Exceptional Orders in Futures Trading

In addition to the commonly used orders, futures trading also permits the use of a number of other orders that might come in handy from time to time. While stop losses/limits and market orders are the kind of everyday instructions you can expect to be working with, even as a beginner, there are other orders that most new traders tend to steer clear of, but that can actually add significant value to your trading outlook. Here’s a brief run-down of a few of those exceptional orders, and a brief discussion of how they work.

Good ‘Til Cancelled

A good till cancelled order, or GTC, is an order that stipulates a position should be maintained beyond the trading day until it is explicitly cancelled by the trader – i.e., as the name implies, the order if good until it is cancelled by the trader. This contrasts with a day order which cancels upon the close of trading on the relevant exchange, thus a GTC gives traders the flexibility to hold their futures for longer rather than closing at the prevailing rate at the end of the trading day.

One Cancels Other

A one cancels other order is a conditional instruction to the broker to buy one or other futures contract but not both. The order will stipulate the prices points at which to buy/sell the relevant futures contracts, and the execution of the first transaction will cancel the order for the second. Thus the order is one that gives the trader an automatic either/or scenario, defaulting to the most favourable transaction at that given moment, cancelling the other partner order as it does so.

Fill Or Kill

Fill or kill orders are, like OCOs, also conditional orders, except in this instance the condition is not between the prevailing of two different futures options, but rather a binary decision as to whether or not to proceed with an investment. The order will stipulate the terms of the traders order, but will carry the stipulation that unless those criteria are able to be met the transaction does not go ahead. This can be used to create automated responses to forecast market movements, such that the savvy trader could effectively create a chain of fill or kill orders that all depend on the wider vision the trader has for the market, all of which would be conditional on the trader’s forecast tying in with reality.

Discretionary Orders

There is also often the option to give the broker the discretion to buy futures contracts within a certain price bracket, known as a discretionary order. Of course, this carries the inherent risk that your acquisition will come at a price point that is unfavourable to your market outlook, but by regulating the parameters of the discretionary order, it can be a good way to ensure your orders are filled even if the market ticks unexpectedly at the point of execution.

Futures trading, as with most other forms of trading, opens up a wealth of different and useful orders which can be implemented as part of a diversified trading account. It is recommended that you try to factor in different orders as and when is suited to your trading account, building up your knowledge of and ability to use different order types as you go. With each fulfilling a distinct role for futures trading, it pays dividends to be familiar with the makeup and operation of the many orders available.

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