GTT, or Good Till Triggered, is a type of stock market order that allows traders or investors to buy and sell stocks at a specific set trigger price. While an intraday or delivery order is valid for a single market day, a GTT order remains valid for one year from the time you set it.
This helps investors save time by continuously monitoring their investments every day. For example, you have the shares of X company at ₹200, and your assumption is the stock will reach ₹240. It may happen that when the price hits this mark, you are not actively monitoring the market. However, this is not a problem with a GTT order.
In this blog, you will learn more about placing a GTT order so that you can use it in your investment journey. Let’s get started.
What Are the Types of GTT Orders?
There are two types of GTT orders available:
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Single Trigger
In a single trigger GTT order, you can only set the trigger price and the limit price of buy and sell orders. The execution process is simple.
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One Cancels the Other (OCO) trigger
In an OCO order, you can set both stop loss and target price along with the trigger price of your order. The execution process is comparatively complex and depends if your trading platform allows it.
Definition and Key Features of GTT Orders
In simple terms, with a GTT order, you are asking your broker to place a buy or sell order only when it matches your set target price. You can set a trigger price as well as a limit price with your GTT order. To use this facility, place a sell order in your broker’s platform and select ‘GTT’ in the order type. Your broker will automatically place the sell order when the stock price hits the mark.
When the stock reaches your preset target price, the broker will place your order with the stock exchange, and the exchange will match and execute your order. Thus, the GTT option helps you to complete orders at any desired target price.
However, a GTT order does not trigger more than once. So, if the order is not executed within the specific market day, it will be cancelled, and you will have to place another GTT order. These are some key features of GTT orders:
- For the equity segment, a GTT is valid for 365 days, and in the F & O segment, it is valid only up to its expiry date. Also, some brokers may not have a GTT option for F&O orders.
- When you select the order type as GTT, you can also select it as a market order or limit order.
- At a particular time, you can place a maximum of 100 GTT orders in your trading account. However, this limit varies with different stock brokers.
- The best part is that no additional charges are levied by a broker to use this feature.
- If you place a GTT in a derivative market, your broker will cancel it if the price is beyond the contract’s execution range.
How a GTT Order Functions in the Stock Market?
Here are some important things to know about a GTT order in the share market:
- To use a GTT order, a trader or investor needs to set the order type as GTT. Then, they have to set their trigger price and target price.
- If the security hits the target price, your buy or sell order will be automatically placed at the stock exchange by your stock broker.
- If you set a limit price with your GTT order, it will be executed only if the price hits your set price. Otherwise, your order will be executed as a market order.
- Fund availability in your account does not matter when placing a GTT order. However, note that if your trading account does not have enough funds to execute the order, your GTT order will be canceled even if it hits the trigger price.
- Until and unless the trigger price is hit, you can modify your order, including its target price, limit order price, and quantity.
- You will receive an email notification from the broker once a GTT order is executed in your account.
What are the Advantages of Using GTT in Trading?
Here are the advantages of using GTT in trading:
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Flexibility
As discussed, it allows traders to set a trigger price and limit price so that they can execute orders at their desired price.
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Risk management
Traders can use this order type to manage risk as it allows them to set a predefined price for exit and entry prices.
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Automation
It saves traders time and effort as it automatically places their order once the price hits the set trigger price.
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Convenience
GTT orders remain active for 365 days unless cancelled or executed. This eliminates the need to monitor the target market every day.
What are the Limitations of GTT Orders?
There are also some limitations of GTT orders that traders need to be aware of:
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Holdings verification
A common problem if you are selling a security from your holdings is the need for multiple verifications. Every day, you need to verify your holdings using T-Pin and OTP to execute the order. Even if the trigger price hits, your order will not be executed if your holdings are not verified.
However, you can solve this problem using the DDPI verification system, which needs a one-time fee of ₹100 + 18% GST = ₹118.
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Execution risk
If a security does not reach your trigger price before the order expires, the GTT order will not be executed.
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Liquidity risk
If the security is not liquid, the execution of the order will be difficult at your desired price.
How to Use GTT Orders in the Share Market Effectively?
To effectively use a GTT order, here are some tips to follow:
- As discussed above, you can activate DDPI so that you don’t need to verify your holdings every day.
- Set a limit price and trigger price so that your order is not executed at a market price that is far away from your desired price due to high volatility conditions.
- Though it reduces the need for constant monitoring, you should keep updates or follow every news about your specific security so that you can change your strategy as per market conditions.
Final Thoughts
Hopefully, at this point, you have all the details regarding what is GTT order and its various aspects. In short, a GTT order is an advanced tool that allows you to automate your trading strategies. It ensures your order is placed only if your set conditions are met.
However, before you place a GTT, make sure to understand its risks and limitations and manage your risks effectively.
