How GTT Can Help Mitigate Risk in Volatile Markets

ByCaesar Trading
How to Mitigate Risk in Highly Volatile Markets? - Securities.io

What is the first thing that comes to your mind when you see the share market? For some, it can be stocks, profits, risks, or valuation. But for others, it is volatility. Market volatility is not new, but if you do not know how to manage it well, it can lead to losses. 

This is where understanding of the market and strategies becomes very important. One such aspect that you can adopt is the GTT in share market. It is an automated order type that helps to avoid losses and ease the trading process.

But how does it help you in managing risk in a volatile market? Well, read this guide to know the answer. But before that, let us quickly understand GTT using the example here. 

How does GTT Work

The Good Till Triggered or GTT order is a powerful tool for investors. This helps automate their trading strategies based on specific price conditions. This order type remains active until it is triggered or cancelled. This makes it particularly useful in navigating volatile market conditions

Now, to understand this better, here is a quick example for you.

Say you plan to buy Tata Motors, and its Current Market Price (CMP) is ₹500.

If you are using GTT, then the buy order will be set as:

  • Trigger Price: Buy Tata Motors shares if the price drops to ₹480.
  • Target Price: The limit price is ₹482 for the purchase.

Now, when the market falls to the trigger price, the GTT order is triggered. If the stock reaches or dips below this target price, the order will execute, and you will purchase the shares.

Likewise, you can set the GTT sell order as well. Say you plan to sell Infosys, and the Current Market Price (CMP) is ₹1,600.

Here, you would set the GTT sell order as below:

  • Trigger Price: Sell Infosys shares if the price rises to ₹1,650.
  • Target Price: The limit price is ₹1,655 for selling.

Now, when the market reaches the trigger price, your GTT order is triggered. If the stock reaches or exceeds the target price, the order will be executed, and your shares will be sold.

Here, you now know how GTT works. So, let us now understand how it can help you mitigate the risks.

How GTT Helps Mitigate Risks

GTT can help investors reach their financial goals easily. They are automatic in nature and require no regular monitoring. This saves time, and so is perfect for many traders in the market. This is why many investors use GTT.

Now, here are some of the reasons why GTT in share market can help mitigate risk.

1. Incorporation of Stop-Loss and Take-Profit Levels

GTT orders enable investors to set stop-loss levels. These automatically trigger a sale if the stock price falls below a certain point. This feature helps limit potential losses and protects capital, especially in volatile markets. 

Similarly, take-profit levels can be established to secure gains when prices reach a desired target. This way, even when you are not monitoring the market, you have a high chance of limiting the losses and gaining better returns. 

2. Automation and Reduced Monitoring

GTT orders operate automatically based on predefined conditions. This means investors do not need to watch the market constantly. This saves time and reduces stress. 

It allows traders to focus on other aspects of their investment strategy while ensuring that trades are executed according to their plans.

3. Long-Term Investment Strategy

GTT is perfect if you are a long-term investor. You can set the GTT and ensure that your trade is executed as per your vision. By setting GTT orders, investors can ensure that they enter or exit positions at favorable prices without needing to check the market constantly.

4. Cost Efficiency

GTT orders allow you to save on added costs. You are not required to place multiple orders, which can add to your brokerage charges. Since GTT orders allow for strategic entry and exit points, traders can minimize unnecessary trades and focus on more significant opportunities.

5. Improved Decision-Making

With precise trigger conditions set in advance, GTT orders allow investors to improve their decisions. This encourages a more disciplined approach based on market analysis and less emotional triggers. They can use multiple strategies at a time. This allows for a more focused investment approach.

Conclusion

The importance of GTT in share market is quite high. Starting from helping you plan better to mitigate losses, GTT can guide you toward better decision-making. If you are using online trading platforms, this is one of the strategies that you must definitely focus on. 

This will allow you to boost profits and reduce losses without constant monitoring. So, commit to a well-structured approach with GTT and unlock sustained financial success.

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