The world of stock markets is vast and filled with complex terminologies and trading mechanisms that can be daunting for beginners. One such term that has gained popularity in recent years is GTT, which stands for Good Till Triggered. In this comprehensive guide, we will dive deep into the concept of GTT in the share market, how it works, its benefits, limitations, and how traders and investors can use it effectively to manage their portfolios.
What is GTT in the Share Market?
GTT (Good Till Triggered) is a type of order mechanism provided by many stockbrokers that allows traders and investors to set a predefined price at which they want to buy or sell a stock. Unlike traditional limit orders, which expire at the end of the trading day, a GTT order remains active until it is either triggered or manually canceled.
This functionality is particularly useful for investors who want to execute trades at specific price levels without continuously monitoring the market.
How Does GTT Work?
Setting a Trigger Price
When placing a GTT order, you specify a "trigger price" and an actual "execution price."
The trigger price is the condition that activates the order. For example, if you want to buy a stock when its price falls to ₹100, ₹100 becomes your trigger price.
Order Execution
Once the stock reaches the trigger price, the system automatically places an order at the predefined execution price.
The execution price for buy orders is either equal to or less than the designated trigger price. It will never exceed the trigger price for a buy order.
Validity Period
The GTT order remains active for a set duration, which could be days, weeks, or months, depending on the broker’s policy.
Types of GTT Orders
1. Buy GTT Orders
A Buy GTT order is executed when the market price of a stock reaches a pre-defined purchase price. It ensures that you do not overpay for a stock and helps you acquire it at your desired price level.
Example:
Current Price of Stock A: ₹120
Trigger Price: ₹100
Execution Price: ₹99
When the stock price falls to ₹100, the system will place a buy order at ₹99 or the most favorable available price.
2. Sell GTT Orders
A Sell GTT order is useful for locking in profits or minimizing losses by selling a stock when it reaches a specific price.
Example:
Current Price of Stock B: ₹200
Trigger Price: ₹220
Execution Price: ₹225
When the stock price rises to ₹220, the system will place a sell order at ₹225 or the best available price.
Benefits of GTT Orders
1. Convenience
GTT orders free up investors' time by automating trades and reducing the need for constant market watching.
2. Risk Management
By setting trigger prices, you can manage your risk effectively. As an illustration, stop-loss GTT orders contribute to the limitation of potential losses.
3. Time-Saving
GTT eliminates the need to manually track stock prices every day. Your orders remain active for an extended period, depending on your broker’s policies.
4. Precision in Execution
GTT ensures that trades are executed only when the predefined conditions are met, providing greater control over your investments.
5. Flexibility
You can use GTT orders for both long-term investments and short-term trades.
Limitations of GTT Orders
While GTT is a powerful tool, it has some limitations:
1. Trigger Dependency
The execution of the order relies on the stock reaching the trigger price. The order shall not be executed until the stock price achieves the designated level.
2. Validity Period
Some brokers may limit the duration for which a GTT order remains active. After expiration, the order must be re-entered.
3. Market Volatility
In highly volatile markets, the execution price might deviate significantly from the trigger price due to sudden price swings.
4. Brokerage Restrictions
Not all brokers offer GTT orders, and some may charge additional fees for this service.
How to Place a GTT Order?
Placing a GTT order is straightforward and can be done via the trading platforms of brokers that offer this feature. Here's a step-by-step guide:
Log in to Your Trading Account
Access your broker's platform (website or app).
Select the Stock
Choose the stock for which you want to set a GTT order.
Choose Order Type
Select the option for GTT orders.
Set Trigger and Execution Prices
Enter the desired trigger price and execution price.
Review and Confirm
Double-check the details and confirm your order.
Monitor the Order
The order will remain active until triggered or canceled.
Use Cases for GTT Orders
1. Long-Term Investors
Long-term investors can use GTT to accumulate stocks at lower prices during market dips without active involvement.
2. Swing Traders
Swing traders can set GTT orders to buy and sell stocks within a specific price range, capitalizing on short-term market movements.
3. Stop-Loss Mechanism
GTT can act as an effective stop-loss tool, helping investors minimize losses by selling a stock when it falls below a certain price.
GTT vs. Other Order Types
FeatureGTT OrdersLimit OrdersMarket OrdersDurationValid until triggeredExpires dailyImmediate executionTrigger ConditionYesNoNoControl Over PriceHighHighLowMarket MonitoringMinimalRequiredRequired
Brokers Offering GTT Orders
Several leading stockbrokers in India and globally provide GTT functionality. Some notable ones include:
Zerodha: Known for its user-friendly interface and extended GTT validity.
Upstox: Offers GTT orders with no additional charges.
Angel One: Provides advanced GTT options for retail investors.
Conclusion
GTT (Good Till Triggered) is a game-changing feature for investors and traders who want to automate their trading strategies and reduce the stress of active market monitoring. By allowing users to set predefined trigger prices, GTT ensures trades are executed precisely as planned.
While it offers numerous advantages, such as convenience, precision, and risk management, it is essential to understand its limitations and use it in conjunction with other trading strategies. Whether you are a long-term investor or a short-term trader, mastering the use of GTT orders can significantly enhance your trading experience.