a GTT order with a trigger price of INR 100 and a limit price of INR 99. If the market price reaches INR 100, your GTT order will be triggered, and if the price drops to INR 99, the order will be executed automatically.
- Example 2: Suppose you own shares of ABC company and want to sell them if the price reaches INR 150. You can set a GTT order with a trigger price of INR 150 and a limit price of INR 151. If the market price reaches INR 150, your GTT order will be triggered, and if the price rises to INR 151, the order will be executed.
FAQ’s about GTT Order :
When a GTT order is triggered, its order history is only visible on the same day and does not carry over to the next day. For a single account, there is a maximum limit of 100 active GTT orders allowed at any given time.
Let's imagine a situation where you want to place a GTT (Good Till Time) order to buy shares of a company called Reliance. The current market price (CMP) of Reliance is ₹2322. To place the GTT order, you need to enter a trigger price and a target price. In this scenario, you decide to set the trigger price as ₹2300 and the target price as ₹2305. Remember, for a GTT order to buy below the CMP, both the trigger price and target price should be lower than the current market price.
The limit of a GTT order depends on the specific trading platform or brokerage you are using. Different platforms may have different limits for GTT orders, so it is best to consult the terms and conditions or contact the platform directly to find out their specific limitations.
You do not require any cash or available margins in your account to set up a GTT (Good Till Triggered) order. The system only verifies margin availability when the GTT is activated and an order needs to be executed on the exchange. At that point, it is necessary to have sufficient margin funds available.
GTT (Good Till Triggered) orders provide traders with a powerful tool to execute trades efficiently while minimizing the need for constant market monitoring. By setting specific trigger and limit prices, traders can take advantage of market opportunities without succumbing to impulsive decisions. GTT orders offer flexibility and time-saving benefits, allowing traders to focus on their overall trading strategy. Incorporating GTT orders into your trading approach can help improve decision-making and potentially enhance trading outcomes.