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Time In Force: When To Cancel the Order

Time In Force orders explained for traders
Time in Force is one of a host of concepts and terminologies you should be familiar with as a day trader.

We all know that day trading and the stock markets use a very specific trading lingo. And beginners usually get lost trying to understand everything they read. So if you’re an active trader or you are just learning to trade you should become familiar with these terms. 

Today I’m writing about TIF or Time in Force. You can find this available with almost every broker and trading platform.But it’s also crucial to understand that Time in Force is one of a host of concepts and terminologies you should be familiar with in order to have a solid grounding in day trading fundamentals and market movements.

Time In Force – When To Cancel the Order

Time in Force allows you to set when an order should expire if it is not executed within the time you set. TIF is mostly used by traders with Limit orders

A limit order is an order to buy or sell an asset at a desired price and when you decide that you refuse to pay the market price.

When you set a limit order of any sort (Stop Limit or just Limit). You will be asked when you want it to expire (the actual execution of the trade, not how long you hold the shares).

That’s pretty self-explanatory, but you must be wondering what does time in force mean? 

So let’s discuss the definition so you can understand this concept much better.

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What is time in force?

Time in force or TIF meaning is pretty simple, it’s an option available when placing an order. It is most commonly limit orders (but also with market orders and stop orders) and it enables an order to be open for more than a trading day. 

The Time in force helping traders to pay less commissions. Since TIF is a tool to decide how long an order will remain open. It can give you a lot of control over the time of the orders you place.

Time in force explained

It’s simple to understand Time in force. When placing orders, we must know it is important to consider the time we want an order to be open before it expires or the order is filled. Fairly simple, right?

This tool suits swing traders very well. Using TIF will give them a better opportunity to manage their trades. If you have your market analysis done, adding a time in force limit for trades will help you avoid trades being executed beyond the desired trading time. This takes traders a weight-out from their shoulders.

We know you can’t avoid many of the big price changes in the market. But this tool you sure can mitigate the losses with this tool.

Types of time in force

2 of the most common limit orders for you to choose from:

GFD- Good for Day Order

Whatever price you decide you only want it executed during market hours of that day. If it doesn’t reach that price that day, it will be canceled, and you can decide what you want to do the next day.

GTC – Good Til Canceled

This order will not be canceled overnight or even in the near future. You can set the dates you want it to be canceled as well.

But you should also note that GTC orders will also automatically be canceled if:

  • if any type of corporate action is taken on a security
  • you do not log in to your account for 90 days

These are the most important to know and always remember to set it right!

As discussed earlier TIF is most commonly used with Limit orders and the 2 types of TIF orders of GFD and GTC are the two you should become most familiar with.

But there are also other TIF orders you should know about.

Time in force vs on close explained
TIF is most commonly used with Limit orders and the 2 types of TIF orders of GFD and GTC are the two you should become most familiar with.

Immediate or Cancel (IOC)

The ‘immediate or cancel’ order is used when you want an order to be filled immediately as soon as you get in.

So whatever cannot be filled immediately gets canceled.

Fill or Kill (FOK)

FOK is used when you want an entire order to be filled straight away. If not, then the whole order is canceled.

Market-on-Open (MOO)

An on-Open order is set to be filled when the market opens at the price of opening. This type of TIF order is used if you feel that price will fall after opening so you want to sell at the on-Open price.

Market-on-Close (MOC)

Similar to the Market-on-Open order except that this order is set for the end of the trading day. This is useful when you want to lock your profits in and not be affected by after-market trading.

Time in Force Day vs On-Close

A typical question I get asked about TIF is what is the difference when it comes to Time in Force Day vs On-Close?

As explained earlier TIF GFD or Good for Day is whatever price you decide you only want it executed during market hours of that day. Again, if the price you want is not reached then the order will be cancelled.

And TIF On-Close is when you want an order to be filled at the close of the day, meaning at a specific time, which is the end of the trading day. So if the order cannot be done at the specific time of close of day then it may be cancelled.

So to answer this very common question I often get when it comes to time in force day vs on-close here’s a summary:

A Good for Day order is dependent on the price you want the order to be filled at while TIF On-Close is dependent on the time i.e close of the trading day rather than the price.

Time in Force: Wrap Up

So there you have it. Not as complicated as you thought, right? In fact the concept is fairly simple in that you can set conditions for when you want an order to be filled and at what price.

And if not filled at the time or price you set then the order will be cancelled.

And you should also understand that again TIF is one of many concepts to understand but you really only need to become proficient in a few areas and simplify your day trading technical analysis and indicators in order to become profitable.

We have also answered the question of the difference between time in force day vs on-close and explained that the main difference is that one is more dependent on time of day while the other relates more to a specified price.

Also this post has looked at the different types of TIF orders. And also the most common ones that you should be aware of, namely GFD and GTC.

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