Getting to know time-in-force orders
What are time-in-force orders?
Time in force, also known as TIF, is the length of time an order is active before execution or cancelation. Traders and investors can create specific instructions when ordering stocks or other financial instruments. So, time in force is a trader's mechanism when controlling the timings of a particular trade.
Usually, traders use only one price for auctions at either the beginning or end of trading because the price should all be the same in transactions. The orders that traders place at the opening or closing of a market and enter the auction do not affect. Certain types of orders such as market on the open, market on close, the limit on open, and the limit on close enter the picture when we add price conditions in the topic.
More on time-in-force orders
Time-in-force orders are very beneficial for traders because they can customize their trade using their preferred time parameters. They can avoid making accidental trades and forgetting to cancel old orders.
While most traders use day orders because this is the default, they can still choose from a wide variety depending on their trading strategy and techniques. Some of the examples of these orders are GTC, IOC, GTC, OPC, and DTC.
Looking closely on orders where we can apply time in force
As we have mentioned previously, we can apply time in force orders to other types of orders. First is the most common, which is day orders. Day orders (DAY) are low supervision orders since they automatically cancel if not filled during the trading day.
Fill or kill orders (FOK) instruct brokers to execute orders as a whole and immediately. The order gets canceled if the broker can't meet the conditions set by the trader.
An immediate or cancel order (IOC) is self-explanatory. It gets canceled seconds after placing the order if the execution can't happen immediately. It is somehow a FOK order; only it accepts partial orders, and FOK does not.
Good til canceled orders (GTC) remains active anywhere from 30 to 90 days unless canceled or executed after hitting the price condition.
We also have good 'til date orders that will continue to work in the system and marketplace unless executed. A trader places the order together with a specific execution date and time.
Adding to the list of orders where we can apply time in force orders are market on open (MOO) and limit on open (LOO) that executes in the market's opening.
Contrasting these orders are market on close and limit on close that executes during and slightly after the markets close.
A conclusion on time in force orders
There are many ways to be
successful in trading, and we have already mentioned quite a few of them. We
can say that time in force is one of the excellent strategies. While it saves
time, it also avoids significant losses through order customization. Traders
can also focus on other things like jobs or even personal matters since trade in force
orders require minimal to zero supervision. Success does not solely depend on
order alone but also significantly on the traders.
