GTT Orders Explained

What Is a GTT Order?

A good till triggered order (GTT) is an advanced investment order type that allows investors to set a conditional buy or sell order. This GTT order remains active until the predefined trigger is reached (Most GTT orders lasts upto 365 days until triggered) or until the order expires according to the validity period, or the investor cancels it manually.

Unlike the traditional orders such as market or limit orders that remain valid only for the current trading session, a GTT order remains active for an extended period. This benefits investors by allowing them to define a future preferred price level at which they wish to buy or sell the stock, thus freeing them from the challenge of placing the same order repeatedly until their desired price is reached. Once the stock price reaches a specified trigger level, the dedicated trading platform automatically places the buy or sell order on the exchange. 

Let’s understand through this example:

Suppose a stock is currently trading at ₹2,500. But an investor is looking to purchase this stock only when it reaches ₹2,350. So, instead of consistently monitoring the price of stock throughout the day, the investor can set a good till triggered order, with a trigger price of ₹2,350. As soon as the stock reaches this level during the order validity period, the order will be automatically activated.

In a similar manner, the investors can also sell their holdings or shares using a GTT order. Once the desired target price is reached, the GTT order allows investors to capture profits by selling the stock automatically, without the need to monitor the market continuously.

How Good Till Triggered Orders Work

The GTT order in stock market works by following a step-by-step approach:

Step 1: Selecting the Desired Stock

The investor selects the stock that is to be purchased or sold.

Step 2: Setting the Trigger and Limit Price

The investor defines the trigger price at which the order gets activated. That means as soon as the stock’s LTP (Last Traded Price) touches this defined price, the GTT order gets activated. The investor is also required to define the limit price, which is the specific price at which the order is placed once triggered. 

For example, for a current stock trading at ₹500, the investor can set a trigger price of ₹485 and a limit price of ₹480.

 Step 3: Specifying the Order Details

As soon as the trigger gets activated, the system places the chosen order. Continuing the above example of a current stock of ₹500, whenever the stock touches ₹485, the GTT order will get triggered, and a limit order to buy the stock at ₹480 will get automatically triggered in the exchange.

Step 4: Order Remains Active

The GTT order defined by the investor will remain active until the trigger price is reached, the order is manually cancelled, or validity expires.

Step 5: Order is Triggered

Once the stock touches the defined triggered price, the platform submits the order to the stock exchange.

Types of GTT Orders

While many stock brokers may offer slight variations, primarily, the GTT orders are of two types:

Single Trigger GTT Order

In this type of GTT order, the investor is allowed to set only one trigger price (buy or sell). It is typically used by investors who want to either purchase a stock at a lower price or sell a stock after it reaches a target price.

Once the market reaches or crosses this defined trigger price, the GTT order automatically gets activated and is sent for execution to the exchange.

One Cancels Other (OCO) GTT Order

It is also known as the two-leg or the bracket GTT order. Using this order, the investors can set two triggers simultaneously: a stop-loss trigger and a target price. As soon as either the trigger price or the limit is reached, the remaining order (the other price) automatically gets cancelled. That means only one of the two orders gets executed.

For example, suppose an investor purchases shares of ₹500. The target price is defined as ₹560, and the stop-loss trigger is defined as ₹470. Now, if the stock rises to ₹560, the sell order is executed, and the stop-loss order gets cancelled automatically. But if the price declines to ₹470 first, then the stop-loss order gets activated, and the target order is cancelled.

GTT Order vs Stop-Loss Order

A GTT order or a stop-loss order both help investors automate the trades; however, each one operates differently and serves a different purpose:

In simple words, a stop-loss order focuses on protecting the existing investments from the downside risks; on the other hand, a good till triggered order focuses on offering flexibility to the investors by allowing them to automate both buy and sell orders for a longer period of time.

When Can Investors Use GTT Orders?

For stock investors, a GTT order is particularly useful when the investors already have a predefined investment strategy but do not have the flexibility to monitor the stock throughout the day. Let’s explore some of the common situations where investors can utilize a good till triggered order:

When Buying a Stock at a Desired Price

Most long-term investors looking to invest in preferred quality stocks often invest only after the price of the stock falls to an attractive buying level. So, rather than wasting time and effort in constantly checking the desired stock price, the investor can place a GTT order in stock market platform with a defined triggered price.

