Exit on Timely Basis with GTT Orders

Trading in the stock market is always marketed as a ‘passive, part-time’ activity. Everyone will have you believe that you only need to spare two to three hours a day and you will be rich. But this is not the case. At least, not yet. You see, you cannot really switch off from trading, especially if you have active open positions. Can you imagine waiting for weeks and months for a stock to reach a particular price point, only to miss out on buying the stock because you were out on a vacation? Or on a bathroom break? Or worse, weren’t paying attention? This is why you would see traders anxiously gazing at their phones every few seconds, whether in trains or in between meetings. The funniest instance is when traders are vacationing in the hills and searching for even the faintest internet signal so they can place a buy or sell order. The truth is that traders don’t get a day off. We are perennially waiting for the perfect opportunity to enter or exit a stock.

If any of this looks or sounds like you, then you have a problem and we have the solution – Good Till Triggered (GTT) order. What is Good Till Triggered Order? Good Till Triggered order is the newest order type provided by Samco. It is nothing short of a life-saver for swing and positional traders. In a normal order, when you place a buy or sell order at a specific price, what will happen at the end of the trading day? If that specific price point is not reached, then the order is automatically cancelled by the exchange. So, suppose you want to buy 100 shares of Reliance Industries Ltd. currently trading at Rs 2,529.15 per share. But you think this price is a bit high. So, you place a buy order at Rs 2,500 per share. Now you wait till the end of the trading day, but the stock market gods are in no mood to give you a discount. So, the buy order gets cancelled. You try again the next day and the next day, till you eventually give up. And as is life, the day you forget to place a buy order is the day the stock falls to your desired purchase price. But unfortunately you have missed this buying opportunity. This wouldn’t have happened if you had placed a GTT order. In the above example, if you had initiated a GTT order, then your buy order of Rs 2,500 would stay active for weeks and months. Simply put, a GTT order has no expiry date. So, even if the order is not triggered at the end of the trading day, it will still stay alive or active the next day, the next week and even the next month. This order is specifically designed for positional or swing traders who take long-term calls on a stock and have to track the stock price like a hawk. GTT orders are especially helpful when setting up a stop-loss order. Now, there is an unwritten rule in the stock market – you must always use a stop loss. This is akin to wearing a seat belt while driving. Neglecting stop-loss can be the final nail in the coffin for retail investors. Let us see how you can reduce your losses by setting up a stop loss with and without a GTT order. Two friends, Karan and Varun decide to buy 1,000 shares of Zomato Ltd. on November 09, 2021 at a share price of Rs 131.15. Both set a mental target price of Rs 200. Simultaneously, they book a road trip to Ladakh for January 2022. While both of them believe in the upside potential of the stock, they also decide to be cautious and put in a stop loss order, just in case the call went awry. They both set a stop-loss of Rs 125, which is the previous low of the stock. But their approach to setting up the stop-loss order was different. Karan used to track the stock every day and punch in a stop-loss order daily. His normal stop-loss order would get canceled at the end of every day for the next two months. On the other hand, Varun decided to set a GTT stop loss order. So, he set a stop loss order for Rs 125 only once and it remained active for weeks and months. Then came January 2022 and the two friends went off on their Ladakh trip. As they started their uphill journey, enjoying the views of the mountains, unbeknownst to them, the stock price of Zomato had began its descent.

Fortunately for Varun, his GTT stop loss order got triggered on January 20, 2022. So, his loss was limited to Rs 6.15 per share or Rs 6,150 in total. But Karan wasn’t this lucky. Since he used to manually punch in the stop loss order every day, and he was in Ladakh when the stock fell, Karan was unable to exit his position. By the time they came back on January 24, 2022, the stock price of Zomato had reached a low of Rs 90.05. So, Karan’s loss was Rs 41.10 per share or Rs 41,100 in total. A simple GTT stop-loss order would cost Karan nearly Rs 35,000!

This is how a GTT stop loss can help you avoid heart breaks in the stock market. Apart from this, a GTT order type also helps you benefit from breakouts, and identify entry and exit points. All this is possible without being you being anxious all the time. So, the next time you have a long term view on a stock, instead of stalking it, simply set a GTT order and sit back. Irrespective of the time, whenever the trade is executed you will receive a notification on Samco App alerting you of the order execution. So, the next time you are out vacationing, do yourself a favor and spend time with your loved ones instead of chasing stock prices. Isn’t that the whole point behind having multiple passive income sources? To enjoy your life? Simply leave the job of tracking stock prices to experts, which in this case is GTT – Good Till Triggered. Watch a short video by Samco’s Chief Markets Editor, Mr. Apurva Sheth, as he shares a few case studies where the stocks slipped below the support line and how GTT orders could’ve helped exit open positions.