What is GTT Order and How Does it Work | Motilal Oswal

What is GTT Order and How Does it Work




Have you ever used a trigger-based investment strategy?

A trigger is a limit you set on your investments, especially those linked to the market. Once the trigger is activated, the investment is automatically managed without your intervention. A GTT Order is one such trigger-based strategy used in stock investing. Let's understand.

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What is GTT Order?

GTT stands for Good Till Triggered. It is a strategy wherein you place a trigger on stocks. You can use the limit price or market price as the trigger and specify the action once the trigger is activated. You can buy or sell stocks after the trigger is activated using the GTT order.

For instance, say you place a GTT order for 500 units of stock once the market price reaches ₹200. Currently, the stock is trading at ₹250. In future, whenever the market price reaches the target of ₹200, 500 units will be automatically bought for your portfolio.

How to place a GTT order?

You can log into your account on your broker’s website or mobile application and choose the stock to place the GTT order.

Under the trading options on the stock, select GTT Order and specify the target price and the units you want to buy. Once the details are entered, you can submit the order, and it will be executed as soon as the specified trigger is activated.

The maximum number of active GTT orders you can place simultaneously depends on your broker.

What are the extra charges levied for a GTT order?

Usually, no additional charges are levied for placing a GTT order. However, check with your broker about the applicable charges.

Managing GTT orders 

After placing a GTT order, you can check it under your portfolio's ‘Orders’ section if the trigger is not activated. However, once the trigger has been activated, your portfolio is updated with the number of shares added or sold.

You also have the facility to modify or cancel an existing GTT order if the trigger is not yet activated. You can do so through your portfolio.

Paying for GTT orders

After you place a GTT order, no funds will be blocked in your account. However, when the trigger is activated, your trading account will block the relevant funds. If your account does not have the required balance to pay for the GTT order, the order will be cancelled after being triggered. That is why it is better to maintain a balance for the amount needed to complete the GTT order.

In the case of selling shares, your account would be activated immediately after the GTT order is executed. Remember, it might take time for the order to be executed even after it has been triggered.

It might happen that the trigger price has been crossed, but the order is not triggered. This is because the trigger follows the direction of the price movement based on the stock's Last Traded Price (LTP). For instance, say the LTP was ₹400, and you placed a trigger price of ₹450. So, when the LTP exceeds ₹450, the order will be placed.

In some cases, the GTT execution price differs from the trigger price. This happens because the order is placed when the LTP crosses the trigger price. However, the execution happens at the regular market price, which might be higher or lower than the LTP if you have placed the market price trigger. In the case of a limit price trigger, the GTT order would be executed at the specified limit price, nothing more, nothing less.

Execution of GTT orders

Even after the trigger is activated, the GTT order might not get executed. This can happen in two instances –

  • You placed a limit price trigger, and the limit price is not yet triggered.
  • You placed a market price trigger, but there are no interested traders.

Your order might also be cancelled or rejected in the following scenarios –

  • In a sell order, non-verification of the TPIN one day before the trigger was activated.
  • In a buy order, insufficient margin amount.

If you want to avoid constant monitoring of stock price movements and still lock in the right price to buy and sell securities, GTT orders can be a good choice. They can help you trade on a trigger-based strategy so that your portfolio is automated to execute trade orders. So, know about GTT orders and use the strategy for minimal intervention in stock trading without compromising on the returns.

 

Related Articles: Understanding order types and margining in commodities | When to use market orders and when to use limit orders | Understanding the nuances of smart order routing

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