Note: This article is meant from investors / traders with some level of skills and understanding. If you are unsure, please check with someone who may be able to help you.
To begin with, knowing how to use Advance Order is only a small part of the total equation (falls under trading system), if used correctly, it can be an important and useful tool within your trading system.
Figure 1: Successful Trading (where does Advance Order fit in)
Well, as the saying goes, a picture speaks a thousand words.. The above picture shows that, in a bigger scheme of things, where does Advance Order fall under.
With the above in mind, let us proceed.
(Note: There is a need to 'activate' Advance Order within the Lim and Tan trading platform, but the purpose of this article is more focus on using Advance Order in tandem with one's trading strategy hence I shall skip the details on the activation.)
So, what are Advance Orders?
Broadly speaking, Advance Orders essenstilally consist of 2 categories, i. Long Dated Orders and ii. Conditioners Orders.
* Long dated orders:
GTM – Good Till Month (30 Calendar Days)
GTC – Good Till Cancel (Pre-defined date within 30 Days)
* Conditional Orders (Will be convered in another article if / when I could find time for it)
Trade will be triggered, i.e. placed (not necessary filled depending on the criteria set) when certain pre-set criteria is met.
Let us touch on the long dated orders, for today's topic, by differentiating the difference between GTM and GTC.
GTC Orders (Good Till Cancelled) / GTD (Good Till Date)
Personally, for this particular order mode that is available, my preference will be to call it GTD (Good Till Date), as GTC, by the term itself suggest, would give the idea that the order is in force (indefinitely) until it is cancelled, which, strictly speaking, is not the case in the SGX / Lim and Tan's Trading Platform context as the order is only good for up to 30 days. Any further extention, one would have to cancel the order (or wait for it to expire) and then place the order again.
As a matter of fact, personally, as of now, I hardly (if ever) use a GTC/GTD, and has always opted for a GTM order. So, under what circumstances will a GTC/GTD order be useful? A GTC/GTD might be useful if say, you plan to go for a business trip / holiday on a certain date and willing to take on a trade only if it gets done a certain number of days before your trip, so free your mind of a newly initiated position.
For the maximum queue period (of 30 days), I would almost always opt for GTM.
Here are the Pros and Cons of using long dated orders:
Once order is placed for the day, by the next day, it will be ahead of the queue (compared to other orders that come in after the trading hours) as the order now already resides in SGX server.
You could set and 'forget' (as long as there's no drastic change in the broad picture or event related to your stock), instead of putting in your order everyday. Some basic understanding of technical analysis such as support and resistance will be useful here.
Useful to set GTM buy order if an instument is range bound (reasonable range) over a period of time. In the example above, Starhub (note that am using a fairly stable mid cap / blue chip stock as an example, extra care should be used on penny or more volatile stocks) ranges between about 3.55 to 3.72 and if one were to place a GTM to buy at support and sell at resistance, the outcome would have been quite good (of course hindsight is 20/20, but to illustrate a point).
When there's sudden drastic event (broad or counter specific), there's a danger of your buy order get hit, and then the share price goes even lower than your buy price.
Somewhat of a less significant, your target sell price using GTM order is hit and the share price for some reason, started to trend upwards, but somewhat okay since you already locked in your profit, just potentially lesser.
With this, I shall conclude this article and will touch on conditional order another time.
Enjoy the weekend!