End of Day Order: How it Works, Advantages

What Is an End of Day Order?

An end of day order is a buy or sell order for securities requested by an investor that is only open until the end of the day. This can be an order that initiates a new trade or closes an open trade, but either way, is set at a conditional price—usually as a stop or limit order.

Understanding End of Day Orders

An end of day order is any type of order for stocks or other assets made in a brokerage account that has a time limit set on it for the end of the given trading session for that day. This order is also known as a day order in contrast to good 'til canceled (GTC) orders.

The end of the trading session depends on which security is being traded and on which exchange the order is being placed. Stocks traded on the New York Stock Exchange (NYSE), or any other exchange that shares the same hours, close at 4 p.m. Eastern Time. By comparison, many agricultural futures traded through the Chicago Board of Trade (CBOT) close between 1:20 and 1:45 Central Time.

End of day orders must be transacted by the end of a trading day regardless of the time that the order is placed. Many broker-dealers will default to an end of day order. If the terms that the order specifies (such as a limit or stop price) are not met, then the order is canceled at the moment the session ends.

Order Options

Generally, investors have two-time frames they can choose from for the execution of their trade order. End of day orders offer a specified time frame and must be filled by the end of the trading day. Good ‘til canceled orders remain open indefinitely unless canceled by the investor. Both of these orders offer the full range of trade options to the investor. With either an end of day order or good ‘til canceled order, investors can choose from the following options:

• Market order: A market order does not have a specified price. This order can be placed at the market’s current rate for a specified security. These types of orders are typically executed within minutes during normal trading hours.
• Limit order: Limit orders are primarily used when buying a security below its market price or selling a security above its market price. These orders will set a specified price to buy that is below the current market price or a specified price to sell that is above the current market price.
• Stop order: Stop orders are primarily used to mitigate substantial losses on a security. A stop loss order is an order to sell that is initiated with a specified price that is below the market’s current price.

Advantages of an End of Day Order

End of day orders can be advantageous for a buyer because they do not have to continue following the order’s progress after the trading day has closed. Most market orders are typically placed immediately and therefore not a concern for end of day order cutoffs. End of day orders that are not executed for any reason will need to be re-entered again.

An end of day limit order frees an investor from the investment’s deduction in the future which allows them to place other trades. If an investor is seeking a specified price they may need to place a GTC order to wait for the price to be reached. This type of scenario is often associated with an investor’s risk management strategy and is best deployed as a GTC order. The GTC designation allows an investor to construct floors and ceilings for risk management purposes using limit and stop orders.