As you might expect, just because you place an order, it does not necessarily get executed. Both the timing and the duration of your orders are important to successfully managing your portfolio. When you place the orders mentioned above, you will usually be allowed to specify the duration of the order. You might be placing trades at night when the markets are closed, or you might be getting ready to go on a vacation where your access to the markets is limited, or you might be following a strict strategy that has very clear entry and exit prices.
When placing your Market, Limit or Stop orders, you can also place orders to control the duration of your order.
- Day Order: Regardless of the type of order you issue (market, limit, stop, etc.), a day order means it is only good for one day. Should your broker be unable to execute your order by the close of the business day, regardless of its type, your order is cancelled. Should your broker execute your order, in error, the next day, you are not obligated to honor it. Should you forget to specify a time period when you place your order, brokers will assume you’ve issued a day order.
- GTC (Good Till Canceled): A GTC orderA Good-Till-Cancelled order stays in effect until the order fills or it is cancelled by the account holder. indicates that your instructions to your broker are “open ended.” Technically, a GTC order stays in effect until it is executed or you cancel it. For everyone’s protection, many brokers will set their own time limits such as 60 or 90 days.
- Fill or Kill Order: Less common than the two favorites listed above, a fill or kill is a Limit OrdersAn order that only executes which the target price has been reached. that you want executed immediately. If your order cannot be filled exactly as placed, it is immediately killed or canceled.
Finally, understand that a new order typically cancels a former order. For example, let’s say you issue a day order to your broker combined with a stop order. You rethink your decision and issue a GTC. Your day order is canceled and replaced with a GTC.