What Is Good Through?
Good through is a type of limit order used to buy or sell a security or asset at a certain price for a specified period of time. Good through orders are an example of time in force orders.
- Good through is a time-frame designation set by an investor or trader that allows an order to remain active for a set period of time, or until canceled.
- A day order is a common designation that allows the order to work through the end of the trading day.
- Good through orders combined with limits or stops are often used to take advantage of pending news announcements or illiquid markets, both of which can lead to price volatility.
Understanding Good Through
Typically, a good through order is a stop loss or limit order that remains valid until the expiration date passes unless the order is executed, canceled, or amended. A special case would be a good 'til canceled (GTC) order which is good until the investor specifies it is not.
Good through is a special instruction used when placing a trade to indicate how long an order will remain active before it is executed or expires. These options are especially important for active traders as it allows them to be more specific about the time parameters. Good through is a useful way for active traders to keep from accidentally executing trades. By setting time parameters, they don’t have to remember to cancel old trades. Unintended trade executions can be very costly if they occur during volatile market conditions when prices are rapidly changing.
Good through time periods are set by investors, such as "Good This Week" (GTW), "Good This Month" (GTM), or for any other specified period of time. A day order is another example of an order specification where the order remains active, good through the end of the trading day.
Another type is GTC orders, which are effective until the trade is executed or canceled. Some common exceptions include stock splits, distributions, account inactivity, modified orders, and during quarterly sweeps. These can be a useful option for a long-term investor who is willing to wait for a stock to reach their desired price point before pulling the trigger. Sometimes, traders might wait several days or even weeks for a trade to execute at their desired price.
Using Good Through Order
- Pending News: Investors could consider using a good through order if a company has pending news, such as reporting its earnings. Setting an expiry date on a good through order one day before the major news announcement ensures it gets canceled before the release. Using this order type means the investor does not need to set a reminder to manually cancel the order before an expected increase in volatility.
- Time-based Trading Strategy: Some trading strategies require entry into a stock before a specific date. For instance, a trader may anticipate that the price of a stock is going to break out of a trading range within the next five trading days and will want to buy before the breakout but cancel the order if it fails to execute before the expected move. In this instance, using a good through order is the perfect solution.
- Illiquid Markets: Good through orders can help investors reduce risk in an illiquid stock by automatically canceling open orders that have not been filled by a specific date. Some illiquid stocks don't trade for days or even weeks and experience large price swings when a trade finally occurs. Using a good through order protects the investor from continual exposure to these significant price movements.
Good Through Order Example
For example, suppose an investor places an order at the start of September to buy 100 shares of Apple (AAPL) with a limit of $350. This means the investor is happy to purchase the shares for $350 or less. Conversely, if the investor places an order at the beginning of September to sell 100 shares of Apple with a limit of $380, they are not prepared to accept a price below $380. If the investor adds a GTM to the order, it will expire and be automatically canceled at the close of business on Sept. 30 if it has not already traded.