What is Time In Force?
How is “TIF” relevant for stock traders and investors?
What are the essential elements you should know!
In this article, we will break down the financial definition of Time In Force so you know all there is to know about it!
Keep reading as we have gathered exactly the information that you need!
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What Is Time In Force
“Time in force” (or TIF) refers to trade instructions where the trader specifies how long an order will remain open or active for execution.
In other words, time in force means for how long a “trade” is “in force” and can be executed.
For example, you can have a stock trader provide instructions for an immediate trade otherwise to cancel (immediate-or-cancel).
Another trader may instruct the order to remain in force for the day (time in force day).
Stock traders and investors use time in force orders to control the number of active trades they place in a day.
The idea is to place an order and have the trade remain in force for a specific period of time after which the trade will automatically expire.
In this case, the day trader does not have to specifically remember to kill a particular order or revisit all of his or her trades in the day to assess which ones are open and which ones are completed.
Time In Force Definition
According to Investopedia, time in force is defined as:
Time in force is a special instruction used when placing a trade to indicate how long an order will remain active before it is executed or expires.
This is a good simple definition of the notion ‘time in force’.
Essentially, it refers to “instructions” when placing a “trade” relating to “how long” an order will remain “active”.
Objective of Time In Force Stock Orders
The main objective of why time in force stock order instructions are given when trading is to allow a trader to have more control over the duration of active stock orders and the time of trades.
Active traders may place many buy and sell orders in a day.
As such, a trader must be diligent to ensure he or she has full control over the stock order prices and the time duration of the orders.
In essence, a time in force order can keep an active trader from executing unwanted trades by accident.
Time in force order parameters can be combined with other order parameters controlling the purchase or sale price of the securities, such as market orders, limit orders, and stop orders.
A savvy trader will configure his or her trades based on the market volatility, investment strategy, and investment needs.
How To Trade With Time In Force
Traders, investors, and individuals trading stocks or securities using their brokerage account (online or other) can specify the duration of the effectiveness of their order when placing a trade.
Typically, before placing an order, the trader will need to think about how long he or she will want to keep the order open until it is filled.
Depending on the type of brokerage account you have, you may have a few options to choose from, such as:
- Day order
- Good till canceled order
- Immediate or cancel order
Once the order is placed with a time in force parameter, then your brokerage firm will be instructed to execute your order according to those parameters.
For instance, if you chose a day order parameter, then your broker will try to fill the order during the day (otherwise, the order will be canceled).
“Time in force” Order Types
There are different types of “time-in-force” orders for stock trades or other types of securities trading.
Let’s look at the main types of order types.
Day Order (DAY)
A “day order” is a type of trading order that remains open for the business day.
If the stock is not traded (or the order is not executed) by the end of the trading day, the order will expire.
In most cases, a day order is the default order type configured by brokerage first on trading accounts.
Good Till Canceled (GTC)
Then you have GTC orders or good-til-canceled orders.
GTC orders remain in effect until the order is either executed or the trader cancels the order.
In some cases, an investor will use a GTC order where the order remains open for days or even weeks until the desired stock price is reached before it is executed.
Fill or Kill Order (FOK)
Another type of stock trade order is the fill-or-kill order (FOK orders).
A FOK order must be filled completely, otherwise, it must get canceled.
With a FOK order, your request is that the broker fills the entire order or cancel it.
The main reason why a fill-or-kill order is used is to ensure that the entire order is executed at the same purchase price as opposed to several blocks of different purchase prices.
Immediate or Cancel (IOC)
The immediate or cancel order is a type of order that is similar to the “fill or kill” order.
With an “immediate or cancel” order, you instruct the broker to immediately execute all or part of the order and cancel what could not be filled.
Good Until Date (GTD)
A “good until date” order or GTD order is a type of order where you specify until what day the order can remain open for execution.
With this type of order, you control the day where the order can expire.
Examples of Time In Force Instructions
Here are some of the common time in force instructions:
- Immediate-or-cancel (IOC)
- Day order
- Fill-or-kill (FOK)
- Good-til-canceled (GTC)
- Market-on-Open (MOO)
- Limit-on-Open (LOO)
- Day-til-canceled (DTC)
The most common type of time in force order used by investors is the “day order”.
However, experts and day traders may want to have more control over their stock trades and may open trading accounts with brokerage firms giving them more control.
Brokers use many acronyms to refer to the type of trade instructions given, such as:
What Does Time In Force Mean Takeaways
So, what is time in force in stock trade?
Let’s look at a summary of our findings.
Time In Force Meaning
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