Introduction
Good-till-triggered (GTT) orders are an effective tool for automating entry and exit conditions without looking at the market all day. Unlike regular orders, which execute immediately, GTT orders wait for specific pricing conditions to be met before triggering. This makes them important for executing disciplined trading strategies. This article focuses on the mechanics and workings of GTT orders.
The Structure of GTT Orders
A GTT order consists of three legs:
- Primary Leg (Entry): This starts your trade
- Stop-loss (SL) Leg: This closes your trade if prices move against you
- Target Leg: This closes your trade if prices move in your favour
The key aspect to understand is that these legs work together as a unit. When you place a GTT order, you’re essentially creating a mini-strategy that handles both your entry and exit conditions automatically.
How are GTT Orders executed
For any GTT leg to fully execute, the price must arrive at or cross your specified levels twice:
1. First price arrival: When your trigger condition is met, the GTT system triggers and sends a limit order to the exchange
2. Second price arrival: When the last traded price reaches your limit price again for the order to execute at the exchange. Limit orders are fired as market orders are not allowed due to regulatory reasons.
This two-step process is crucial to understand because it means your order won’t execute completely in a single instance.
How the Primary Leg Works
The primary leg has three possible trigger conditions:
- Price is above: Your order triggers when the market price rises above your specified trigger price
- Price is below: Your order triggers when the market price falls below your specified trigger price
- Immediate: A Limit order is sent to the exchange right away without waiting for a price condition
When the primary leg’s trigger condition is met, Upstox’s GTT system recognises this event and sends a limit order to the exchange at your trigger price. However, this doesn’t guarantee immediate execution. The limit order will only execute when the last traded price reaches the limit price again.
Example:
Let’s say you want to buy ABC stock when it rises above ₹500, believing it will continue to climb after breaking this resistance level:
- You set a GTT order with “Price is above” condition
- Trigger price: ₹500
The execution process works as follows: ABC stock’s price rises above ₹500, triggering the GTT system to send a limit buy order at ₹500 to the exchange. The last traded price needs to be at or below ₹500 again for your limit order to execute.
How the Exit Legs Work (Stop-Loss or Target)
Your exit legs are in an inactive state until the primary leg is completely executed. Once your primary leg executes, both the stop-loss and target legs become active (Scheduled). Whichever condition is met first will trigger, and the other leg will be automatically cancelled. The same two-step execution process applies to exit legs as well.
Example:
Let’s continue with our ABC stock example. Say your primary leg was completed, and you bought at ₹500:
- Stop-Loss trigger: ₹480 (to limit losses)
- Target trigger: ₹550 (to lock in profits)
If ABC’s price falls to ₹480, triggering your stop-loss:
- The GTT system recognises that the price has reached your stop-loss trigger of ₹480
- The system sends a limit sell order at ₹480 (or at ₹465.60 if you’ve set a 3% MPP)
Similarly, if the price rises to ₹550, triggering your target:
- The GTT system recognises that the price has reached your target of ₹550
- The system sends a limit sell order at ₹550
Market Price Protection (MPP): A Safety Net
Market Price Protection (MPP) is a feature designed to improve the execution probability of your stop-loss orders. It creates a price range within which your limit order can execute rather than at a single price point. MPP is expressed as a percentage and applies to the stop-loss leg of your GTT order.
How MPP Works
When you set an MPP value, you’re essentially creating a buffer zone between your stop-loss trigger price and the actual limit price of the order:
- Without MPP: If your stop-loss trigger is ₹100, your limit order would also be at ₹100
- With MPP of 3%: If your stop-loss trigger is ₹100, your limit order would be at ₹97 (for a sell order)
This 3% buffer increases the likelihood of your stop-loss order executing, even in volatile markets where prices can jump quickly.
Example:
Let’s say you have a long position in XYZ stock and set a GTT stop-loss at ₹100 with an MPP of 3%:
- Stop-loss trigger price: ₹100
- Limit price with MPP: ₹97 (calculated as ₹100 - 3%)
If XYZ’s price falls to ₹100, starting your stop-loss, a limit sell order will go at ₹97. This means your order can be completed at any price between ₹97 and ₹100, giving you better chances of exiting the position.
How Long GTT Orders Last
GTT orders have a maximum validity of 365 days. They remain active until one of the following occurs:
- They are triggered by meeting price conditions
- They are manually cancelled by the user
- The contract expires (for F&O instruments)
- The 365-day validity period ends
Unlike regular-day orders that expire at the end of the trading session, GTT orders persist across multiple trading days within these validity constraints.
Modification of GTT Orders
GTT orders offer flexibility for modifications at different stages:
Before primary leg execution:
- You can modify the trigger prices of all legs (primary, stop-loss, and target)
- All aspects of the GTT order can be adjusted, or the entire order can be cancelled
- You can add new or remove stop-loss or target legs if they were added initially
After primary leg execution:
- You can modify the trigger prices of the stop-loss and target legs
- You cannot add new or remove stop-loss or target legs if they were added initially
- The primary leg can no longer be modified as it has already been executed
This flexibility allows you to adjust your exit strategy as market conditions change.
Conclusion
Now that you understand the mechanics of GTT orders, there are several important considerations and best practices that can help you use them effectively. We’ll explore these topics in our next post, which will cover scenarios that could impact execution and strategies for maximising their effectiveness in your trading plan.
Feel free to leave a comment below if you have any specific questions about GTT orders. If you experience any issues with their execution, don’t hesitate to contact Upstox customer support for assistance.