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Good Through Orders: Navigating Trading with Precision, Examples, and Risk Assessment

Last updated 01/22/2024 by

Alessandra Nicole

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Summary:
Explore the intricacies of “Good Through,” a pragmatic time-in-force order used in trading. Uncover its role in strategic risk management and how it aids traders in navigating volatile markets with specific time parameters.

What is good through: a practical guide to time-in-force orders in trading

Good through orders play a pivotal role in the world of trading, serving as a pragmatic time-in-force order designed for precise control over trade execution. In this comprehensive guide, we delve into the practicalities of good through orders, shedding light on their functionality, advantages, and strategic applications.

Understanding good through

A good through order, often a stop-loss or limit order, remains valid until its specified expiration date unless executed, canceled, or amended. The flexibility of good through orders is exemplified by the “good ’til canceled” (GTC) order, effective until the investor decides otherwise.
Traders use good through instructions when placing trades, indicating the duration an order will stay active. This specificity is invaluable for active traders, preventing unintended trade executions—particularly crucial during market volatility when prices can rapidly fluctuate.
Time periods for good through orders are set by traders, such as “Good This Week” (GTW), “Good This Month” (GTM), or any other specified duration. This approach enables traders to avoid the risks associated with forgetting to cancel outdated trades.

Using good through order

  1. Pending News: Good through orders prove beneficial in scenarios with pending news, such as earnings reports. Setting an expiry date ensures automatic cancellation before expected volatility, eliminating the need for manual intervention and minimizing potential losses.
  2. Time-based Trading Strategy: Certain trading strategies demand timely entry into a stock. Good through orders are ideal for situations where traders anticipate a price breakout within a specific timeframe. This allows them to buy before the expected move or cancel the order if conditions don’t align with their strategy.
  3. Illiquid Markets: In illiquid stocks, good through orders reduce risk by automatically canceling open orders not filled by a set date. This proactive approach shields investors from exposure to significant price movements during sporadic trades, a common occurrence in illiquid markets.
  4. Good Through Order Example: Consider an investor placing an order in September to buy 100 shares of Apple (AAPL) with a limit of $350. By adding “Good This Month” (GTM), the order will expire at the close of business on Sept. 30 if not executed. This strategic use of good through orders provides traders with flexibility and risk management capabilities.
WEIGH THE RISKS AND BENEFITS
Here is a list of the benefits and drawbacks to consider.
Pros
  • Strategic risk management
  • Prevents unintended trade executions
  • Flexibility for active traders
Cons
  • Requires careful monitoring of expiration dates
  • May limit opportunities for quick market changes

Frequently asked questions

How does a good through order differ from a day order?

A day order lasts only until the end of the trading day, while a good through order remains active for a specified period or until canceled, providing more flexibility for traders.

Can a good through order be amended after placement?

Yes, a good through order can be amended before its expiration date. Traders have the flexibility to modify the order parameters to adapt to changing market conditions.

Are there any restrictions on using good through orders?

While good through orders provide flexibility, traders should be aware of any broker-specific restrictions or limitations on order durations to avoid potential complications.

Can a good through order be placed for extended periods, like months or years?

Yes, traders can set good through orders for extended periods, such as “Good This Month” or “Good This Year,” allowing for a longer-term strategic approach to trading.

Key Takeaways

  • Good through orders provide specific time parameters for trades.
  • Strategic use can prevent unintended trade executions.
  • Flexibility in expiration dates suits different trading strategies.
  • Especially useful in managing risks during pending news or illiquid market conditions.

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