Gain Booking Profits

For investors who already own shares, they can make use of a GTT order to sell these shares as soon as the stock reaches a desired target price. This way, shareholders can gain profits without manually tracking the price fluctuations.

Risk Management

Investors who want to manage risks while investing in stocks can utilize OCO GTT orders. They can define both a profit target and a stop-loss trigger to protect investments from sudden market movements.

For Long-Term Investing

Many investors use GTT orders to accumulate stocks gradually. Moreover, since the GTT remains active for an extended period, investors are not required to place orders with every trading session.

To React to Market Volatility

Sudden price movements in stock markets are common. Investors can use a GTT order to react automatically to these price fluctuations without tracking the stock price changes manually. This also helps investors to identify potential market opportunities during volatile market conditions.

Benefits of GTT Orders

Utilizing GTT orders is an efficient way to automate trading while maintaining control over investments. Here are some of the top benefits of GTT orders: 

Saves Time 

GTT orders reduce the need to monitor the stock prices continuously. Once the trigger price is set, the order monitors the price and executes the buy or sell action automatically when the preferred price is triggered.

Increased Order Validity

The GTT orders have an extended validity period of a year until they are triggered, manually cancelled or reach expiry according to the broker’s policy.

OCO GTT Orders

Many brokers offer OCO (One Cancels the Other) GTT order, which allows investors to set both a target price and a stop-loss to prevent any risk. If any of the set price triggers, the other gets automatically cancelled.

A Disciplined Investment Strategy

Investors get the flexibility to define their entry and exit prices for the stocks. This helps in protecting the stock portfolio from impulsive or emotional trading.

Limitations and Things to Remember

While a GTT order can be an efficient way to automate stock trading, investors must know certain limitations and important things to remember before placing a GTT order:

A Trigger Does Not Guarantee GTT Order Execution

Most investors consider that the GTT order will execute as soon as the stock price reaches the triggered preferred price. However, the trigger only activates the order; the order execution depends on the matching market conditions. Such as if the sufficient liquidity for the investment is unavailable or the market price moves suddenly beyond your limit price, the order may remain pending or partially executed.

Broker Dependent Validity

GTT orders may remain active for a longer period of time than regular orders. However, different brokers may specify different validity periods after which the GTT order expires automatically.

CDSL Authorization

Investors who do not have an active DDPI (Demat Debit and Pledge Instruction) or a provided POA (Power of Attorney) to the broker will be required to authorize the sell transaction through a CDSL TPIN once a GTT order is triggered. 

Corporate Actions

Stock splits, bonus issues, or large dividend payouts can lead to cancellation of GTT orders for specific stocks, as these actions might have a substantial impact on the stock price or affect its trading characteristics.

Product Types

The functionality of most GTT orders is restricted to CNC (Cash and Carry) and NRML (Normal) product types. Many GTT orders might not be available for MIS (Margin Intraday Square-off) trades, as these trades are intended to be opened and closed on the same day.

GTT Order Example

To gain an in-depth understanding of GTT orders, let’s go through the following example:

Suppose a stock of the ABC company is currently trading at ₹1,000. An interested investor wants to invest in this stock when it reaches a better price of ₹900. So, instead of manually checking the price every day, the investor places a GTT order by defining prices:

Target Price: ₹901

Limit Price: ₹900

Then, according to the defined prices, here’s how the GTT order process will work:

• Till the stock continues to trade at ₹1000, the GTT order is not triggered.
• As soon as the stock price declines to ₹901, the trading platform will automatically place the limit buy order at ₹900 on the exchange.
• If the seller is ready and available at ₹900, the GTT order is executed to buy the stock.
• However, if the stock rebounds all of a sudden, with trading at ₹900, then the order may not get executed or remain pending.

Thus, in a GTT order, the trigger price activates the order, while the limit price helps in determining the maximum price an investor is ready to pay.