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Use Good ‘til Canceled Orders to Capitalize on Down Markets

A good ‘til canceled (GTC) order can help you set the stage for dip-buying opportunities when they inevitably present themselves in the next down market.

Man using tablet. Trash can and files. Representing good 'til canceled orders being canceled

Things are good. This is what a real bull market looks like, which makes it the perfect time to think ahead to the next dip and deploy some good ‘til canceled orders.

The S&P 500 is up about 14% this year and we’re not even at the halfway point. This is after a 22% gain last year. The index has rallied a staggering 55% since October 2022.

Over the past two years, the S&P 500 provided an average total return of over 22% per year. That’s more than double the long-term average annual return for the index. These are good times indeed. And why not?

Inflation is way down. Interest rates have likely peaked and should trend lower going forward. And the economy is still solid. Meanwhile, there is a massive growth catalyst from artificial intelligence for technology stocks, by far the market’s largest sector.


Things have been good and maybe too good. It might be a good time to get nervous. Like that 93-year-old who everybody quotes says, “Be greedy when others are fearful, and fearful when others are greedy.” Hopefully, the good times can continue. And they probably will. But exuberant markets don’t last forever. It’s prudent to at least prepare for some downside and ways to potentially exploit it.

And there are risks out there.

The market is pricing in likely falling interest rates with a solid economy. But interest rates are still near a twenty-year high and inflation isn’t budging. There are no guarantees. Even if we somehow tango through the inflation and high interest rate situation without a recession, there is a chance of market turmoil resulting from the election or an escalation of the wars in Ukraine and Israel or something else.

Things looked good five years ago too, in June of 2019. Indeed, the S&P has doubled since then. But there was a lot of trouble along the way. There was a global pandemic that crashed the U.S. and world economies for more than a year. It was followed by the worst inflation in forty years and the highest interest rates in twenty years. There was also the worst conflict in Europe since World War II and the worst Middle East conflict in decades.

The S&P 500 crashed 30% in record time at the onset of the pandemic in 2020. There was also a bear market in 2022 during which the S&P fell over 20% and the Nasdaq plunged well over 30%. Of course, most stocks were down a lot more than the indexes. Sure, you could have just hung in there and stayed invested and been fine. But you could have been a lot better than fine. If you picked up some of the very best stocks at fire sale prices you could have gotten amazing returns.

The calm of a good market is the best time to plot a down-market strategy.

Unfortunately, buying market dips isn’t nearly as easy as it may seem. Sure, the market has clearly demonstrated an upward bias over time. Buying the dips makes perfect sense intellectually. You’d get it right on test. But during a real market selloff, few people are interested in buying. I’m guilty of that fear myself.

We have an instinct to avoid danger. When the market is crashing, we don’t want to go anywhere near it. Like with an earthquake, there’s always the fear that this crash is “the big one.” We tell ourselves that we will wait until the market finishes falling and then consider buying something. The problem is that we only know the market is done falling after the fact. And by then, it has rebounded, and much of the opportunity for big gains is gone.

How Good ‘til Canceled Orders Can Help You Buy the Dip

Preparation is the remedy. Instead of relying on overcoming our natural emotions in the heat of the moment, we can calmly plan for a market drop ahead of time, safely away from the tumult of the moment. Specifically, you can target great stocks, that you would love to own but are always too expensive, at bargain basement prices that may only be hit in the market overreactions during irrational selling. You can do this with a good ‘til canceled (GTC) order.

Good ‘til canceled means that you’ll buy the stock if it drops to your targeted price at any time, unless, of course, you cancel the order. It’s a way to be intellectual about investing and probably get it right. Of course, the order may never go off. But you don’t lose anything for trying.

You would have done fine investing and just hanging on over the last five years, as you probably will over the next five. But if you stepped up and purchased any of the best stocks at fire sales price during the low points over the last five years, you would have done a whole lot better than just fine. Preparation can make it happen going forward.

The world is a crazy place. It may be going to Hell in a handbag. You can’t fix that. But big profits can be very therapeutic.


Tom Hutchinson is the Chief Analyst of Cabot Dividend Investor, Cabot Income Advisor and Cabot Retirement Club. He is a Wall Street veteran with extensive experience in multiple areas of investing and finance.